Stocks to watch

The Internet of Things (IoT) can be explained as a way to connect everyday appliances like homes, industrial equipment, watches, etc to the internet, for the purpose of tracking usage, collecting data and automating systems. The IoT connectivity is expected to hit 50 billion objects by 2020 with $7.1T valuation by that same year.

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Current use of IoT in the companies:
Company                                      IoT Focus
Apple                                          Smart watches
Alphabet                                    Smartwatches, Nest, Andriod Things, Google Home, Google                                                         cloud IoT services, Weave platform
General Electric                        Predix software, Asset Performance management software,                                                       IoT security monitoring and Brilliant Manaufacturing                                                                 software.
Verizon Communications       Smart city connections, ThingsSpace platform, asset                                                                     tracking and management, smart device monitoring, 5G                                                             wireless

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The impact of IoT is not limited to a particular sector, as there are telecom companies already building Internet of Things networks that are designed specifically to bring low-power devices online. Tech firms pushing for virtual assistants that are helping to connect IoT devices to each other and car makers are pushing for driveless cars with help me small IoT comopanies to make their plans into reality.

Worldwide spending on IoT is predicted to reach $1.4T by 2021, according to IDC (the Motley Fool, LLC)

Companies likes Amazon (NASDAQ: AMZN), Skyworks Solutions (NASDAQ: SWKS) and Verizon Coomunications (NYSE: VZ) are already making big investments in the IoT spcae, with aim to gain benefits for years to come.

Best Stocks in IoT 2018

Verizon Communication: The connectivity play

With being positioned as the nation’s leading wireless service provider, the company has made a couple of strategic IoT acquisitions over the past several years, including Fleetmatics and Telogiz. these takeovers helped Verizon boost its telematics business (connecting cars and fleets to the internet), which generated $220 million in the Q3 2017 & grew 13% y/y. Despite the fact that telemetics numbers seems far less than other revenue streams Verizon has, but the telemetics market is expected to grow into an $18.4B industry by 2022, with Verizon has an early lead in the space. Apart from telemetics, Verizon is expanding its IoT presence through its LTE Cat-M1 network- this is specifically designed for IoT devices and the development of its 5G network. The LTE Cat-M1 network was the first of kind to launch in U.S. last year, and it gives the company the option to sell cellular connectivity for low-power, low-bandwidth devices, from water meters to wearable tech devices for consumers.

And Verizon is also conducting more tests of its 5G wireless network, which will be used to connect more IoT devices and could be used to navigate telematics space. And investors should take notice of Verizon’s annoucement to lauch 5G network in the selected cities this year, allowing them to have a kick start in this space.

Amazon: The IoT cloud and device play

Amazon has entered the race through its latest product; Echo devices, powered by the voice assistant Alexa. Echo devices account for about 70% of the smart speaker market right now, and there is plenty of evidence indicating that 2018 will bring more growth for sales of such devices as RBC Capital is already estimating that Echo devices could add atleast $10B to Amazon’s top line by 2020. But Amazon is not only solely focused on smart speakers (Echo) but also keen on extending IoT through Amazon Web Services- its cloud computing segment, which is on the forefront of this space as well, suggested by the data that Amazon is already a cloud computing leader with 40% of the market.

The underrated company within IoT: Skyworks Solutions 

Skyworks is a chipmaker that used to only focus on selling its products/components to large mobile device manufacturers like Apple and Samsung. But the company expanded into IoT components that connects cars to the internet. The company is banking on the fact that more semi-autonomous driving components are being added to the vehicles, and that automakers and tech companies will rely on wireless connections to update the software that controls them. For instance, Tesla, already sends over-the-aire updates to its vehicles. Skyworks, IoT chips can already be found in Amazon’s Echos, Hyundia’s connected cehicles, and smart-home lighting technology by Cisco Systems.
Quickly breaking down Skyworks revenue segments, it earns around 26% of its top line from non-mobile revenue, with 22% y/y growth in recent quarter. Skyworks has already proven that it can be a primary supplier for major tech and automotive companies, which should put company in a great position once market starts to adapt more IoT devices and connected vehicles hit the market.

 

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Investment strategy: Go Long

While Amazon, Skyworks and Verizon are in great position to reap the IoT space benefits, investors should understand that they need to play the long-game in this market. For instance, Verizon will roll out 5G network slowly, and its telematics business will take time to grow. Skyworks is earning significant revenue from its IoT components, but it still relies mostly on its chips sales for mobile phones. And Amazon is acting rapidly within its IoT devices and AWS IoT services, but its other AWS services provide majority of the company’s profit.

Strategic Tech Opportunity: SNAP & ETF

As we all know, Snap Inc. (NYSE: SNAP) hype train is gone and many never bought into it. Despite the fall, the app developer behind Snapchat instant-messaging service did well early upon going public this month, as it sold 145 million shares at $17 per share (Leading investment banks such as Goldman Sachs and Morgan Stanley suggested that Snapchat could have kept the offer price higher, as order book ratio was 10-to-1) during its IPO and raised nearly $2.5 billion. Following the IPO execution, price surged 44% on Day 1, followed by bopped around uncertainty for the past weeks and backslide has yet to fully develop.

