Exact Sciences Update Target Price Now $23

EXAS : NASDAQ : US$21.04 BUY 
Target: US$23.00

COMPANY DESCRIPTION:
Exact Sciences Corporation is a molecular diagnostics
company focused on the early detection and prevention
of colorectal cancer. It is developing a patient-friendly,
stool-based (sDNA) test known as Cologuard, for the early
detection of colorectal pre-cancer and cancer. The
company is based in Madison, WI.
All amounts in US$ unless otherwise noted.

Life Sciences — Biomedical Devices and Services
AFTER MAYO CLINIC, LOOK FOR OTHER SYSTEMS TO FOLLOW; RAISE PT TO $23
Investment recommendation
We reiterate our BUY rating on EXAS following yesterday’s conference
call hosted by EXAS and the Mayo Clinic, which announced it is the first
healthcare system to adopt Cologuard. While the deal is a positive, we
think the bigger opportunity is the likelihood for additional systems to
come onboard as the publicity raises awareness among primary care
doctors. We raise our price target to $23 from $21.
Investment highlights
 Mayo Clinic endorsement a positive. EXAS will begin shipping
Cologuard tests to Mayo Clinic next week, gradually as doctors order
on behalf of patients (not one large order from the Mayo Clinic). We
expect additional systems will come on line, most likely after the
company obtains its preliminary Medicare reimbursement amount
by end of August/early September (no change to timing).
 National coverage decision. Following the prelim. reimbursement
amount, look for a comment period, followed by a final national
coverage decision by end of October/November. At that time, all
individuals in the US age 65+ would be covered under Medicare.
 USPSTF “A” or “B” decision mitigates private payor risks. We
expect USPSTF will grant Cologuard an A or B rating by the end of
2015; thus, under the ACA, Aetna’s “no coverage decision” of
Cologuard will not be meaningful by end of 2015, in our view.
 Divide and conquer. Management is wasting no time, dividing and
conquering initial phases of commercializing Cologuard: meeting
with payors, raising awareness with KOLs, and developing its
marketing strategy, among other critical launch activities

DexCom

DXCM : NASDAQ : US$38.21
BUY 
Target: US$48.00

COMPANY DESCRIPTION:
DexCom is a medical device firm focused on pioneering
technologies for the continuous monitoring of glucose
levels in people with diabetes. The company has received
FDA approval for its short-term continuous glucose
monitoring system (CGMS), the DexCom STS system, and
in June 2007 gained approval for its second-generation
STS Seven system.

Life Sciences — Biomedical Devices and Services
DXCM Q2/14 CRUSHES IT; THE BEST IS
YET TO COME; REITERATE BUY, PRICE
TARGET TO $48
Investment recommendation
We reiterate our BUY rating following strong Q2/14 results that came in
well above our and consensus estimates. Demand for the Gen4 system
continues, with pediatric sales demonstrating the potential to be a strong
lever for growth throughout 2014. Specifically, pediatrics accounted for
25-30% of new patient additions in the first full quarter of sales and are
expected to grow as the company further penetrates the pediatric
endocrinology market. Lastly, the JNJ/Animas VIBE SAP in the US and
DexCom Share both present potential upside to current estimates in the
H2/14.
Investment highlights
 Q2/14 results were well above our/Street estimates with product
revenues of $58.2M, up 64% Y/Y, well above our $51.7M estimate.
 Both durable revenues (~$17.5M) and consumable sales (~$40.7M)
beat our estimates of $14.6M/$37.1M, respectively.
 Product GMs of 67.9% were up Y/Y and beat our 66.6% estimate.
 2014 guidance was raised with product revenues now expected in the
range of $220M-$235M (~40%-50% growth Y/Y), up from $205M-
$225M previously.
Valuation
We are increasing our price target to $48.00 from $40.00. We base our
valuation on an 11.8x EV/sales multiple applied to our 2015E revenue
estimate of $301.0M.

