Tuesday, August 21, 2007
Invest along with Ichan on Biogen
“The long-term outlook for biotech is excellent and many of today's undervalued companies will ended up looking like screaming bargains at today's prices,” notes biotech expert John McCamant.
In his Medical Technology Stock Letter, the advisor has long been a fan of Biogen Idec (NASDAQ: BIIB). Now, he is joined by Carl Ichan, who has purchased shares in the biotech firm.
“There may be no such thing as a pure safe haven within the equity markets. However, we believe the market for new drugs will continue to grow rapidly even if we enter into a difficult period for the economy.
“Quite simply, if an individual has to decide whether to buy a new TV or a new cancer drug, it is a safe assumption that they will chose the best drug possible. Additionally, with the continued aging of America, the demand for healthcare is poised for unprecedented growth.
“With full awareness that biotech stocks are not completely immune to the twists and turns of the broad markets, we firmly believe that it is the sector to be in for the long haul. In the current environment, we urge investors to buy stocks on price dips in companies whose underlying fundamentals remain strong.
“One such company is Biogen. We have long recommended the stock primarily for the significant growth opportunity Rituxan brings to the plate in treating autoimmune disease, most importantly rheumatoid arthritis (RA).
“Earlier in August, the FDA’s Gastrointestinal Drugs Advisory Committee voted in favor of approval of Biogen Idec’s and partner Elan’s drug, Tysabri, for the treatment of patients with moderate-to-severe Crohn’s disease who have already failed or who cannot tolerate other therapies.
“Meanwhile, it was just recently announced that Biogen Idec. is selling the U.S. rights to their approved radioimmunotherapy product, Zevalin, to Cell Therapeutics. (BIIB's European Zevalin partner Bayer Schering will continue selling the drug outside the U.S.)
“Right now, it is approved to be used in relapsed or refractory NHL patients. We would note that this product was launched five years ago, but despite being on the market for several years now, its 2006 full-year revenue contribution to BIIB was a meager $17.8 million.
“We view this as a prudent move by BIIB's management. They are getting a nice little chunk of change immediately, and potentially even more if the drug's label gets expanded. Essentially, they are monetizing an asset which has, for all intents and purposes, been virtually forgotten by the company.
”In other news, BIIB reported that the positive Phase 2 results on Adentri, their oral A1 adenosine receptor antagonist, for the treatment of heart failure have finally been published in the Journal of the American College of Cardiology. The publication of these results in a prestigious, peer-reviewed scientific journal provides excellent validation of the program.
We would note that BIIB faces competition in this space, as NovaCardia, which was acquired not all that long ago by Merck, has been putting forth an extensive effort in the development of its own selective A1 adenosine receptor antagonist.
“From a business development standpoint, it would not be out of the question, given Merck's acquisition of NovaCardia, to see Merck or some other Big Pharma company do a deal with BIIB in order to get a piece of the Adentri pie.
”There is one final BIIB-related tidbit that we felt worthy of mention in today's Issue. Billionaire financier Carl Icahn-who became heavily involved in and eventually Chairman of the Board of ImClone Systems (another of our recommendations) has apparently found BIIB to be an attractive investment opportunity.
“In fact, he established a new position in the stock during the second quarter, purchasing nearly three million shares. Good things have more often than not happened to shareholders of companies that Mr. Icahn has become involved with and/or bought shares in. This substantial position in BIIB is certainly a strong vote of confidence for an investment in BIIB.”
posted at 3:06 PM
