Broadcom Update :BUY Target Price $46

BRCM : NASDAQ : US$37.33
BUY 
Target: US$46.00

Technology — Hardware — Semiconductors and Related Technologies
STRONG QUARTER DRIVEN BY CONNECTIVITY GROWTH AND RESILIENT SERVICE PROVIDER
RESULTS; ALL EYES TOWARD ANALYST DAY

Investment recommendation:

Broadcom posted strong Q3/14 results with sales above our estimate driven by strong 20% Q/Q growth in Connectivity
sales with the inclusion of new 802.11ac WiFi solutions in key smartphone
launches including iPhone 6. Further, service provider sales were down only
roughly 2.5% Q/Q, better than feared given recent market commentary.
Finally, faster operating expense reductions post the decision to shut down
the cellular baseband business helped drive a solid beat on the bottom line.
We believe the stock will likely rebound post the recent sell-off in the group
and all eyes will then turn to Broadcom’s December 9 analyst day for future
growth strategy and increased capital returns commentary. We reiterate our
BUY rating and raise our target to $46 from $45 on increased estimates.

Investment highlights

 Q3/14 revenue of $2.26B was above our and consensus estimates of
$2.18B (see Figure 1) driven by a surprising rebound in baseband sales,
20% Q/Q Connectivity growth, and only a roughly 2.5% Q/Q service
provider sales decline in ING versus. Non-GAAP gross margin of 54.3%
was a bit below 55% guidance midpoint, but was very strong
considering the unexpected increase in baseband sales (roughly a 170
basis point gross margin headwind in total) and a greater mix of
Connectivity sales to large customers. We believe additional upside
exists to gross margin into 2015 for Q4/14 guidance of 55%. Non-GAAP
operating expenses were $10M below our estimate at $646M, and
management expects another $50M reduction in Q4/14 as baseband
costs continue to be wound down. Non-GAAP EPS was $0.91, $0.07
above our estimates and consensus.
 Given these significant cost savings of the baseband exit, we believe
gross margin can remain in the mid-to-high 50s and operating margin
will expand into the mid-to-high-20s during 2015. We maintain our
belief Broadcom’s core Home and Infrastructure businesses are well
positioned for solid growth and will benefit further from increased
management attention and investment post the baseband exit.

Valuation:

Our $46 price target is based on shares trading at roughly 14x
our 2015 pro forma non-GAAP EPS estimate.

Apple Update Target Price $ 120

AAPL : NASDAQ : US$99.76
BUY 
Target: US$120.00

Technology — Communications Technology — Wireless Equipment
STRONG RESULTS; RECORD IPHONE 6 UPGRADE CYCLE DRIVES SOLID Q1/F’15 GUIDANCE

Investment recommendation:

Apple reported strong September quarter results above our and consensus estimates. Consistent with our surveys
indicating very strong global iPhone 6 demand with limited supply, Apple
issued strong Q1/F’15 EPS guidance slightly above our estimates as Apple is
currently selling all iPhone 6 devices it can produce. Please see our October
13 report titled “Monthly surveys indicate very strong iPhone 6/6 Plus
demand; limited supply” for more details on our survey work.

We maintain our expectations for a record iPhone 6 upgrade cycle driven by strong
replacement sales to existing iPhone customers and strong high-end
smartphone market share gains due to our surveys indicating a greater mix
of Android smartphone consumers switching to the iPhone 6 smartphones
than during the iPhone 5 series launches. Mac sales were also above our
expectations as Apple gained material PC market share during the important
back-to-school season. We reiterate our BUY rating and increase our price
target to $120 from $115.

Investment highlights

 Apple reported Q4/F’14 sales of $42.1B and EPS of $1.42, above our
$39.7B/$1.28 and consensus of $40.0B/$1.30. The strong results were
driven primarily by stronger iPhone sales of 39.3M units at $606 ASP
versus our above-consensus 37.7M/$574 estimates.
 We believe Apple’s Q1/’15 sales guidance in the range of $63.5-66.5B
was adversely impacted by F/X from the stronger dollar and iPhone
demand well above Apple’s ability to supply throughout the December
quarter. Our updated estimates are at the high-end of Apple’s guidance
due to our surveys indicating an increasing sales mix of higher-ASP
64GB (versus 16GB) iPhone 6/6 Plus SKUs combined with a growing
demand for the higher-ASP iPhone 6 Plus, particularly in China. We
anticipate materially higher iPhone ASPs during Q1/F’15 and maintain
above-consensus iPhone ASP of $680 adjusting for deferred revenue.
 Given the strong results and guidance, we maintain our bullish F2015
product cycle thesis and raise our F’15/F’16 EPS estimates from
$7.77/$8.19 to $8.00/$8.50.