Alere

ALR : NYSE : US$34.75
BUY 
Target: US$45.00

COMPANY DESCRIPTION:
Alere is the largest provider of rapid point-of-care (POC)
diagnostic products and the second largest disease
management franchise. Its product line-up includes areas
such as infectious disease, cardiology, oncology, drugs of
abuse, and women’s health. The company operates
through three business segments — Professional
Diagnostics Products, Consumer Diagnostics, and Health
Management — while addressing more than 100
diseases

Life Sciences — Biomedical Devices and Services
TRANSITION WILL TAKE TIME – Q2 WAS WEAK,
BUT SELL-OFF LOOKS OVERDONE; REITERATE BUY
Investment recommendation
Alere reported an ugly Q2 that missed our/Street expectations on both
the top and bottom line. While admittedly the company is on a slower
path to operating improvements than we were expecting, we believe an
Alere under new management is better positioned to unlock shareholder
value by divesting noncore assets and paying down debt. Reiterate BUY

Investment highlights
Empowering Namal. For the first time, interim CEO Namal Nawana
has been empowered by the board to drive change and will now be
tasked to oversee asset divestitures. While we expect ongoing slow
growth in the short term, we believe the company’s strategy is
sound and will likely take through 2015 to fully realize the changes.

A strong divestiture message. Alere announced it plans to divest HM
by the end of 2014, which helps eliminate an albatross around the
board’s neck and better enables the company to focus on its core.

Ugly Q2. Q2 Adj. EPS of $0.42 missed our/Street’s $0.58. Revs of
$738M (-3%) missed our $750M/Street’s $747M

Pipeline. On a positive note, ALR filed CLIA waiver for influenza and
looks to commercialize the first CLIA-waived MDx flu test in time for
the 2014-2015 flu season

IDEXX Laboratories Raising to BUY

 

IDXX 

now at $132

Target Price $148

Life Sciences — Biomedical Devices and Services
RAISING ESTIMATES ON CATALYST ONE
PULL-THROUGH; UPGRADE TO BUY, RAISE
PRICE TARGET TO $148
Investment recommendation
We upgrade IDEXX Laboratories to BUY from Hold and raise our PT to
$148 from $116. We believe the rollout of Catalyst One in Q4/14 will
enable IDEXX to capture share in the lower-volume vet market and
accelerate 2015 revenue growth to 9%. We believe IDXX can achieve
double-digit organic revenue growth by 2016 driven by increased
penetration and conversion to Catalyst Dx, increased cross-selling in the
US from its revamped sales force, and significant global expansion.
Investment highlights
 Catalyst One is another growth driver. We raise our 2015 revenue
estimate by $30M to $1,635M (+9%) vs. consensus of $1,616M and
raise our 2015 EPS estimate to $4.38 (+14%) from $4.32. We
believe IDXX’s roll-out of Catalyst One (a scaled-down version of the
Catalyst Dx instrument) in Q4/14 will help accelerate consumable
reagent growth to 13% in 2015 and 14%+ in 2016.
 Introducing 2016 estimates. We introduce our 2016 EPS estimate of
$5.00, which assumes accelerating EPS growth of 14%+ on
revenues of $1,800M (+10%), consistent with IDXX’s goal of
achieving double-digit organic revenue growth.
 Balanced organic growth. We believe IDXX has solid visibility for
organic growth (8.8% average in the last three quarters) both within
the US (upgrade customers, modest share gains, new product revs)
and OUS. We believe global expansion in the EU, Brazil and Asia
represent major LT growth drivers, as countries outside the US
begin to approach levels of sophistication practiced by US Vets.

