Marty Chilberg

Long only, special situations, research analyst, healthcare
Marty Chilberg
Long only, special situations, research analyst, healthcare
Contributor since: 2010
Analyst price target changes this morning so far for $DATA
Wunderlich $130 to $75
SunTrust $70
Stifel Nicolaus $145 to $100
RBC $120 to $80
Deutsche Bank $100 to $65
DA Davidson $101
Jefferies $92 to $65
Wedbush $97 to $68
Susquehanna RAISED $55 to $100
Sterne Agee $145 to $101
Pacific Crest RAISED $93 to $138
Goldman Sachs $99 to $61
Drexel Hamilton RAISED $75 to $132
Credit Suisse RAISED $65 to $130
Barclays RAISED $67 to $110
Nice summary. I'm also looking to add but am waiting to see if there is another flush before I do.
Recent article about Dennis Lo working to "identify the presence of a healthy fetus despite abnormalities in the DNA" = improved PPV for low risk #NIPT
Oppenheimer report on MRK pricing
Gilead Sciences
Merck's HCV Drug Zepatier Finally Enters the Fray
On Thursday, Merck announced the FDA approval of Zepatier (grazoprevir/elbasvir) for the treatment of HCV genotypes (GT) 1 and 4. (Although Merck filed for GT6, approval was not granted.) Zepatier's list price is $54,600 for 12 weeks, markedly lower than Harvoni's $94,500 for 12 weeks. We suspect the large delta was influenced by heightened public scrutiny over drug pricing, particularly in HCV. That said, we stress that what really matters is the realized price which takes into account rebates/ discounts offered by drug manufacturers. In the coming months, we remain focused on how exclusive payer contracts will be divvied up amongst GILD/MRK/ABBV. While we expect a drop in market share and realized pricing, we maintain our view that the impact to GILD will be modest.
■ Zepatier label recommends testing for baseline NS5A resistance-associated variants (RAVs). For GT1a HCV, baseline NS5A RAV testing is recommended but not mandated. A longer 16-week regimen of Zepatier+ribavirin is recommended for those with baseline NS5A RAVs. We view this as a key disadvantage vs. Harvoni, whose efficacy is less affected by baseline RAVs and does not require ribavirin for any patient population.
■ Harvoni still the clinically superior regimen. Harvoni's cure (SVR12) rates were higher than Zepatier across the board in GT1 treatment-naive and -experienced patients. Furthermore, Harvoni offers the option of an 8-week regimen for treatment-naive non-cirrhotic GT1, whereas Zepatier does not. That said, Zepatier does have an edge in chronic kidney disease patients (99.1% SVR12) but the population is small (~10% of HCV).
■ Realized price, not list price, is key. For Zepatier, we believe a 15-20% gross- to-net adjustment would be reasonable, which translates to a realized price of $44-46K. This is not far off from what we already estimate for Harvoni in 2015; assuming 46% gross-to-net and 10% of patients treated with the 8-week regimen ($63K list price), blended realized pricing is $46K/patient.
■ The fight for payer contracts begins. Most of Gilead's multi-year contracts should flow through 2016. While some will need to be renegotiated now that Zepatier is approved, we suspect the majority of payers will continue to favor Harvoni given its superior clinical profile supported by a vast body of real-world data. Accordingly, we do not anticipate significant share loss to Merck.
■ Our view on HCV remains unchanged. We reiterate our view that GILD will remain the market leader in HCV, though a drop in market share and realized pricing is inevitable. Longer term, we assume an 85% US patient share, and with the recent loosening of payer restrictions on treatment, we see strong potential for sustainable HCV cash flows through ~2022-2023
Read more:
No question that the currency comps improve after Q1 but to say that it's all about the dollar is not accurate. Almost half of their market (US/Japan) was down YY in constant currency. This cycle like all has it's peaks and valleys
Don't ignore $ABBV. Higher dividend and after ruling they appear to have a strong moat in biosimilars
The parallel $MSFT is notable. $MSFT took about 6 yrs to swap out investor classes while they consistently grew the dividend. The then brought in Satya and the sentiment changed. Finally they begain to grow again and look like a a technology company of this generation.
$CSCO stabilized the business. Started the dividend and committed to raising it to appear to dividend growth investors. They replaced Chambers with an insider and committed to the Internet of Things which appears likely to reinstate top line growth looking forward. Now they have had about 5yrs to swap out investor classes.
