Egalet EGLT-NASDAQ BUY PRICE TARGET US$18.00

 

Egalet

EGLT-NASDAQ

BUY  PRICE TARGET US$18.00↑ from US$12.00 Price (23-Jan) Ticker US$8.54

Raising Target Price Major catalyst mid-2015 with EGLT-002; higher confidence based on positive EGLT-001

Head-to-head study vs. Purdue major catalyst, expect data by mid-2015 We expect positive results for EGLT-002 (abuse-deterrent oxycodone) by mid-2015 from a Category 3 likeability study head-to-head versus Purdue’s Oxycontin OP, which should move shares substantially higher.

Validation of Egalet’s Guardian Technology from the Category 3 study with EGLT-001 gives us higher confidence for positive results from EGLT-002. Both drugs use a polymer API-based matrix and utilize the same injection molding manufacturing process. Importantly, EGLT-002 uses a two-part abuse deterrent technology, which may be even more robust vs. EGLT-001’s one-part technology.

Finally, the recent withdrawal of Remoxy by Pfizer significantly reduces competitive risk for EGLT-002, which we believe puts the company in a strong competitive position. EGLT-001 demonstrates significantly lower abuse potential vs. MS Contin, positive for EGLT-002 Top-line results from the Category 3 abuse-deterrent human abuse liability (HAL) study for EGLT-001 showed significantly lower potential for abuse vs. manipulated MS Contin, a positive in giving further validation of the company’s Guardian Technology. EGLT-001 continued to retain its abuse-deterrent characteristic after severe manipulation, where there was no statistical difference between the drug liking scores (as measured by Emax) between the intact and manipulated formulation. We remind investors that FDA recently required the company to modify its Category 3 study design, based on the very high level of abuse deterrence seen with EGLT-001. Phase 3 data for EGLT-001, EGLT-002 due 1H16 EGLT plans to initiate a Phase 3 study for EGLT-001 in 1Q15, and for EGLT-002 in 1H15, with Phase 3 data expected for both studies during early 2016. We expect both studies to be positive, given similar AUC for EGLT-001 and EGLT-002 versus MS Contin and Oxycontin OP. We remind investors that AUC is the critical factor in pain relief for longacting opioids.

Increase price target to $18

BUY rating We increase our price target to $18 and maintain our BUY rating as we have higher confidence in seeing a positive result from the Category 3 EGLT-002 study and phase 3 EGLT-001 clinical study. In our NPV valuation, we increase our probability adjustment of EGLT-001 and EGLT-002 to 65% and 50%, respectively, from 50% and 35%

Alnylam Pharmaceuticals TOP PICK BUY

 

BUY
PRICE TARGET US$160.00
Price (6-Jan)
Ticker ALNY-NASDAQ
US$94.02

Initiation of Coverage
Validated delivery technology sets stage for
unprecedented pipeline advancement; top pick,
BUY, $160 price target
We are initiating coverage of Alnylam Pharmaceuticals with a BUY rating and a $160
price target. Alnylam is a platform-technology drug development company with a rapidly
expanding pipeline of innovative, siRNA, gene-silencing therapeutics, focused on three
disease areas: rare genetic, cardio-metabolic, and hepatic infectious. We believe recent
clinical validation of the company’s proprietary, best-in-class, siRNA drug delivery
technology (ESC-GalNAc) primes the company for unprecedented pipeline expansion.
As the broad early pipeline (12+ pre-clinical products) advances into mid-stage human
clinical trials, we expect the Street to ascribe increasing value to the development
portfolio and drive shares substantially higher. In 2015, we expect shares to be driven by
clinical data flow on multiple products and potential new partnership deals.
• ESC-GalNAc is Holy Grail: siRNA drug delivery has posed a long-standing challenge
for companies in the space, and sub-optimal delivery technologies have impeded
drug development. We believe Alnylam’s ESC-GalNac delivery technology is poised to
shatter this barrier and, like the breaking of a dam, will allow for unrivaled pipeline
advancement in coming years.
• ALN-AT3 data clinically validates ESC-GalNAc: Recent ALN-AT3 results provided
human clinical validation for ESC-GalNAc, which has broad implications for the early
pipeline, in our view. All of Alnylam’s early pipeline candidates use this best-in-class
technology.
• Preclinical pipeline worth $25, by our estimates: We believe ESC-GalNac clinical
validation allows for value to be ascribed to Alnylam’s early-stage pipeline products. We
determine a YE15 value of $25/share based on a probability-adjusted discounted EPS
methodology.
• Abundant clinical catalysts in 2015:

We expect 2015 to be a seminal year for
Alnylam, with clinical results anticipated for five different products. P2 OLE data for
both patisiran (mid-15) and revusiran (2H15) will be central, in our view, with potential
read-through to both ongoing P3s. In addition, we expect mid-15 P1 results for ALNAT3,
ALN-PCSsc, and ALN-CC5 to further validate the Alnylam pipeline and siRNA
approach.
• Potential partnership opportunities:

In 2014, Alnylam signed a broad partnership
agreement with Genzyme in the rare genetic disease space. In 2015, we would not be
surprised to see additional partnership deals in the cardio-metabolic and/or hepatic
infectious disease areas.
• Valuation/risks:

We justify a 12-month price target of $160 using sum of the parts: a
probability-adjusted DCF for the advanced pipeline of $135, and a probability-adjusted discounted EPS for the early pipeline of $25. Risks include clinical, regulatory, and competitive.

Tax website http://www.youroffshoremoney.com

 

 

Monsanto BUY Targat Price $ 149

MON

Q1/F15 EPS better than expected;

2015 guidance reiterated

 BUY with US$149 target 

Investment recommendation
From a Monsanto-specific viewpoint, it is the only large cap company under our coverage
list that not only offers substantial growth but offers farmers a better differentiated
and value-added portfolio of products every year when compared to the previous year.
For that reason, we also continue to prefer the company on a relative play. We expect
continued sales volume increases and margin expansion going forward in Seeds and
Genomics, a near term uplift in earnings from their Intacta soybeans, followed by the
rollout of the Xtend system, the potential of the Precision Ag platform a few years out as
well as the more aggressive return of capital to shareholders, all of which continues to
bode well for shareholders.
Investment highlights
Monsanto reported adjusted Q1/F15 EPS of US$0.47 versus our and consensus
estimate of US$0.35. F2015 annual guidance was reiterated at US$5.75-6.00 (on an
ongoing earnings basis).
The company stated that given the stronger than expected Q1 and lower US corn acres,
management now expects Q2 EPS to be down 5-10% versus the prior year. They also
commented that ‘this leaves growth for the year to the third and fourth quarters’, the
latter of which Monsanto continues to expect is breakeven to positive YOY on an absolute
basis (versus a loss in each Q4 over the past five years).
Management commented it now projects Intacta sales to exceed the previously guided
range of 10-12M acres due to stronger farmer demand.
Valuation
We continue to rate the shares of Monsanto a BUY with a target price of US$149 based
upon a 21.5x multiple to our F2016E EPS

 

Q1/F15 results
Monsanto reported adjusted Q1/F15 EPS of US$0.47 versus our and consensus
estimate of US$0.35. The results were above expectations largely due to higher gross
profit in both the Seed and Genomics and Agriculture Productivity segments, partially
offset by higher operating costs and net interest expense. Total gross margin was
reported at US$1.41 billion, above our US$1.16 billion estimate (Figure 1) while
operating costs were US$992 million versus our expectation of US$823 million.
F2015 annual guidance was confirmed at US$5.75-6.00 (on an ongoing earnings
basis) versus our original estimate of US$5.91 and consensus of US$5.87. This
guidance is in line with management’s prior comments of double-digit to mid-teen
growth in F15 EPS.
Gross margin analysis
Seed and genomics gross margin was above our estimate (at US$941 million versus
US$733 million) due to better performance in corn and soybean, slightly offset by
vegetable and other crops. The company reported corn GM of US$525 million versus
our US$423M, soybeans at US$277M versus our US$157M, cotton at US$58M
versus our US$45M, vegetables at US$64M versus our US$81M, and all other crops
at US$17M versus our US$27M. The Agriculture Productivity segment reported GP at
US$470M, above our US$422M estimate.
Operating expenses
Operating costs were higher than expected on an absolute basis and mostly in line on
a relative to sales basis: US$992 million (34.6%) versus our estimate of US$823
million (34.3%). SG&A costs were reported at US$580 million versus our US$487
million estimate while R&D expenses were US$412 million, above our US$336 million
forecast. Net interest expense was reported at US$77 million, above our US$72
million estimate.
Management outlook
The company stated that given the stronger than expected Q1 and lower US corn
acres, management now expects Q2 EPS to be down 5-10% versus the prior year.
They also commented that ‘this leaves growth for the year to the third and fourth
quarters’, the latter of which Monsanto continues to expect is breakeven to positive
YOY on an absolute basis (versus a loss in each Q4 over the past five years). Given
the lower global corn acreage expectation, seeds and genomics gross profit YOY
growth for F15 is now expected in the high single digit range versus double-digit YOY
growth the company suggested in Q4/F2014. Management still expects growth in the
corn business for the year due to share gains and price mix lift. Soybeans gained 7%
margin lift in Q1 and the company expects further positive influence in F15.
Regarding operating expenses, the company noted that in order to provide funds for
incremental spend on new platforms, disciplined plans were put in place with the
expectation to keep full-year core spending flat to slightly down YOY.
Cash flow guidance was left unchanged. Cash provided by operating activities was
guided at US$3.2-3.6 billion while cash required by investing activities is expected to
be in the US$1.2-1.4 billion range, resulting in a free cash flow range of US$2.0-2.2

