Clovis Oncology: Waiting on PARP Traction; Competition a Concern

  • Many institutional investors and sellside analysts hold tepid outlooks for Clovis Oncology

  • One concern is slow PARP uptake within maintenance therapy for recurrent ovarian cancer, and limited Rubraca share gains within the PARP class

  • The second concern is upcoming competitive threats that could further slow sales and impact Rubraca’s expansion into mCRPC and frontline ovarian cancer

  • Bulls see eventual PARP class gains, which should drive Rubraca sales higher, and potentially the first positive pivotal trial for PARP+PD1 in first line maintenance of ovarian cancer

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Biogen: Aducanumab Questions Linger After CTAD, but Trading Opportunities Exist

  • On Thursday, Biogen presented additional aducanumab data at CTAD that answered some questions, and raised others

  • Bulls believe the totality of the data, including the first positive pivotal trial in Alzheimer’s, is supportive of approval

  • Bears believe the data is too confounding to receive approval

  • Potential considerations beyond the stats could also potentially shift the odds of approval in Biogen’s favor

  • Drug approval could add over $10B in gross revenue, but investors should consider the potential for a more narrow label

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Amarin: Low Compliance and Competition Key to Bear Thesis, but Bulls Don't See the Threat

  • In this note, I detail some common elements of the bear thesis, as well as the counterarguments to this thesis.

  • Low compliance serves as a risk to consensus estimates, which suggest high growth rates after label expansion approval

  • Additionally, several competitors are expected to see trial readouts over the coming months

  • Finally, ongoing patent litigation could pose a risk to longer-term estimates

  • Bulls posit that compliance is not a significant issue, that competitors lack CV outcome results or a clean safety profile, and that patent litigation is in Amarin’s favor.

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GSK: Detailing Growth Opportunities in Oncology and Upcoming BCMA Data

  • GSK’s oncology portfolio is key to growth prospects, as they are expected to offset headwinds currently faced in HIV and the Advair business.

  • Zejula provided additional data in maintenance treatment of ovarian cancer that could present share gain opportunities from Lynparza. GSK will look to expand Zejula into additional oncology indications.

  • Belantamab mafodotin could be the first to market within the BCMA class of drugs in multiple myeloma, and will provide additional details at ASH in early December along with other BCMA treatments.

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Regeneron: Beovu Threatens Eylea Revenue, but Dupixent and Oncology Show Promise

  • Eylea faces increased competition, but is also benefiting from demographic tailwinds and additional line extensions. Future growth will depend on Beovu’s success.

  • Dupixent is seeing strong adoption in atopic dermatitis driven by a differentiated clinical profile, and is being explored in numerous additional indications

  • Investors are excited by REGN1979, which could challenge rituximab in non-Hodgkin’s Lymphoma. An update will be provided at ASH in early December

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Merck: Keytruda Competition Not Seen as a Threat, but Could Act as Stock Overhang in Near-Term

  • Keytruda is key to Merck’s growth prospects, as the drug’s growth makes up most of the company’s revenue growth for 2019

  • Two competing drug regimens announced positive results in 1L NSCLC recently, which could negatively impact Keytruda’s growth trajectory

  • Keytruda sets a high bar in efficacy and safety, and the street does not think that competitors will be able to meet this bar to commercially impact Keytruda sales

  • With that said, the trial results could act as an overhang in the near-term until full results are released in 2020

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Peloton: Creating a New Fitness Category, or the Next Fitness Fad?

- Is Peloton the next short-lived fitness fad? Peloton has a lasting product with the engagement of a live class and the convenience of a home workout.

- Currently, heavy up-front investments in a new headquarters, its treadmill product, its supply chain, and an international expansion mask a highly profitable business. Profitability will come with scale.

- I see further potential upside to consensus sales, driven by its treadmill product, higher marketing expense, and geographic expansion into Canada, UK, and Germany.

- Sum of the parts valuation, with a 3-4x 2021 sales multiple on the equipment segment, and a 8-10x 2021 sales multiple on the subscription business, points to a $30-34 stock price.

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Reata: A "Show Me" Story Showing the Results and with Two Upcoming Catalysts

- Strong omaveloxolone results in Friedreich’s Ataxia (FA) was a surprise and could generate over a billion in sales. Importantly, their Nrf2 activators hold promise to treat many other neurodegenerative indications beyond FA

- Moving forward, attention will shift back to bardoxolone with Alport Syndrome readout expected this quarter, and CTD-PAH by 1H20

- The bear case still centers on hyperfiltration and an abundance of caution given 2012 safety issues in BEACON. Reata appears to have put these issues to rest with its consistent results since 2012

- As Reata continues to validate its MOA, bulls see the platform growing into many other indications, including four others currently being studied in CKD.