Exact Sciences Target Price $ 18

EXAS : NASDAQ : US$13.65

BUY 
Target: US$18.00

Life Sciences — Biomedical Devices and Services
CONFIDENCE BUILDS IN TIME OF UNCERTAINTY, SCENARIO ANALYSIS TAKES OUR PT TO $18, REITERATE BUY
Investment recommendation
We believe EXAS’ Cologuard test for colorectal cancer and pre-cancer
will soon obtain FDA approval and good preliminary Medicare
reimbursement. We are buyers of EXAS ahead of a series of catalysts,
the first of which is FDA approval, likely by July-end. Reiterate BUY.
Investment highlights
 Raising numbers based on our scenario analysis. We think EXAS
has ~20% upside in the next month based on the base case of our
scenario analysis (Figure 1), assuming FDA approval and a $400
CMS reimbursement. Given our higher conviction that Cologuard
can convert 8%, 14% and 21% of the 10.2M/year FIT/FOBT testing
market (see Figure 3) for 2015, 2016 and 2017, we raised our
revenue estimates to $111M, $202M and $321M, above consensus’
$87M, $191M and $320M for 2015, 2016 and 2017, respectively.
 Three scenarios for the stock. We think EXAS trades up to $16
under our base case (+5% on FDA approval; +12% on CMS
reimbursement of $400); $20 under our bull case (FDA approval;
$500 Medicare decision); and trades down to $8 in our bear case
(no FDA approval), the latter of which we assign a 5% probability.
 Higher patient compliance should increase the size of the market.
While patient compliance for colonoscopy is low at 38%, total
compliance rates rise to 69% when a physician offers the patient a
choice of either colonoscopy or FIT/FOBT. We believe the addition
of a superior non-invasive test can expand the non-invasive test
market and help EXAS achieve its goal of ~80% patient compliance.

Why Investors Love Drug Companies

  APRIL 28, 2014

Few people have done better in the recent stock boom than biotech investors. Biotech was the best-performing market sector last year, and in the past two years its stocks rose a hundred and twenty per cent. But suddenly, in late March, the stocks tanked, some falling more than twenty per cent in a few weeks. The selloff can be explained to some extent as a market correction and part of a wider flight from risk. But the real story concerns a revolutionary new hepatitis-C drug developed by the biotech giant Gilead.

Hepatitis C affects 3.2 million Americans; untreated, it leads to scarring of the liver and to liver cancer. Until now, the best treatments cured only about half of patients and often had debilitating side effects. But in December the F.D.A. approved the first in a new wave of hep-C drugs, Gilead’s Sovaldi. This is huge news—not just in medicine but on Wall Street. Vamil Divan, a drug-industry analyst at Credit Suisse, told me, “Sovaldi and the other new hep-C drugs are great drugs for a tough disease.” Sovaldi can cure ninety per cent of patients in three to six months, with only minor side effects. There’s just one catch: a single dose of the drug costs a thousand dollars, which means that a full, twelve-week course of treatment comes to more than eighty grand.

For Gilead this is great. Take an expensive treatment, multiply by a huge number of hepatitis-C patients, and you get a very lucrative business proposition. It’s also good news for patients. But it’s a big problem for insurers and taxpayers, who—given that hepatitis-C patients have an average annual income of just twenty-three thousand dollars—are going to end up footing much of the bill. There has been an uproar of criticism. Private insurers blasted Gilead’s pricing strategy; the pharmacy-benefit manager Express Scripts said that it wanted its clients to stop using Sovaldi once an alternative appears. Then, on March 20th, three Democratic members of Congress sent Gilead a letter asking it to explain why Sovaldi costs so much. The letter had no force of law, but it spooked investors by raising the spectre of what they most fear—price regulation.

Investors love drug companies in part because they often have tremendous pricing power. Drugs designed to fight rare diseases routinely cost two or three hundred thousand dollars; cancer drugs often cost a hundred grand. And, whereas product prices in most industries drop over time, pharmaceuticals actually get more expensive. The price of the anti-leukemia drug Gleevec, for instance, has tripled since 2001. And, across the board, drug prices rise much faster than inflation. The reason for this is that prices for brand-name, patented drugs aren’t really set in a free market. The people taking the drugs aren’t paying most of the cost, which makes them less price-sensitive, and the bargaining power of those who do foot the bill is limited. Insurers have to cover drugs that work well; the economists Darius Lakdawalla and Wesley Yin recently found that even big insurers had “virtually zero” ability to drive a hard bargain when it comes to drugs with no real equivalents. And the biggest buyer in the drug market—the federal government—is prohibited from bargaining for lower prices for Medicare, and from refusing to pay for drugs on the basis of cost. In short, if you invent a drug that doctors think is necessary, you have enormous leeway to charge what you will.