Tax website http://www.youroffshoremoney.com

Thoratec UPDATE BUY  Target: US$36.00

THOR

NASDAQ :

US$31.19 BUY 
Target: US$36.00

COMPANY DESCRIPTION:
Thoratec manufactures medical devices used for
circulatory support, vascular graft applications, and blood
coagulation testing. Thoratec’s ventricular assist device
(VAD) systems are currently marketed in the US and
internationally for use as a bridge to heart transplant and
for recovery of the heart after open-heart surgery. The
company has the only VAD currently FDA-approved for the
destination therapy indication.
All amounts in US$ unless otherwise noted.

Life Sciences — Biomedical Devices and Services
RAISING PRICE TARGET TO $36  FROM $30; REITERATE BUY
Investment recommendation
We remain positive on the long-term growth potential of the
LVAD market, owing to the size of the TAM (40k+ patients in US
alone), low penetration level (10%E in US/Europe; <5%E in
Japan) and next-generation technology coming down the pipe
(HMIII and MVAD), which we think will drive strong double-digit
growth in this duopolistic market for years to come. We continue
to favor Heartware common (HTWR : NASDAQ : $73.53 | BUY),
but reiterate our BUY on THOR as well. Owning both, while not
likely to elicit out-sized returns in the near term, could very well
do so over the next 12-18 months, in our opinion.
We are increasing our target to $36 from $30, reflecting not only
increasing optimism about the VAD market and THOR’s next-gen
pipeline (HM3, HM-PHP), but also to account for an uptick in the
mean small-cap comp group’s 2015 EV/sales multiple (3.7x
currently vs. 3.4x previously – ex-outliers).
Investment highlights
 Our 2016 estimates call for revenue growth of 4.7% to
$486M, gross margin expansion to 71%, and pro-forma EPS
growth of 4.8% to $1.35.
 For 2016, we estimate THOR’s US VAD revenue will grow
about 1% to $359M, but model faster OUS VAD sales growth
of 11% to $125M.

BioAmber BUY Target Price $16

BIOA : NYSE :
US$10.10 BUY 
Target: US$16.00

COMPANY DESCRIPTION:
BioAmber is pursuing renewable chemicals (bio-based
“drop-in” alternatives to petroleum-based products) with
its proprietary industrial technology platform (microorganisms,
catalysts, purification).
All amounts in US$ unless otherwise noted.

Sustainability — Bioresources
PROVING OUT THE PROCESS IS PARAMOUNT MAINTAIN BUY, $16 TARGET
Investment recommendation
BioAmber is pursuing renewable chemicals (bio-based “drop-in”
alternatives to petroleum-based products) with its proprietary industrial
technology platform (micro-organisms, catalysts, purification).
Investment highlights
 Aseries of investor meetings with BioAmber’s
CEO (JF Huc) and EVP Mike Hartmann. Our favorable view
gets reinforced for this industrial biotech platform, as the move to commercial production at Sarnia stays on track to ahead of schedule (’15 completion) by all metrics (and on budget).
 While investor skepticism rightly persists across this sector given the
risks associated with plant commercialization (and unsuccessful
attempts by other technology developers) we find BioAmber’s
technology and process well positioned (low cost sugar inputs, only
3x scale-up) to help change this perception (clearly the outcome is
binary in nature, as investors rightly focus on handicapping risks).
 As a reminder, management anticipates ~5 months for Sarnia
commissioning (post mechanical completion in early ’15), with a
gradual ramp expected in H2/15. Current cash supports the process
(~$79M exiting Q3, vs. burn <$2M/month), while the company also
continues to quietly make progress on preliminary work for a
potential plant 2 (bolstered by Vinmar take-or-pay).
Valuation
Our target of $16 equates to an EV/sales multiple of ~6x our F2016 sales
estimate of $56M and ~6x EV/EBITDA based on our probability-adjusted
EBITDA contribution of ~$55M for Sarnia (75%) and plant 2 (25%).
Risks
Development-stage company and scale-up, commodity exposure,

 

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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.