Valuation:

Our $120 price target is based on shares trading at roughly 14x
our F2016 EPS estimate.

BLACKBERRY – Lenova Takeover Rumors

TORONTO (Reuters) – BlackBerry (BB.TO) (BBRY.O) shares rose more than 3 percent on Monday after a news website said Chinese computer maker Lenovo Group might offer to buy the Canadian technology company.

Benzinga.com, citing an unnamed source familiar with the matter, said an offer $15 a share could come as early as this week.

Lenovo and BlackBerry said their companies did not comment on rumors and speculation.

Rumors of a Lenovo bid for BlackBerry have swirled many times over the last two years. Senior Lenovo executives at different times have indicated an interest in BlackBerry as a means to strengthen their own handset business.

The speculation reached a crescendo in the fall of 2013, when BlackBerry was exploring strategic alternatives.

Sources familiar with the situation however, told Reuters last year that the Canadian government had strongly hinted to BlackBerry that any sale to Lenovo would not win the necessary regulatory approvals due to security concerns.

BlackBerry’s secure networks manage the email traffic of thousands of large corporate customers, along with government and military agencies across the globe. Under Canadian law, any foreign takeover of BlackBerry would require government approval under the Industry Canada Act.

Canadian Prime Minister Stephen Harper told Reuters in February 2012 that he wanted BlackBerry to grow “as a Canadian company.” And in December 2011, then-Industry Minister Christian Paradis referred to the company as a “Canadian jewel.”

Analysts also have said any sale to Lenovo would face regulatory obstacles, but they have suggested that a sale of just BlackBerry’s handset business and not its core network infrastructure might just pass muster with regulators.

BlackBerry’s long-struggling handset business turned a profit before special items in the last quarter, after the Waterloo, Ontario-based company concluded its three-year restructuring program.

However, BlackBerry Chief Executive Officer John Chen has said he sees the handset business as core to the company for now, as it will foster sales growth over the next few quarters until the software and services business begins to generate new revenue streams in the first half of 2015.

Shares of BlackBerry were up 3.4 percent at $9.81 in early Nasdaq trading. Its Toronto-listed shares were up 3.1 percent at C$11.03.

You Can’t Buy a BlackBerry Passport – ‘Being Sexy’

It’s a good thing that some people can’t buy BlackBerry Ltd. (BBRY)’s Passport phone, Chief Executive Officer John Chen said.

That means it’s popular.

Disclosure : Blackberry remains one of Jack A. Bass Managed Accounts largest long positions.

Shortages of the business-focused smartphone show that efforts to turn around the unprofitable company, formerly known as Research In Motion Ltd. (BB), are taking hold, Chen told an MIT Enterprise Forum event today in Hong Kong. Demand for the phone — the first major new device released globally since Chen took charge in November — has exceeded the Canadian company’s expectations.

“I’m glad to have inventory issues. It shows that people want the phone,” said Chen, 59. “We took a very conservative approach and didn’t order too many.”

In his attempt to return the company to profitability by 2016, Chen is focusing on products such as the BlackBerry Blend feature that appeals to corporate customers because it helps them merge work and personal information. BlackBerry’s smartphone shipments sank to 13.7 million units last year from 52.3 million in 2010, according to data compiled by Bloomberg, as it struggled to compete with touch-screen devices produced by Apple Inc. (AAPL) and Samsung Electronics Co.

‘Being Sexy’

The Passport pre-sold 200,000 units in the first two days, selling out in six hours on BlackBerry’s website and within 10 hours on Amazon.com. The square-screen smartphone is designed for business users who write e-mails, study spreadsheets and read documents on their phones.
BlackBerry was focused on the 30 percent of the market that sees their phones as a tool, not as an entertainment portal, Chen said.

“That is not a space that we can afford to be in now. Being sexy and being a workhorse are two different things,” he said.

Chen, a Hong Kong native, said he doesn’t yet have a strategy for expanding into China. The company got 16 percent of its sales from the Asia-Pacific region during the fiscal year that ended in March, compared with 19 percent from the U.S., according to data compiled by Bloomberg. Chen said he hopes to get ideas when he attends the Asia-Pacific Economic Cooperation summit in Beijing next month, his first trip to the country as CEO.