Still, this is an inherently fragile arrangement, dependent on our willingness to keep paying whatever the companies ask. The signs of a backlash are clear. More than a hundred cancer specialists have called for action to lower the price of cancer drugs. The chair of M. D. Anderson’s leukemia department co-authored an article saying that the cost of cancer drugs is “out of control.” The United Kingdom has announced a cap on annual drug spending, and Germany has adopted stringent rules to determine what drugs it pays for. Now Sovaldi has people talking again about allowing the U.S. government to do something similar. “It’s a growing issue, and this outcry may be a sign that we’re going to see more pushback,” Divan said. Every other developed country, after all, has some form of drug-price regulation, and it’s not as if drug companies then abandon those markets. Gilead sells Sovaldi in the U.K. for fifty-seven thousand dollars per treatment, nearly thirty per cent less than the price we pay.

Price restrictions have always been a political non-starter here, but at some point the math of the situation will be hard to resist. According to a study by the research group I.S.I., by 2018 spending on “specialty drugs” like Sovaldi could account for half of all drug spending in the U.S. Furthermore, one traditional argument against price controls is looking weaker: biotech companies claim that prices need to be high to reward risky and expensive innovation, but the fact that they’re churning out drugs and profits so consistently seems to undermine that claim. Biotech, in other words, may become the victim of its own success: the bigger the profits, the bigger the likelihood of regulation.

You might think that this prospect would encourage companies to be more cautious. But, if you assume that price controls are coming, the rational play is to squeeze out all the profits you can now. The uproar over Sovaldi may, somewhere down the line, help contain drug prices. But in the short run it could well make drugs even more expensive. And that’s what you call a serious side effect.

 

At AMP we are looking to Harris and Harris Group ( TINY) – little know and about to file for three or more IPOs in the next year.They avoid long periods of research and expensive investing by investing in advanced research projects.

OPKO Health ( OPK) is following the same route and has the backing of Dr. Phillip Frost – former head of TEVA.

or to the cynic

http://www.davidicke.com/headlines/

 

OPKO Health QRT. Report

OPKO Announces First Quarter Operating Results

  • 4Kscore™ Test successfully completed clinical validation study and launched on March 31, 2014
  • All RAYALDEE™ Phase 3 clinical trials have completed enrollment on schedule – top line data expected for release mid-2014
  • Cash and cash equivalents totaled $156.4 million providing sufficient liquidity to fund development programs

MIAMI–(BUSINESS WIRE)– OPKO Health, Inc. (NYSE:OPK), a multi-national biopharmaceutical and diagnostics company, today reported operating and financial results for its first quarter ended March 31, 2014.

Business Highlights

  • 4KscoreTest Launch: During the first quarter 2014, OPKO successfully completed the 4Kscore Test clinical trial in the U.S. and on March 31, 2014, launched the 4Kscore Test in the U.S. through its CLIA-accredited OPKO Lab in Nashville, TN. OPKO expects to begin offering the 4Kscore Test through its Spanish subsidiary in late 2014 and through its other subsidiaries shortly thereafter. The laboratory-developed test is designed to enhance the prostate biopsy decision making process that, in the U.S., leads to approximately 1 million biopsies being performed annually, with 80% of the results indicating no cancer or a low-grade cancer. The 4Kscore Test will help to reduce unnecessary prostate biopsies by providing information on the risk (probability) of having high-grade prostate cancer.
  • 4Kscore Data Presentations: OPKO will present data from its recently completed U.S. clinical validation study at two upcoming conferences: the American Urological Association (AUA) inOrlando, which selected “The 4Kscore Test as a Predictor of High-Grade Prostate Cancer on Biopsy” as a Late-Breaking Abstract for presentation in Plenary I on Sunday, May 18, 2014; and, the 83rd Annual Meeting of the New England Section of the AUA in October 2014 in Newport.
  • Completed Patient Enrollment in the Third Phase 3 Trial of RAYALDEEThis trial is a 6-month open-label extension of two ongoing identical randomized, double-blind, placebo-controlled, multi-site pivotal phase 3 studies for RAYALDEE intended to support marketing approval in the U.S. This third study is designed to evaluate the product’s long-term safety and efficacy in treating secondary hyperparathyroidism (SHPT) in subjects with stage 3 or 4 chronic kidney disease (CKD) and vitamin D insufficiency. OPKO is on schedule for releasing top-line pivotal data in the third quarter of 2014 and filing a New Drug Application (NDA) with the FDA in the first quarter of 2015.
  • Inspiro Acquisition: In April, OPKO entered into a definitive agreement to acquire Inspiro Medical Ltd., an Israeli medical device company with a new platform to deliver small molecule drugs such as corticosteroids and beta agonists, as well as its own new drug working with a novel mechanism of action, to treat respiratory diseases. Inspiro’s Inspiromatic™ is a “smart” easy-to-use dry powder inhaler with several advantages over existing devices.
  • Rolapitant Continues on Schedule For a Mid-Year NDA Filing: OPKO’s partner, TESARO announced it is on track for its NDA filing for rolapitant mid-2014 and anticipates completing a dose study for the intravenous (IV) formulation during the second quarter of 2014. The IV formulation is expected to be launched approximately one year after the oral product becomes available.
  • Key Management Positions Added: OPKO made a number of important additions to its management team: Greg Stanley joined OPKO as Vice President of Sales and Marketing for the Global Diagnostics Business Unit, and Scott Toner joined OPKO as Vice President, U.S. Marketing and Sales for the Renal Division.
  • Establishment of a Global Supply Chain Infrastructure and Holding Company Based in Dublin, Ireland: OPKO is expanding its presence by establishing a global supply chain operation and holding company in Ireland. OPKO is recruiting employees to support the ongoing launch of the 4Kscore diagnostic test and in anticipation of the commercial launch of RAYALDEE. The Irish operation is also expected to manage the global supply of other products over the next several years and to serve as a holding company for many of OPKO’s non-U.S. subsidiaries.
  • In January, OPKO completed the acquisition of Laboratorio Arama de Uruguay Limitada (“Arama Uruguay”), a privately-owned company located in Montevideo, Uruguay. Arama Uruguay will expand OPKO’s presence in Latin America and complement the business activities of its operations in Chile and Mexico, as well as permit commercialization of OPKO’s products currently commercialized and those in development.

