What This News Means For Healthcare Stocks

by: Timeless Wealth

PDL BioPharma (NASDAQ:PDLI) confirmed that Genentech (a part of the Roche Group (OTCQX:RHHBY)) will begin paying a royalty to the company on sales of Pertuzumab, a drug used to treat HER2-positive breast cancer patients, the quarter following its initial launch. According to regulatory filings, PDL and Genentech have a tiered royalty agreement in place which promises a 3% royalty on sales of up to $1.5B (PDL has licensed at least four major products to the company). Roche forecasted Pertuzumab sales north of $1B if Pertuzumab received regulatory approval. This suggests the deal is worth no less than $30MM a year. A slight increase in overhead costs, costs related to financing aside, the royalty should translate to a high net profit margin, and consequently add to the bottom line. The company has returned cash to investors in the form of dividends, with its yield now slightly above 9.4%.

Elsewhere, Horizon Pharma (NASDAQ:HZNP) enlisted the help of Grunenthal, a global pharmaceutical company, to commercialize DEUXIS, "indicated for the relief of signs and symptoms of rheumatoid arthritis and osteoarthritis and to decrease the risk of developing upper gastrointestinal ulcers in patients who are taking ibuprofen for these indications", in Latin America. The company announced earlier that Mallinckrodt, a part of Covidien, would co-promote DEUXIS in the United States by soliciting 'an agreed upon' list of physicians. Horizon said it would pay Mallinckrodt quarterly fees based on their performance; terms of the Grunenthal deal have not yet been disclosed. However, it appears that Horizon is aggressively pushing to commercialize DEUXIS in the face of mounting debt and losses that typically accompany development-stage or early commercial-stage enterprises.

BioSante (BPAX) regained compliance with the NASDAQ in regards to its minimum bid price requirement after effecting a one-for-six reverse split of its common stock earlier this month. Investors remain skeptical over the company's pipeline, which comprises a drug called 'LibiGel', designed to treat hypoactive sexual desire disorder. The low-dose testosterone gel failed to meet efficacy endpoints in a late-stage study; Biosante said they will spend approximately $36MM to re-run clinical trials on LibiGel. Shares continue to hover near 52-week lows in anticipation that BioSante will raise capital [again] sometime before the end of the year.

Medical device maker Symmetry (NYSE:SMA) said its surgical subsidiary has launched "innovative Rongeur Instrument Holders", which have the capacity to hold 10 to 12 various sized instrument, are easy to use, and reduce "processing time and the risk of lost parts" during surgery. The product launch news comes at a time when the company is struggling with servicing its [mounting] debt, primarily as it relates to turning a profit (interest has had a material impact on EPS). Notwithstanding, shares of the company are trading at the upper range of a 2-year downtrend, suggesting investors are optimistic management can turn things around and deliver stronger financial results in the next twelve months.

Also making news in the surgical instrument segment, MRI Interventions (OTCQB:MRIC), a company that developed the first FDA-cleared MRI-guided platform for performing minimally-invasive surgery in the brain, reported that the United States patent office granted the company patent No. 8,175,677, which relates to a disposable component on their surgical platform. The component, called 'SmartFrame', is "an MRI-compatible adjustable trajectory frame" that was featured on the cover of The Journal of Operative Neurosurgery, a prestigious peer-reviewed medical journal, in March. The patent brings the company's IP portfolio to "66 issued patents and over 100 pending patent applications, both United States and foreign". The additional of this patent is particularly crucial at a time when MRI Interventions is aggressively pushing a platform that creates real-time images of a patient's brain during surgery. The company has a co-distribution agreement with BrainLab for this system; collaborations with Siemens Healthcare (SI) and Boston Scientific (NYSE:BSX) for the development of other assets. MRI Interventions has seen thin trading, though this may resolve with strong news flow pertaining to product and/or commercial development.

Rigel Pharmaceuticals (NASDAQ:RIGL) is up on a partnering deal with AstraZeneca (NYSE:AZN); Medivation (NASDAQ:MDVN) is trading higher on takeover speculation from a Jeffries Analyst.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PDLI over the next 72 hours.

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