“China is too big a market to ignore,” Chen said. “It is clear that BlackBerry needs to and should be in that market.”

Shares of BlackBerry rose 1.3 percent to $9.42 at 9:37 a.m. New York time.

Good News on Chesapeake : $5.4 Billion Divestment.

Readers will note that we have been out of CHK for a very long time but today’s news marks a real turn in the company . Finally it will have a substantial reduction in the debt that kept our manged accounts away from the sector and this stock in particular.

Chesapeake Energy Corp. (CHK), the company that forced out its co-founder last year amid an investor revolt, plans to sell natural gas and oil shale fields to Southwestern Energy Co. (SWN) for $5.4 billion in its biggest-ever divestment.

The transaction includes 1,500 wells and drilling rights across 413,000 acres in the southern Marcellus Shale and eastern Utica Shale in Pennsylvania and West Virginia, Oklahoma City-based Chesapeake said in a statement today.

Chief Executive Officer Doug Lawler is exiting some shale prospects to devote drilling crews and rigs to oil-rich formations that have delivered rates of return in excess of 20 percent. Before today, Chesapeake had sold or spun-off more than $3 billion in gas fields, office buildings, pipelines and rigs this year, as it unwinds deals done by former CEO Aubrey McClendon.

Today’s announcement marks a major step in Chesapeake’s transformation and a dramatic improvement in our financial strength as we seek to maximize value for our shareholders,” Lawler said in the statement.

The transaction, which is expected to close before the end of the year, won’t impact Chesapeake’s production growth targets, Lawler said. Chesapeake, which had fallen 31 percent this year, surged 11 percent to $19.65 at 8:45 a.m. in New York, before the start of regular trading. Southwestern fell 5.3 percent to $33.80.

Reserves Boost

For Southwestern, the transaction represents the first major foray into oil-rich shale for a company that has been almost exclusively focused on gas production. Wells that are part of the deal produce the equivalent of 56,000 barrels of crude a day, 45 percent of which is oil and so-called gas liquids such as propane. The acquisition also is Southwestern’s largest-ever deal, according to data compiled by Bloomberg.

The purchase will increase Houston-based Southwestern’s reserves by one-third to the equivalent of 890 million barrels of crude at a cost of about $24 per barrel.

“We think the sale is transformational for both parties,” Scott Hanold, an analyst at RBC Capital Markets, said in a note to clients today.

A shortage of gas-processing plants and pipelines in the Appalachian region could delay Southwestern’s plans to expand output from its new assets. Those bottlenecks should ease in the coming years as more infrastructure is added, Hanold wrote.

Dismantling Empire

In an internal e-mail today, Lawler announced plans for a town hall-style meeting with employees on Oct. 20 to discuss the impact of the sale and long-term growth plans. Senior managers and human resources executives have already met with employees at the affected divisions to talk about transitioning to Southwestern, he said in the e-mail.

Chesapeake announced plans in July to expand in the Rocky Mountains amid Lawler’s campaign to reduce costs, unload unprofitable gas fields and untangle complex financing arrangements created during the reign of his predecessor.

Since becoming CEO two months after McClendon’s dismissal in April 2013, Lawler has outperformed the average gas and oil production estimates of analysts in quarterly Bloomberg surveys.

Southwestern expects to sell equity and debt before closing to finance the transaction. Bank of America Corp. advised Southwestern and will provide a $5 billion bridge loan.

Statoil ASA (STL), co-owner of some of the West Virginia and Pennsylvania assets, has 30 days to acquire the stake at the agreed price, Southwestern said.

(Southwestern scheduled a conference call for 11 a.m. New York time. To listen, dial 877-407-8035 in the U.S. and 201-689-8035 from overseas.)

Netflix – Lower Price Target

NFLX : NASDAQ : US$448.59

BUY
Target: US$450.00

COMPANY DESCRIPTION:
Netflix is the world’s leading Internet television network
with over 50 million members in more than 40 countries
enjoying more than one billion hours of TV shows and
movies per month, including original series. For one
monthly price, Netflix members can watch as much as
they want, anytime, anywhere, on nearly any Internet connected device.
Telecommunications
LOWERING ESTIMATES, TARGET ON WEAK ADDS AND GUIDANCE; BUY
Investment recommendation
Netflix reported results after the close with weaker-than-expected
subscriber trends notably in the US. Although financial results were
largely in line with expectations, the company believes that the $1 price
increase – in addition to certain market factors including large-scale
credit card data breaches – contributed to the net addition weakness.
While we believe the shortfall is due to neither intensifying competition
in this nascent category nor penetration maturation, we are nevertheless
reducing our estimates and price target accordingly.