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Amgen: With Enbrel Overhang Cleared, Investors Focused on AMG510, Omecamtiv, and Tezepelumab

- Amgen’s Enbrel patents held up in court, removing a major overhang on the stock. This has led to increased investor attention now that a major binary event is largely removed from the picture

- Amgen recently presented AMG510 results in NSCLC and CRC that were below high investor expectations. Results were still good, but durability remains the key unresolved question to focus on

- Omecamtiv and tezepelumab are interesting late-stage drugs in Amgen’s pipeline that will see additional readouts in 2020

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Zillow: Digitizing the Home Buying Experience

- Zillow, Redfin, and Opendoor are all looking to improve the archaic buying experience in real estate through iBuying and offering adjacent products

- Zillow’s primary strength lies in its ownership of the customer relationship, which will translate into lower customer acquisition cost on both the buying and the selling of homes

- The unit economics remain unproven but Zillow has outlined a path to 2-3% adj. EBITDA margins. If successful, Zillow could more than double its adj. EBITDA

- Zillow’s most significant risk in the near-term is the large amount of change underway at both its new and core businesses. These changes, and the resulting guidance revisions that could come, keep me on the sideline for now

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AbbVie: Can Skyrizi and Upadacitinib Offset Humira Competition?

- For International Humira, the debate centers on whether there is further downside to AbbVie’s 2019 guidance of a 30% ex FX decline. This follows several downward revisions by management over the last year.

- For US Humira, the drug will face competition from several novel mechanisms of action, including JAK, IL-17, and IL-23 inhibitors in rheumatoid arthritis and psoriasis. These drugs could also present downside risk to Humira estimates.

- Skyrizi and upadacitinib are the most often-cited drugs within the pipeline. While they could offset some of the gap, AbbVie is looking at a $10B+ revenue gap from Humira, and Skyrizi/upadacitinib do not look exciting enough to cover the shortfall.

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Tesla: 1Q Issues Reduce Demand Visibility, but Long-Term Demand Still Appears Healthy

- Tesla saw 1Q deliveries fall short of expectations, leading to demand concerns. The key question is whether this is a temporary blip or an ongoing structural issue

- Based on the data we know today, I view the issues as temporary in nature and see strong longer-term demand driven by high customer satisfaction and strong market share within their existing products

- Model S/X weakness is concerning, but explained by the decision to stop selling entry-level models. An upcoming refresh mitigates this risk, but Tesla must demonstrate superior value to other models

- Tesla Network buzz ahead of the Autonomy Investor Day is overly bullish in my view, but Tesla could still financially benefit from a capable semi-autonomous driving system

- The path to a higher stock is driven by showing profitable demand that can fund the next growth initiatives - the China Gigafactory and Model Y. I believe this is likely to occur over the course of 2019

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Gilead: What Will Provide the Growth Needed for Multiple Expansion?

- In order to outperform, Gilead will need to generate higher revenue growth going forward

- HIV franchise sales will depend on Gilead’s ability to transition TDF-based patients onto newer TAF-based drugs after 2021. TAF-based drugs are safer, but generic TDF could look favorable to payers.

- Filgotinib is a key component of the pipeline and will have two important readouts this quarter. Expectations are high and Gilead will need to show strong safety results.

- Ultimately, Gilead has a path to growth, but the visibility is poor. Gilead must show a clearer vision to growth in order for the stock to rerate.

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Allergan: Botox Durability is the Key Value Driver

- Allergan’s recent failure with Rapastinel adds to the company’s woes. However, there is a portion of the investor community that remain believers in Allergan’s underlying value

- These investors see value in the Medical Aesthetics business, which will face competition soon from Evolus’s Jeuveau and Revance’s RT002. Bulls still believe the segment will grow in the mid single digits.

- Unlocking this value, either through drastic company actions (as activists are pushing for) or through consistent execution over the next several quarters, should drive the stock higher.

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Pfizer: Street Bullish as Growth Set to Reaccelerate Beyond 2019

- Lyrica sales are expected to erode significantly over the next two years as generics enter the market.

- Pfizer’s pipeline has strengthened significantly over the last several months and has a number of opportunities that could offset these losses and drive mid-single digit growth in the coming years

- Specifically, Ibrance, Xeljanz, Xtandi, Tanezumab, and Tafamidis represent significant opportunities that could drive growth for Pfizer

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TEVA: Is 2019 the Trough, or Will 2020 Continue to See Pressure?

- After showing several years of resilience, competition is finally starting to eat away at Teva’s Copaxone and ProAir revenue

- Investors and management expect Ajovy and Austedo to make up much of the loss in revenue in 2019 and 2020

- Beyond those two components, the generic environment, management’s ongoing cost cutting efforts, and the pipeline could determine whether 2019 will ultimately be the trough year or if declines will continue.

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Biogen: BAN2401 Not A Home Run Anymore, But Still Holds Some Promise

- Since releasing initial BAN2401 results in July, excitement among investors has waned as detailed analysis has shown confounding results. However, many investors still see promise in the drug.

- When viewed within the context of Biogen’s entire Alzheimer’s portfolio, Biogen remains well positioned to get an Alzheimer’s drug to market with aducanumab, BAN2401, and elenbecestat

- Amyloid beta hypothesis still has legs as drugs that target subtypes beyond monomers have shown some degree of clinical efficacy

- Possible futility analyses for aducanumab/crenezumab and FDA statement on ADCOMS as a legitimate endpoint are catalysts to watch, while aducanumab P3 readout in 2020 remains the key conclusive event.

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