Tag Archives: technology

Gilead, Biogen Down On Patent Rulings; Ionis, Merck, Forward Rise

Big biotechs Gilead Sciences ( GILD ) and Biogen ( BIIB ) were both trading down Wednesday morning after receiving unfavorable patent news. Late Tuesday,  Ionis Pharmaceuticals ( IONS ) said that it and its big pharma partner Merck ( MRK ) had won a case alleging that Gilead’s hepatitis C virus (HCV) drug sofosbuvir, which is sold individually as Sovaldi and as an ingredient in Harvoni, infringed on patents that Ionis and Merck had obtained from earlier research. “We used our expertise in a 1998 collaboration with Merck to discover and develop modified nucleosides that benefit patients with HCV,” said Ionis CEO Stanley Crooke in the press release . The case goes back to 2013, when sofosbuvir was on the verge of FDA approval and Merck sought a 10% royalty on sales from Gilead. Gilead sought a judgment invalidating the patents, though it conceded that it had infringed them. The case went to a jury, which ruled Tuesday that the patents were in fact valid. There was no word on damages, though Ionis said that it’s entitled to 20% of the damages. Leerink analyst Geoffrey Porges said that the awards won’t be huge and that more litigating would delay them. “We continue to expect that any damages awarded in this case will be relatively modest, the equivalent of a single-digit royalty, significantly less than the 10% Merck was seeking,” Porges wrote in a research note. “In spite of whatever damages the jury awards Merck, Gilead has already indicated that it will appeal.” Ionis stock popped to an eight-week high of 46.05 early on the  stock market today , though midday it was down a fraction, near 41.50. Gilead stock, though, was down more than 3% near 90, while Merck was up a fraction near 53. Patent Office Will Review Biogen’s Tecfidera Biogen stock, meanwhile, was off 1.2%, near 257, in midday trading Wednesday, after the U.S. Patent and Trademark Office (USPTO) reversed an earlier decision and decided to review a patent on Biogen’s top-selling drug, Tecfidera. Hedge-fund manager Kyle Bass filed the request for a review; last year, he launched an unusual short-selling strategy by filing such requests on a number of blockbuster drugs, which he said had “BS patents.” The USPTO initially denied his request in September, but on Tuesday it changed its tune. Coincidentally or not, European Union authorities earlier this month invalidated the European equivalent of the same patent , which expires in 2028. In addition, Forward Pharma ( FWP ) is separately challenging the patent; its stock was up 4% near 17 in midday trading Wednesday. “Today’s decision is just a first step in the (review) process, and nothing happens yet in the USA, and as of today Tecfidera still enjoys 10-year exclusivity in EU (would protect it to 2024 in EU),” wrote RBC Capital Markets analyst Michael Yee in a research note. “Even though the … patent expires in February 2028, consensus did not assume this would get full protection and already assumed/expected generics to launch at some point.”

CyrusOne Hits All-Time High As Data Center Stocks Advance

CyrusOne ( CONE ) stock hit an all-time high on the heels of Tuesday’s investor day, where the data center operator outlined goals to double the company’s revenue by 2020. Cloud computing and corporate outsourcing of IT infrastructure has increased demand for data center space. Data center operators — including DuPont Fabros Technology ( DFT ), Digital Realty Trust ( DLR ) and CoreSite Realty ( COR ) — are among the top performers in IBD’s Finance-Property REIT group. It’s ranked No. 46 out of 197 industry groups that IBD tracks. Many data center operators are real estate investment trusts. Apple ( AAPL ), Microsoft ( MSFT ), Facebook ( FB ) and Salesforce.com ( CRM ) are among tech companies expanding data centers. Data center operators provide space, power and cooling. Customers pack the warehouse-sized data centers with their own computer servers and other gear. The data center market has been divided among wholesale providers — such as Digital Realty   and DuPont Fabros — and retail operators such as Equinix ( EQIX ), though some lines are blurring. CyrusOne stock was up a fraction in midday trading in the stock market today , above 42, but earlier rose nearly 5% to 43.42, its record high. Shares have gained nearly 13% in 2016. At its investor day event, CyrusOne said that it aims to double its enterprise value from around $4 billion to $8 billion by 2020, said Colby Synesael, an analyst at Cowen & Co., in a research report. “The company plans to achieve this goal by doubling its revenue, EBITDA and normalized FFO from 2016 to 2020 while being prudent to maintain (debt) leverage at 4.5 times or less, so that it can achieve an investment grade credit rating over that period,” added Synesael. REITs use a cash flow metric called funds from operations, or FFO. DuPont Fabros stock has shot up more than 25% this year, while CoreSite has gained about 20%. Digital Realty is up 15%. Equinix, part of IBD’s Internet-Infrastructure Solutions group, has gained 5%. Capital spending has been rising at data center operators. DuPont Fabros, aiming to raise $275 million, announced a stock offering on March 17. “New leasing volume suggests that demand remains robust and should support DFT’s growth plans with low leverage,” said Barclays analyst Ross Smotrich in a report. “However, the trade-off is that DFT had made it abundantly clear at their November 2015 investor day that their growth strategy would not include new equity. When future capital needs arise, therefore, investors may anticipate an equity raise.” Image provided by Shutterstock .

One Item In Red Hat’s Q4 Earnings That Blew The Surprise

Despite a fourth-quarter earnings report that flew past estimates, Red Hat ( RHT ) stock fell Wednesday as analysts raised concerns of an unexpected slowdown. The line item that spooked investors was a slowing in customer billings and confusion about future revenue. “The fourth quarter was a mixed bag, with signs that fundamentals remain strong with large deals, but also billings deceleration and a lack of margin expansion for fiscal 2017,” wrote Pacific Crest Securities analyst Ben McFadden. Red Hat stock was down more than 5%, below 72, in morning trading on the stock market today . Shares had touched a 15-month low below 60 last month after hitting a 16-year high above 84 in December. Red Hat is the leading provider of Linux-based software that businesses use to run operations. Revenue comes from subscriptions that customers pay for software support, training and integration services in using the open-source version of its Linux operating system. Red Hat reported fiscal Q4 earnings after the market close Tuesday for the quarter that ended Feb. 29. Revenue rose 17% to $544 million, or 21% in constant currency, year over year. Earnings per share minus items jumped 21% to 52 cents, the fourth quarter in a row of double-digit gains. Both beat Wall Street estimates. First-quarter revenue guidance also beat, though EPS only met expectations. “Growth of reported billings and deferred revenue were not very good relative to expectations,” BMO Capital Markets analyst Keith Bachman wrote in a research note. “Red Hat’s quarter had something for both bulls and bears.” For the past seven quarters, deferred revenue grew by an average of 20% year over year. In fiscal Q4, it rose 17.6%. Billings rose 13%, compared with the average of 19% in the prior three quarters, Bachman wrote. He maintained an outperform rating on Red Hat stock but lowered his price target to 88 from 90, based on concerns about lower billings and cash flow. RBC Capital Markets maintained an outperform rating on Red Hat with a price target of 95. Needham kept a buy rating and price target of 98. Red Hat has made a strategic shift to cloud computing, a fast-growing tech field dominated by Amazon.com ( AMZN ) , Microsoft ( MSFT ) and Alphabet ( GOOGL ). In November, Red Hat announced a partnership with Microsoft, which made Red Hat software available on Microsoft’s Azure cloud platform. Amazon is being watched by analysts in light of its Amazon Web Services stepping up Linux offerings, in competition with Red Hat.