Investment highlights
 Material shortfall on subscribers – While we anticipated domestic
add trends would rebound strongly following dramatic network
improvements during the quarter, the price increase appears to
have dampened the impact. Despite an improved content library,
managing any price increase relative to such improvements remains
a delicate balancing act, in our view.

 Financial metrics remain solid – We note financial metrics for Q3/14
were largely in line with expectations. Adjustments to our forecast
reflect a lower subscriber base, higher marketing and G&A spend.
Continue to play the secular trend – Despite the fact that Q3/14
produced unexpectedly-weak subscriber trends and a weaker-than expected outlook, we continue to believe management will refine
their approach in determining the appropriate mix of pricing
changes to content improvements that will continue to redefine the
programing as we know it. With the changes, however, we are
reducing our estimates and price target to $450 from $550

Dry Bulk Sector : we are still out of the sector – watchlist only

Dry Bulk Shipping

The dry bulk shipping industry is affected by numerous factors—like world economies’ growth and commodity supply and demand. Considering the various world economies, China’s economic growth rate impacts dry bulk shipper’s movement. China is an important commodity market.

The sell-off

Since the beginning of September 2014, dry bulk shipping companies—like Navios Maritime Holdings Inc. (NM), DryShips Inc. (DRYS), Knightsbridge Shipping Ltd. (VLCCF), and Safe Bulkers Inc. (SB)—have all suffered great losses.

NM fell by 47%. DRYS fell by 42.9%. VLCCF fell by 41.8%. SB fell by 35.8%.

The Guggenheim Shipping ETF (SEA) tracks a variety of major shipping companies worldwide. It fell by 17.8%. It underperformed the S&P 500. The S&P 500 decreased by 4.8%.

Important indicators

Why have these dry bulk shipping companies fallen so much over the last few months? What do the industry fundamentals look like? We’ll use key indicators to help us answer these questions throughout this series.

The dry bulk shipping companies transport dry bulk—like iron ore, coal, and grain—around the world using vessels.

China is one of the largest commodity importers in the world. China’s manufacturing and real estate sector remains a key driver of dry bulk trade throughout the world.

At an industry level, iron ore exports out of Australia and Brazil are key data points to follow. Since coal is used to generate electricity, we’ll take a look at China’s recent thermal power output trends.

To gauge industry players’ sentiment and expectations of the industry outlook, we’ll look at newbuild and second-hand vessel prices. We’ll look at the Capesize and Panamax vessels in particular. We’ll also look at ship ordering activities.

We’ll provide the Baltic Dry Index’s fourth quarter outlook. We’ll also discuss analyst opinions on dry bulks—provided by RS Platou.

We’ll start by looking at the Baltic Dry Index. It’s an Index that reflects the overall rate of transporting dry bulks on water.

Why the Baltic Dry Index is decreasing

Baltic Dry Index

The Baltic Dry Index measures the cost of major raw materials. The raw materials are transported by sea in the global economy. It indicates a strict demand supply price situation. When the cost to move goods by ship is lower, there are less goods to ship.

The Baltic Exchange Dry Bulk Index is a combination of rates for different ship sizes. It factors in the average daily earnings of Capesize, Panamax, Supramax, and Handysize dry bulk transport vessels. Most of the vessel classes that make up the Index are at their lowest level for this time of year—since at least 2006. Capesize ships are an exception. They’re used to carry iron ore or coal cargoes of ~150,000 deadweight tonnage (or DWT).

September performance

The Baltic Dry Index recorded a decreased percentage in trading to 1,063 on September 30, 2014, from 1,151 at the beginning of the month. So far in October, the Index decreased more to 1,029 as of October 6, 2014. Capsizes pulled down the Index by the maximum rate. On a year-over-year (or YoY) basis, the Index recorded a decreased percentage from 2,115 on October 7, 2013. Since October 2, the iron ore ship charter cost—charter cost to ship iron ore—declined the most.

Impact on companies

How the Baltic Dry Tanker Index performs, especially its YoY growth, is one factor that has significant implications for dry bulk companies.

Historical trends suggest strong third and fourth quarters. Investors should watch the Index for any rate of increase.

