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Healthcare Update Week Of Nov 25: Piper Resumes On Several Biotechs

Healthcare Update

Nov 25 2013 - Nov 29 2013

Major Pharma

Anthony Petrone at Jefferies initiated coverage of Mallinckrodt (NYSE:MNK) with a Buy rating and $60 price target. He noted, "Mallinckrodt is uniquely positioned in a consolidating Specialty Pharma industry having three attractive attributes: 1) Potential long duration assets in Xartemis XR and MNK-155, 2) Room for margin expansion post spin; and 3) Tax leverage from its Irish domicile. We see the combination as supporting accelerating earnings over the next three years with potential optionality from M&A and licensing. We rate shares Buy with a $60 PT."

Piper Jaffray analyst David Amsellem upgraded Forest Laboratories (NYSE:FRX) to "neutral" from "underweight" and increased his price target to $49 from $33, citing the previous bearish thesis is no longer tenable given the backdrop of a dynamic M&A landscape in specialty pharma (with FRX possibly using its balance sheet more aggressively) coupled with the potential for meaningful expense savings.

Specialty Pharma & Generics

Teva Pharmaceutical Industries (NYSE:TEVA) announced that the FDA has granted orphan drug exclusivity for TREANDA through October 2015 for indolent B-cell non-Hodgkin lymphoma (OTC:INHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. Orphan status is granted to therapies intended to treat diseases or conditions that affect fewer than 200,000 patients in the United States. With the previously granted six months of pediatric exclusivity for TREANDA, regulatory exclusivity for this indication is now extended through April 2016.


Barclays analyst C. Anthony Butler increased his price target ofGilead (NASDAQ:GILD) to $90 from $74 to reflect an updated view of a faster-than-anticipated launch of the HCV product sofosbuvir; Jefferies analyst Thomas Wei increased his price target to $80 from $40, citing a major overhaul of HCV and GILD model and an introduction of brand new estimates for GILD.

Piper Jaffray analyst Joshua Schimmer initiated, resumed, or assumed coverage of the following companies, citing the outlook for the biotech sector in 2014 remains strong, although the tape may be somewhat choppy as the average large-cap biotech growth stock multiple is now above that of growth stocks in other sectors: initiated coverage of Chimerix (NASDAQ:CMRX) with an "overweight" rating and $33 price target; GW Pharma (NASDAQ:GWPH) with an "overweight" rating and $73 price target; Insmed (NASDAQ:INSM) with an "overweight" rating and $34 price target; Nektar Therapeutics (NASDAQ:NKTR) with an "overweight" rating and $20 price target; Repros with an "overweight" rating and $26 price target. The analyst resumed/assumed coverage of the following: Alexion (NASDAQ:ALXN) with an "overweight" rating and $172 price target; Amgen (NASDAQ:AMGN) with an "overweight" rating and $143 price target; Biogen Idec (NASDAQ:BIIB) with an "overweight" rating and $331 price target; BioMarin Pharmaceutical (NASDAQ:BMRN) with an "overweight" rating and $87 price target; Celgene (NASDAQ:CELG) with a "neutral" rating and $170 price target; Gilead with an "overweight" rating and $91 price target; Incyte (NASDAQ:INCY) with an "overweight" rating and $56 price target; Isis Pharmaceuticals (ISIS) with a "neutral" rating and $38 price target; Mannkind (NASDAQ:MNKD) with a "neutral" rating and $5 price target; Pharmacyclics (NASDAQ:PCYC) with an "overweight" rating and $160 price target; Vanda (NASDAQ:VNDA) with an "overweight" rating and $21 price target.

Life Sciences

Isaac Ro at Goldman Sachs upgraded shares of Danaher (NYSE:DHR) to Buy based on 2014 growth via new product cycles in LS&D and incremental share gains. In the same note, Waters (NYSE:WAT) was downgraded to Neutral based on continued top line and organic growth disappointment coupled with potential share loss in pharma end markets and the effects of a prolonged management transition.

Clinical Labs

Bio-Reference Laboratories (NASDAQ:BRLI) provided a preview of revenues and earnings per share expected for its FY13 and Q4FY13. Despite continued strong volume growth, the Company believes there is an ongoing recalibration of reimbursement for the industry, which has resulted in substantial downward pressure from many payers regarding reimbursement in FY13. In addition, increased infrastructure expenses related to upgrading acquisitions in Florida and California and the launch of the company's inherited cancer program that occurred too late in the period to meaningfully contribute to revenue in Q4FY13 also contributed to the results and for the quarter as well as guidance for the upcoming Fiscal Year. Based on the company's recent experience, the company expects that its guidance for 2014 will call for an increase in net revenues of 10%, an increase in patient volume of 10% and an increase in net income of 10%. The company notes, however, that this guidance may be subject to adjustment in the event that CMS (Medicare)makes any significant changes to the Physician Fee schedules for 2014.

Medical Products/Technology

Shagun Singh Chadha at CRT capital initiated coverage of Edwards Lifesciences (NYSE:EW) with a Fair Value, Spectranetics (NASDAQ:SPNC) andHeartware (NASDAQ:HTWR) with a Buy, and Intuitive Surgical (NASDAQ:ISRG) with a Sell.

Eye Care

No sector news.

Healthcare IT

Donald Hooker at KeyBanc Capital Markets upgraded MedAssets, Inc. (NASDAQ:MDAS) to "BUY" with a $25 price target.The analyst said, "Our target valuation assumes a ~10x multiple of our 2014 EBITDA estimate ($239 million), which we think is very reasonable for a company with ~5% revenue growth, ~12% free cash flow growth (7.7% yield) and sustainable secular tailwinds related to health care reform.

Healthcare Services

Eric Coldwell at Baird increased his price target on Charles River (NYSE:CRL) to $57 from $53 and decreased his price target on PAREXEL (NASDAQ:PRXL) to $47 from $52. He said, "The sector posted 27% EPS growth (and 7% EPS upside vs. Street) as strong OM% expansion more than offset a modest revenue shortfall. Backlog grew to another record. We believe that fundamentals remain relatively stable and execution generally strong, though PRXL's big bookings miss and recent Pharma restructuring noise create headwinds to sentiment. Our current focus is on the largest CROs and a near-term sentiment trade in early stage.

Managed Care

Cowen analyst Christine Arnold decreased her price target ofUnitedhealth Group (NYSE:UNH) to $85 from $87.


On Friday last week after the close, Community Health Systems (NYSE:CYH) and Health Management Associates (NYSE:HMA) announced that the Registration Statement on Form S-4 relating to the companies' proposed merger has been declared effective by the Securities and Exchange Commission. The Form S-4 contains HMA`s definitive proxy statement relating to soliciting the required approval of the transaction by HMA stockholders. HMA is expected to commence the mailing of the definitive proxy statement to its stockholders on or about November 25, 2013. CHS and HMA encourage HMA stockholders to review the proxy statement and to vote FOR adoption of the merger agreement at the HMA special stockholders` meeting to be held in Naples, Florida, at 8:00 a.m., local time, on January 8, 2014.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: COCKRELL GROUP does and seeks to do business with companies covered in COCKRELL GROUP Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of COCKRELL GROUP Research. Investors should consider COCKRELL GROUP Research as only a single factor in making their investment decision. The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Data provided by: Thomson Reuters