GW Pharamaceuticals BUY Target Price $ 102

GWPH : NASDAQ : US$69.81
GWP : AIM
BUY 
Target: US$102.00

COMPANY DESCRIPTION:
GW Pharmaceuticals is focused on discovering, developing and
commercializing cannabinoid pharmaceutical-grade drugs. Lead
product Sativex is an oromucosal spray to treat MS symptoms,
cancer pain, and neuropathic pain, now approved in the EU and
other ex-US territories, and in Ph3 program for cancer pain. It has
two product candidates in Ph2 trials in diabetes and
inflammation, and earlier stage programs for epilepsy and
psychiatric illness.

All amounts in US$ unless otherwise noted.

 

Life Sciences — Biotechnology
FQ2/14: DRAVET’S IND OPEN, GAME
ON–RAISING TARGET TO $102
Investment recommendation
Reiterate BUY, raising target to $102 from $65 on addition of
Epidiolex potential in Dravet’s and Lennox-Gastaux to model. We
now add intractable pediatric epilepsy to our model based on the
new Dravet’s IND and clinical path. Our $102 target is based on a
sum-of-the-parts analysis of a pipeline pNPV and EU Sativex DCF.
Investment highlights
 $(0.56) EP/ADS vs consensus of $(0.34); our $(0.34) estimate. Q2
revenue was $12.6M vs. $12.9M consensus; our $13.0M
estimate.
 Positive FDA guidance meeting, new IND gives major clarity on
clinical path forward. The pre-IND meeting, held Feb 2014,
confirmed investigational CMC standards, the upcoming Phase
2/3 two-part, placebo controlled trial design, and utility of future
open-label safety data. The IND is now open and we anticipate
trial start in H2/14 (details later in the note). Market potential in
Dravet’s and Lennox-Gastaux comprises $62 of our valuation.
 Upcoming catalysts for Sativex in cancer pain, ulcerative colitis
(UC) and Glioma. We think there is strong POC for activity of
THC/CBD in the gut; and we think Ph2 UC trial (data due H2/14)
has a high chance of success with excellent market potential.
First Ph3 data from the US Sativex cancer pain studies are also
due around the end of 2014. Safety data for a Ph1/2 trial in
Glioma are expected on an initial cohort this year

Endologix BUY

ELGX : NASDAQ : US$12.68

BUY 
Target: US$17.50

COMPANY DESCRIPTION:
Endologix develops, manufactures and markets
minimally invasive treatments for vascular diseases,
namely abdominal aortic aneurysms (AAA).