As a result, the following dry bulk companies—like Star Bulk Carriers Corp. (SBLK), Safe Bulkers Inc. (SB) Baltic Trading Inc. (BALT), and Knightsbridge Tankers Ltd. (VLCCF), and the Guggenheim Shipping ETF (SEA)— could benefit in the short-term.

However, if the YoY changes remain in the negative, then the long-term outlook for these companies will remain in the negative
Company downgrades

Some of the largest names in the sector—including Capesize giant Knightsbridge Shipping Ltd (VLCCF) and Danish owner Norden—have also been downgraded in RS Platou’s recent quarterly report.

Knightsbridge is the largest Capsize owner listed in the U.S. It has been cut to sell from buy. Norden was downgraded to neutral.

Meanwhile, in the weaker dry cargo market, Platou also downgraded Diana Shipping (DSX) and Golden Ocean. It downgraded them from buy to neutral.

Platou analysts, Frode Morkedal and Herman Hildan, said that Knightsbridge is an attractive long-term investment vehicle. In the near term, weaker rates will bring a lower dividend.

Norden was downgraded to neutral. This was a result of the expected marginal rate improvement. It will pull its operating numbers back to black in 2015. However, the numbers won’t be at a level that justifies a higher stock price.

This could impact other companies in the industry like DryShips Inc. (DRYS), Safe Bulkers Inc. (SB), and the Guggenheim Shipping ETF (SEA).

Oil Enters Bear Market

Brent Falls to Lowest Since 2010 After IEA Cuts Forecast

Brent crude fell to the lowest level in almost four years after the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. West Texas Intermediate slipped for the fifth time in six days.

Futures dropped as much as 3.1 percent in London and 2.1 percent in New York. Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, the Paris-based agency said in its monthly market report. U.S. crude supplies probably grew by 2.5 million barrels last week, according to a Bloomberg survey of analysts before a report from the Energy Information Administration on Oct. 16.

Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output. Saudi Arabia won’t alter its supplies much between now and the end of the year, a person familiar with its oil policy said on Oct. 3.

“The IEA report is killing Brent,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “This is the fourth month in a row where they’ve cut their demand forecast. There’s tremendous downside risk for the market.”

Fourth Month

Brent for November settlement declined $2.54, or 2.9 percent, to $86.35 a barrel on the London-based ICE Futures Europe exchange at 10:24 a.m. in New York. It slipped to $86.17, the lowest intraday price since Dec. 1, 2010. The volume of all futures traded was 68 percent above the 100-day average for the time of day. Prices have decreased 22 percent this year.

WTI for November delivery dropped $1.71, or 2 percent, to $84.03 a barrel on the New York Mercantile Exchange. The contract settled at $85.74 yesterday, the lowest close since December 2012. Volume was 72 percent higher than the 100-day average. The U.S. benchmark grade traded at a $1.96 discount to Brent, down from $3.15 at yesterday’s close.

The IEA reduced its estimate for demand growth this year for the fourth month in a row, meaning oil consumption will expand by about half the rate of 1.3 million barrels a day anticipated in June. The IEA cut its 2015 demand growth forecast by 100,000 barrels a day to 1.1 million. About 200,000 barrels a day less crude will be needed from OPEC this year and next than estimated previously, the agency said.

Market Share

OPEC, which supplies about 40 percent of the world’s crude, is raising output as its members compete for market share while seeking to meet increased domestic demand. The group pumped 30.935 million barrels a day in September, the most since August 2013, according to a Bloomberg survey. The gain was led by Libya, where output climbed by 280,000 barrels a day to 780,000, the fifth straight increase.

“The recovery in Libyan oil production has pushed up total OPEC output at a time when demand growth is slowing,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “OPEC has a serious problem.”

Iraq said on Oct. 12 that it will sell its Basrah Light crude to Asia at the biggest discount since January 2009, following cuts by Saudi Arabia and Iran. Middle East producers almost always follow the lead of Saudi Arabia, OPEC’s largest member when setting export prices. The Saudis need to deepen price cuts for Asia by between 70 cents and $1 a barrel to restore a competitive position against other Middle Eastern and West African suppliers, according to JPMorgan Chase & Co.

Divergent Views

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the price slump prompted Venezuela to call for an emergency OPEC meeting. The group is scheduled to gather on Nov. 27 in Vienna.