Msft is now at a 17x fwd PE multiple
CSCO is at a 10x fwd PE multiple.
Analysts have pegged the secular growth at 9% for both companies. CSCO is a better risk/reward play IMO but I'm invested in both.
Thx for article Casey!
Some interesting info in the latest Economist related to the crude oil price declines:
- 94% of current worldwide production has a marginal cost less than $30 per barrel. The cash cost production costs by country:
Iran < $5
Saudi Arabia < $10
Russia $10
US Shale $12
Canada Oil Sands $16
Brazil $20
Venezuela is by far the hardest hit economy. The IMF is estimating a 10% decline in GDP. Also estimating the inflation rate is > 200%.
Russia saw a 4% GDP decline in C15 with 13% inflation and has announced a 10% reduction in govt spending due to the reduction in oil related revenues.
Saudi Arabia saw a 15% spending deficit in 2015 from oil declines. They have announced reduced spending of 15% in C16 as a result.
The historical rule of thumb: Every 10% drop in crude oil price boosts GDP growth by 0.1 to 0.5%. We have seen a 75% drop in crude pricing yet the growth rate has slipped a little. This is one of the arguments for a pending recession.
ILMN Q3 cc:
NIPT service revenue, including test fees, grew approximately 20% versus the third quarter of 2014 as we performed close to 50,000 tests. We recently signed a supply agreement with Counsyl that includes access to our NIPT patent pool, our 36th customer globally that has acquired these rights. We're encouraged to see our customers develop NIPT LDTs, which further boost test adoption. Keep in mind as these licensees bring NIPT in house, revenue will decrease in services but increase in products.
Goldman Sachs revised their top-down EPS estimates today:
2015 $106 -7%
2016 $117 +11%
2017 $126 +8%
It was a good announcement overall and long past due. Once Quest was validated the volume dropped indicated the capacity was excessive. The G&A has always been to high.
R&D confuses me alittle as I would have hoped for a milestone payment type deal with a commercialization bigpharma. Not sure what this means because if they cut R&D first with little to no IP protection they only reason for a big partner to agree is time to market and access to clinical data. Hope to hear more next week.
Good insight. I've also heard some investors are waiting to see some signs that the commitment to improving shareholder value has substance. JP Morgan presentation should be next week and hopefully will fill in some details.
Sounds good yet I don't see that in the body of the article. Since you agree that they need to deleverage, the sole issue on the table is what are the available market terms to do so and did the management team negotiate this deal accordingly. I'd enjoy hearing your take on it.
Instead though the article makes comments such as: "Rather than the notes being exchanged for anywhere near the $34.59 per share area, $121.47 million principal amount of the note is being exchanged for 12.16 million TERP Class A shares which values each share at $9.99."

Is real really any convertible debt holder dumb enough to convert at close to the original exchange target of $34.59 when SUNE is currently trading at $5?. It seems to me to be a pretty curious complaint.
I'll admit that the amout of the discount to the current value of TERP is surprising as is the fact that TERP has rallied on the news. This deal seems to me to be similar to the last forced renegotiation which helped SUNE at the expense of TERP. My only conclusion is that the market realizes that these entities are tied at the hip relative to debt and if the outlook for SUNE improves with these deals, it will ultimately reduce the risk to TERP.
I don't disagree that the cost of this unwinding is dear. However, the article ignores the reality of the current debt market for SUNE. They made the choice of over-leveraging when the debt markets were supportive. Not unlike the E&P market or even the commercial real estate market of a few years back. The current reality is that SUNE needs to deleverage and that isn't cheap as indicated by the fall in the market cap. Every time they make progress the market responds as management gets closer to the leverage ratios that will be considered acceptable. If the cost of this transaction was as bad as you describe, the initial rally this morning from short covers would not have had any legs.
They are slowly making progress. The growth and earnings will be hurt but it was going to be devastated with no deleveraging so this process is ultimately positive.
Thanks for adding. These trends are very positive for entire moldx space next year.
$FMI received good coverage news
$GHDX published clinical data
Thanks. The post was basically a reminder to myself after a couple portfolio mistakes this year
Excellent article! I would take minor issue with the statement: "...not necessarily something for younger investors with at least, say, 10 years before retirement". I'd argue that younger investors would also benefit from a dividend growth profile. The reduced volatility will likely keep them in the market when they otherwise might cash out.