Monsanto Company : Update Target Price $149

 

MON : NYSE :

US$109.73 BUY 
Target: US$149.00 ↓

Company Description

Monsanto is a leading global provider of seeds,
biotechnology traits, and glyphosates. The company
operates two segments: Seeds and Genomics and
Agricultural Productivity. The seeds and genomics
segment consists primarily of soybeans, corn, cotton, and
vegetable seed brands, as well as biotechnology traits
that help control weeds and insects. The agricultural
productivity segment consists of crop protection,
including glyphosates.
All amounts in US$ unless otherwise noted.

Agriculture — Biotechnology
Q4/F14 RESULTS MOSTLY IN LINEAND F15 GUIDANCE IS REITERATED

Investment highlights
 Monsanto reported adjusted Q4/F14 EPS of US$(0.27) versus our
and consensus estimate of US$(0.24). F2015 annual guidance was
provided at US$5.75-6.00 versus our original estimate of US$6.04
and consensus of US$6.01. This guidance is in line with
management’s prior comments of double-digit to mid-teen growth
in F15 EPS.
 Operationally, we expect further improvement in Seeds & Genomics
in F15, with our expectation of YOY gross margin growth of 11.7%.
We expect to see a continued lift in the product portfolio (a
laddering-up, if you will), with farmers seeing an increased bill (a
benefit to Monsanto) but being offset by increased yield to the
farmer (a benefit to the farmer). As the fiscal year unfolds, we
anticipate confirmation of the 10-12M acres of Intacta and a good
(although delayed) order book for the US spring, both of which we
see as comforting highlights for investors through a more
challenging commodity price environment
Valuation
We continue to rate the shares of Monsanto a Buy but have lowered our
target price to US$149 (from US$155 previously) based upon a 21.5x
multiple (from 22x previously) to our F16 EPS. The reduction in our
multiple is due to the general commodity pricing environment and
investors’ increased conservative approach towards agriculture equities.

SAGE Therapeutics BUY Target Price $40

SAGE : NASDAQ : US$29.05
BUY 
Target: US$40.00

COMPANY DESCRIPTION:
SAGE Therapeutics is a development/clinical stage
biopharmaceutical company founded in 2010 that is
focused on developing and commercializing drugs to
treat central nervous system (CNS) disorders where no
effective or FDA approved options exist.
Life Sciences — Biotechnology
SAGE-547 CHANCE OF SUCCESS FAVORABLE IN TOUGH DISEASE
Investment highlights
Estimate $980M US peak sales for SAGE-547
We estimate $980M US peak sales from ~13,300 SRSE patients,
representing 55% of total super refractory status epilepticus (SRSE)
patients and 13.8% of all ~96,000 patients treated for status epilepticus
in the hospital. We assume a cost of ~$75,000 per patient annually,
which we believe is appropriate for the hospital setting given these
patients are critically ill and are on last lines of therapy.
SAGE-547 has clear mechanism of action
SAGE-547’s mechanism is well understood, upregulating GABA at two
synapses (α1 and α 4) while current therapies only hit GABA at α1
receptor. We believe this gives the drug an advantage over other
therapies because the dual interaction can potentiate stronger GABA
duration, leading to improved seizure control.
Current therapies remain ineffective
Current therapies remain ineffective in controlling SRSE (response rates
<40%) or have intolerable side effects, giving SAGE-547 a low risk of
penetrating in this market. Additionally, we want to emphasize the
severity of this disease where patients in the ICU carry a mortality risk
of close to ~50%, making this an area of high unmet medical need.
Expect positive SAGE-547 weaning data in December
We expect positive data for SAGE-547 when patients are weaned off
drug and brought out of coma in December for at least n=10 patients.
Previous data suggested resolution of SRSE in 9/10 patients, whereas
new data will discuss weaning patients off drug and reversing coma

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

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