The EIA, the Energy Department’s statistical arm, will release its weekly petroleum inventory report on Oct. 16 at 11 a.m. in Washington, a day later than usual because of yesterday’s Columbus Day holiday. Crude supplies rose 5.02 million barrels to 361.7 million in the week ended Oct. 3, the biggest increase since April, EIA data showed.

“The market isn’t expected to get any relief from Thursday’s inventory numbers,” Yawger said. “We’re looking for it to show a substantial build in crude supplies, coming on top of a 5 million-barrel build the previous week. There’s plenty of crude on hand.”

The report will probably show that gasoline stockpiles dropped by 1.55 million barrels in the week ended Oct. 10, according to the median estimate in the Bloomberg survey of eight analysts. Inventories of distillate fuel, a category that includes diesel and heating oil, are projected to have slipped by 1.65 million barrels.

Fuel Prices

Bankers’ Petroleum

 

COMPANY DESCRIPTION:

Bankers’ operations are focused on developing heavy oil assets in Albania, which include rights to develop the Patos-Marinza and Kuçova heavy oil fields (both 100% interest) during the 25-year licence period. Bankers has an opportunity to unlock immense potential from its 5.4 billion barrels oil-in-place Patos-Marinza field by applying modern techniques to optimize recovery factors, expand its resource base, and increase production.

All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production CHANGING TIDES IN THE MARKET;

RAISING TARGET PRICE

Investment recommendation Following Bankers’ most recent marketing tour, we believe investor sentiment continues to strengthen. In our view, the shift is attributable to several quarters of solid production growth, a positive reserve update and the company’s consistency in meeting production guidance. We also believe that the market has generally become more receptive to international investments and to Bankers’ story in particular.
Investment highlights

In our view, the markets have become more receptive to the risk associated with international E&Ps.
 Given the decline in Brent prices over the last couple of weeks, we believe Bankers’ strong share price performance relates to ongoing marketing efforts by the company.
Valuation We are maintaining our BUY recommendation and increasing our target price from C$6.00 to C$7.25/share.

Our revised target now accounts for 80% of the risked upside in our model. We maintain our view that there will always be some apprehension toward Albania-based investments, which may prevent full recognition of upside potential. At current prices, we project a potential return to target of ~30%.
Risks In additional to general commodity risk, we believe Bankers is subject to country risk associated with its Albania operations. While the company has increased efforts to improve netbacks, we believe potential large- scale enhanced recovery efforts

Radius Health Raising Target Price to $ 30

RDUS : NASDAQ : US$23.11
BUY 
Target: US$30.00

COMPANY DESCRIPTION:
Radius is a biotechnology company focused on
discovering, developing, and commercializing drugs for
endocrine disorders. Its wholly owned lead asset is
abaloparatide, in Phase 3 for treatment of
postmenopausal osteoporosis.
All amounts in US$ unless otherwise noted.
Life Sciences — Biotechnology
RAD1901 EARLY, BUT INTERESTING FOR BRAIN METASTASES
Investment highlights
$1.7B Seragon acquisition advantageous to RAD1901
Roche’s recent ~$1.7B acquisition of Seragon for its early-stage SERD
(ARN-810) suggests healthy interest in the SERD area, including
RAD1901. We also believe RAD1901’s potential to cross the blood brain
barrier could be an advantage vs. current therapies. Additionally,
RAD1901 may avoid the uterine cancer and bone loss risk associated
with AIs or tamoxifen, possibly permitting RAD1901 to earlier treatment
settings in hormone receptor positive metastatic breast cancer (MBC).
RAD1901 early, but could address ~$1.4B market in MBC
Analysis shows RAD1901 has potential to penetrate the ~$850M
hormone receptor positive MBC population and ~$540M MBC + brain
metastases market. We do not include RAD1901 in our valuation given
its early stage, but believe continued positive data could contribute to
long-term upside for RDUS.
Recent Phase I update at EORTC conference promising
New highlights from the Phase I MTD trial for RAD1901 showed
suppression of ER signals via PET scans after only six days of dosing, a
move forward towards initiating a 1b clinical trial, possibly starting
YE14. We expect top-line data from the Phase I MTD trial YE14 at
SABCS and results from the 1b trial in MBC presented at ASCO in 2015.
Raising price target to $30 from $26
We are raising our price target to $30 from $26 given prior market
expansion for injectable non-bisphosphonate drugs. We believe
abaloparatide will have better efficacy data compared to Forteo, which
could expand the market.

We are raising our US peak sales estimate to ~$820M vs. ~$650M previously.

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