I would recommend a drip program for younger investors as opposed to retirees who may need the cash flow to fund their golden years.
How exactly did this article explain the 2nd mortgage and subprime lender analogy? If the lease needs to be satisfied to sell a house, which in turn then pays off the 1st lien holder, this doesn't seem like an appropriate analogy at all. I have no idea what happens if a home is foreclosed upon with respect to the lease but with rising home pricings, higher down payments and slowing foreclosures this seems like an attempt to cast a negative light on a business practice to talk one's book.
Understand but you made references to valuation, insider ownership, take or pay contracts while implying these were different to well publicized issues at KMI or others. These are largely common attributes with the primary common thread of the need for outside capital to continue to fund growth/div practices. Agree that the preferred is a far safer vehicle to common.
regardless, thanks for the article
Appreciate the article and look forward to tracking company. Unfortunately in this climate of debt issuance concerns, they fail on the first test. While having a reasonable debt/equity ratio, a quick review of their trailing 3 quarters and 3 years shows that they have been paying dividends in excess of their FCF, tapping equity ad debt markets to fund the difference. That behavior is what has been under attack of late.
Not going to change anytime soon. 34% (2014) is a significant slice of SWKS bus. I'm long but just have to accept the correlation
Purchased LAD today at $113
I've followed LAD for quite some time along with others in the dealership space. The biggest driver is what all in the space are doing including Berkshire Auto. There is a consolidation in this defragmented market and the acquisitions have virutally all been accretive to earnings. Only KMX is opting to open new dealers rather than acquire existing. The new vehicle market has grown for 6 straight years and is forecast for another up year in 16. Used vehicle market is 3x the size and is much more stable and likely to grow even faster as new vehicle debt starts to dampen new buys..
Chrysler is less than 20% of LAD business now. Both Honda and Toyota are a higher mix and the luxury market continues to grow, now at around 12%.
It's been a great ride at LAD with a 10x run over past 5 yrs. I sold recently when my covered call was assigned at 120 and am looking to get back in for the next stage-hoping for test of $100 but probably won't get it.
I did a blog comparing the top players yesterday if interested.
results AH on Wednesday, December 9, 2015. The Company has scheduled an investor conference call for Thursday, December 10, 2015 at 8:30 AM ET
Hoping for some guidance on any potential secondary to help fund acq
Just one example today about gene-editing that could eradicate Malaria:
Thanks for sharing. Stories like yours need to be shared more often for all to understand the potential for these screens to dramatically improve lives.
Natera handled the Piper Jaffray presentation quite well. No real data was provided beyond what was already known. Continued to state that they are the market leader because the do the most tests. The primary reason they stated their test was best was that they were 4th to the market and now have the most volume. Then it was added that many of the tests were at $0 revenue but that was acceptable because of the Horizon carrier screen attach rate. It wasn't mentioned that the revenue from these attached tests, while up sequentially, was below the amount seen in Q4-14, Q1-15 and Q2-15.
Dec 2nd Piper Jaffray conference presentation by NTRA to include finanical guidance. Given timing coming after two months of quarter, it's possible they will modify Q4 guidance. If so, expect to see an 8K filing AH on same day.
TSYS agreed to be acquired by Comtech for $5 per share.
I'm more hopeful only because I've had an opportunity to meet Dirk and I spent many years in technology companies that were fun by technology geeks that had to learn the business by hiring the best talent around them. I have no problem with a scientist or technologist being in charge but their approach to building the business foundation starts with focus and team. This transitiion has to be a short one given the pace of change that is likely to occur next year. I suspect that we will know much more by the January JP Morgan conference as to who the permanent CEO is and what strategic changes are to occur.
Having said all that, I can't say I'm optimistic in general because history with SQNM has show us that they don't seemingly care about the business of diagnostics and won't replace poor performers wiith outstanding leaders to build the competency
Well thought out. I expect them to not only cut costs but to reallocate some to address needs such as building a field presence that is approapriate for the OB/GYN channel that will be the conduit for growth in the future. Lots of possibilities in this arena with a serious tail wind poised to start blowing. They just need to get prepared and learn the basics of commercialization and shareholder value creation.