All amounts in US$ unless otherwise noted.

Life Sciences — Biomedical Devices and Services
FIRM STEP IN THE RIGHT DIRECTION, NELLIX  DELIVERING; BUY
Investment recommendation
We recommend investors add to positions in ELGX on the heels of an
encouraging first quarter, highlighted by the strong Nellix uptake in Europe,
which we believe is a precursor of great things to come for this technology WW.
Nellix holds the potential of making ELGX one of the most compelling long-term
growth stories in small-cap med-tech, in our view.
While challenges highlighted a quarter ago did in fact impact the U.S. business
in Q1, they weren’t worse than expected. To wit, ELGX maintained 2014 U.S.
sales growth guidance of 6-10% (we model 5.5%). Notably, OUS trends, namely
Nellix in Europe, give us confidence ELGX can deliver material upside to its 26-
30% OUS growth guidance (we model 47% and think this could be beaten). In
sum, if ELGX can hit the low end of its US guidance, there is material upside to
total 2014 revenue guidance, in our view. With the next-gen VELA now fully
launched, and stated plans to further expand its U.S. sales force, ELGX has a
good chance of delivering.
We continue to believe ELGX represents one of the most attractive growth
companies in med-tech, notwithstanding the near-term challenges to the U.S.
business. Our bullish view of ELGX is unchanged, supported by a robust product
pipeline and elite GM profile, which has room for expansion to the 77% level, in
our estimation. We maintain our BUY rating and $17.50 price target.
Investment highlights
 ELGX reported total Q1 revenue of $33.3M, representing Y/Y growth of
12%, eclipsing our $32.5M estimate and the Street’s $32.2M projection.
Gross margin of 73% declined from the 76% in the year-ago period but was
spot on with our projection.
 Our $17.50 year-end price target is predicated on a 6x EV/sales multiple
applied to our 2015 revenue estimate. The target multiple is a 5% discount
to the “growth equity” med-tech comp group (>12% forward 2-year revenue
CAGR). We model 16% forward 2-year CAGR for ELGX

RTI Surgical Upgrade

RTI Surgical

RTIX : NASDAQ : US$3.93

BUY 
Target: US$5.00

COMPANY DESCRIPTION:
RTI Biologics, Inc. prepares human-donated tissue and bovine
tissue for transplantation worldwide. It performs tissue
processing services for sports medicine, dental, spine, urology,
hernia repair, breast reconstruction, and ophthalmology
applications, as well as ear, nose and throat applications. The
company distributes its allograft and xenograft implants to
hospitals and surgeons via a direct selling force and through
distribution partners.

All amounts in US$ unless otherwise noted

Life Sciences — Biomedical Devices and Services
RTI SHOWS STRONG MOMENTUM;
UPGRADE TO BUY; PT TO $5
Investment recommendation
We are upgrading shares of RTI Surgical to a BUY from Hold as we
believe Q1/14 results demonstrate a turnaround of the core business
and improving results momentum from the recent acquisition of Pioneer
Surgical. Q1/14 was a continuation of progress experienced in the Q4/13
and showed wins across the board. We once again believe RTI has
multiple levers available to drive top- and bottom-line growth, but note
that there are significant execution hurdles ahead. Specifically, we note
recapturing growth within its direct sports medicine business,
accelerating the commercial ramp for the Fortiva porcine dermis
product, and building the inventory to support the broad launch of
MAP3.
Investment highlights
 Revenues of $60.7M were above our estimate of $58.8M and
consensus of $59.2M. Pro forma EPS of $0.01 was above our and
street estimates for $(0.03) and $(0.01), respectively.
 New products Fortiva and MAP3 are showing positive signs of
momentum.
 Sports Medicine rebounded significantly with 8.1% Y/Y and 4% Q/Q
growth and spinal implants were up sequentially after a rough start
post the acquisition of Pioneer Surgical.
Valuation
We are raising our price target to $5.00 from $4.00. Our price target is
based on a 12x EV/EBITDA multiple applied to our 2015 EBITDA
estimate of $35M.

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