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IBD 50: Ligand Pharma Beats Q1 Estimates, Buys Device Royalties

Ligand Pharmaceuticals ( LGND ), an  IBD 50 stock, rose early Wednesday after the small biopharma beat Q1 estimates and announced an acquisition that helped lift its guidance. Ligand reported earnings  excluding one-time items of 97 cents a share, more than triple the year-earlier number, beating analysts’ consensus by 30 cents, according to Thomson Reuters. Revenue rose 103% to $29.6 million, topping consensus by about $3 million. As described in a recent IBD  New America  story, Ligand’s business model is based on developing or acquiring technologies used in drug development and partnering with larger biotechs and pharmas that can make them into commercial products. Much of the growth in Q1 revenue came from the timing of milestone payments, along with the January acquisition of Open Monoclonal Technology, which licenses its biotech platform to drug developers. Ligand’s royalty payments grew thanks to the continued ramp of Amgen ’s ( AMGN ) blood-cancer drug Kyprolis and Novartis ’ ( NVS ) low-platelet treatment Promacta. Ligand also said it had agreed to pay $17.5 million for royalties on multiple programs from CorMatrix Cardiovascular, a privately held company that sells devices that help regrow human tissue. Ligand is guaranteed a minimum payment of $2.75 million annually, but says this is expected to double over time as CorMatrix rolls out new products. “CorMatrix’s existing and pipeline medical devices address market opportunities estimated to exceed $1 billion annually,” Ligand said in its press release . Ligand added $2 million to its 2016 revenue guidance, of which $1 million was expected to come from CorMatrix, bringing the range to $115 million to $119 million. That was still on the low side of Wall Street’s average estimate of $118.5 million, but EPS guidance beat Wall Street, at $3.41 to $3.46. Last year, the company made $3.37 a share on $71.9 million in revenue. It also guided 2017 slightly below consensus, with $160 million and EPS of $5.03. Ligand stock was up 2% in early trading on the stock market today , near 122. The stock is No. 18 on the current IBD 50 list of top-performing names over the past 12 months, with a strong Composite Rating of 93 despite somewhat light trading volume.

Biogen Q1 Earnings Beat Estimates, But Sales Miss; Stock Climbs

Big-cap biotech Biogen ( BIIB ) reported a mixed first quarter Thursday morning, and its depressed stock rose in early trading. Biogen posted Q1 earnings of $4.79 a share excluding one-time items, up 25% from the year-earlier quarter and 32 cents above analysts’ consensus, according to Thomson Reuters. Revenue rose 7% to $2.73 billion, about $20 million below Wall Street’s average estimate. Biogen did not change its full-year guidance of $11.1 billion to $11.4 billion in revenue. The shortfall came mainly in sales of multiple-sclerosis drugs, which is also Biogen’s core business. Oral drug Tecfidera grew 15% to $946 million, about $15 million short of consensus, according to Evercore ISI. Interferon products Avonex and Plegridy together sold $670 million, down 11% from Q1 2015 and more than $50 million below consensus. “The shortfall was increased by $40 million in channel inventory reduction, but also included the effect of further rebates to payers in an increasingly competitive category,” wrote Leerink analyst Geoffrey Porges in a research note. “The company’s reported EPS of $4.79 beat consensus … as the company trimmed their R&D expenses more than anticipated.” Biogen’s competition in MS comes mainly from Novartis ( NVS ) and Sanofi ( SNY ), and it might soon get more competition from Roche ‘s ( RHHBY ) ocrelizumab, which is nearing an FDA filing after performing well in clinical trials. Analyst Max Jacobs of Edison Investment Research was more blunt, calling Biogen’s Q1 “an awful quarter” that will likely bring a guidance reduction down the road. “While operating expense control helped save the quarter from an earnings standpoint, management will likely be under pressure from investors to do something drastic to right the ship,” he wrote in a research note. Biogen stock was nonetheless up 4% in early trading on the stock market today , near 277. It’s still down more than 40% from its lifetime high, hit in March 2015, as the company’s MS franchise first started showing weakness last year.

United Therapeutics Down As FDA Rejects Medtronic’s Remodulin Pump

Biotech United Therapeutics ( UTHR ) said Thursday that the Food and Drug Administration had rejected its partner Medtronic ‘s ( MDT ) application for approval of a device to deliver the former’s lung-disease drug Remodulin, sending United Therapeutics’ stock down sharply. Remodulin, a treatment for pulmonary arterial hypertension, became a top seller for United Therapeutics in injectable form, but the company has been developing different delivery methods that broaden the patient base and also help extend the drug’s patent life. United Therapeutics had hoped that Medtronic’s implantable device could treat patients with the most severe forms of the disease, who can currently only use the intravenous form. United Therapeutics’ brief SEC filing didn’t say why the FDA had rejected the device, and Medtronic has said nothing about it, although the FDA’s response letter arrived over a week earlier. The filing did say that the letter had “noted various measures that Medtronic should take” to make the filing approvable, which the two companies were currently discussing. United Therapeutics also noted that it’s filed for a label extension on Remodulin to approve it for use through the device, which is due for a decision by October. United Therapeutics’ stock hit a 17-month low of 109.44 in early trading on the stock market today . By mid-morning it was down 8.5% near 111, while Medtronic stock was down more than 1%, near 73.50. A top-rated stock a year ago, United Therapeutics retains a stellar IBD EPS Rank of 98, but quarterly results that missed analyst estimates and increasing competition started pressuring the stock, even before the biotech sell-off started in August. This made the pump financially important, according to RBC Capital Markets analyst Michael Yee. “Investors view the ‘implantable pump’ as an important near-term program that could stop or slow erosion of Remodulin generic with a settlement with ( Novartis ( NVS ) unit) Sandoz set to allow a version starting June 2018,” Yee wrote in a research note. “If this pump is continuously delayed, then there’s less time to convert patients over to it and bring the approvability into question, and (it) increases risk of generic erosion of the core franchise.”