But the attention Snap is drawing with its high profile IPO, does nothing to change its iffy business model or finances – its 2016 net loss was north of $500 million, despite improving revenue. And many core analysts believe that it will be difficult for Snapchat to engage users for long period of time when comparing its social platform with Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR). Plus, Snapchat could also find it difficult to attract advertisers, as compare to heavyweights like Google (NASDAQ: GOOGL), Youtube and Facebook.

However, on the flipside, Snap is taking early steps not only to unlock new growth but also to diversify its revenue streams with camera-equipped spectacles sunglasses. This approach could pave the way for entry into the VR space that Facebook (FB), Microsoft (MSFT) and Sony (SNE) have shown to be potentially revolutionary.

Therefore, despite bumpy start for Snap Inc. (NYSE:SNAP), many analyst who are part of banks that work on SNAP IPO believes it could still soar as 13 initiated research coverage with nine on BUY recommendations and four on HOLD along with price target of $24 to $31. While, of the 14 analysts whose firms didn’t work on the Snapchat IPO, only two suggested that the company’s stock was worth buying with median price target at $21 a share.

That’s why suggestion would best to start looking at the First Trust U.S. Equity Opportunities ETF (NYSE: FPX), which tracks the IPO market by seeking to replicate the IPOX-100 U.S. Index. And it picked up shares of Snap at its IPO.

So if one got in on FPX, the upside and excitement of Snap’s IPO is already part of the investor’s portfolio – without the risk and volatility of buying Snap outright.

Numerous private tech companies – including some can’t-miss outfits -have filed to go public this year. It’s largely not because of consumer-focused Snap’s success.  It’s because these companies are selling their products and services to businesses.

And the appetite from Corporate America for these B2B-focused firms is soaring.

The massive – if overshadowed by Snap – success of the recent MuleSoft Inc. (NYSE: MULE) IPO shows this. The software firm also gained more than 40% in its first day.

FPX is a nice way to be part of the pre-IPO world. As it’s an ETF that every tech investor should consider holding for a long time.

Why Invest In The Water Industry

• Starting point can easily be that Water is the commodity which will never be obsolete due to its form factor and how it is being consumed unlike oil & electricity industry.
• After doing a rough research to lay down foundation for further investment thesis on the water industry, the best position would be to focus on household names within this industry because it is seen that despite water industry holding such an essential role in our economics, they are less covered by advertisers or discussed in news outlets compare to Apple or Google. Thus, making it difficult for new investor to locate these stocks for its portfolio.
• American Water Works (NYSE: AWK) and Aqua America (NYSE:WTR), which are the two biggest water utility companies in the U.S

The water and wastewater industry is the nation’s most fragmented utility industry. The great majority of the U.S. population is served by municipal drinking water and wastewater systems. Approximately 53,000 water systems and more than 16,000 wastewater systems exist in the country. Even though roughly half of the drinking water systems are privately owned, they serve only about 15 percent of the population. Approximately 20 percent of the wastewater systems are privately owned, but they serve only about 3 percent of the population. More stringent regulations from federal and state environmental regulators, and the capital needed to meet such standards on the part of many system owners, as well as the monetizing of public assets to support the financial condition of municipalities, are among the factors that might drive consolidation. The U.S. Environmental Protection Agency has estimated that an investment of $335 billion is needed for required improvements to the nation’s aging water infrastructure over the next 20 years. While the American Society of Civil Engineers has estimated that $298 billion is needed to improve the nation’s wastewater infrastructure.

In nutshell from Aqua water’s statement (above), we can conclude that market outlook looks to have enough potential for expansion since the companies in the industry can look to expand water services to more residential and commercial regions along with scoring contracts with public authority to manage water and replace outdated wastewater system.

AQUA AMERICA (NYSE: WTR)

• Founded back in 1886, is the publicly traded holding company for regulated water and wastewater utilities that serve approximately 3 million people and growing with their growth strategy
• Region covering: Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana and Virginia
• Company completed more than 200 acquisitions of utility systems in the last 10 years
• Services provided include repair, inspects, clean waterline and sanitary wastewater lines.
• Supports municipal authorities as well as regular households

From reviewing the financial statements, it is clear that WTR has been steadily increasing revenue for the past 10 years. Most notably aspect is the increase in debt from their annual reports. According to the company, they are using the debts to obtain more water and wastewater systems as followed by their growth-through-acquisition strategy.

AQUA AMERICA’s GROWTH STRATEGY:

“Aqua looks to capitalize on its core capabilities, which include prudently investing in infrastructure, consistently earning credibility with our stakeholders and maintaining our status as one of the most efficient utilities in the nation. This strategy directly and positively impacts the communities we serve. Our employees’ expertise and the company’s financial strength allow us to prudently analyze and competitively bid for utility systems, especially those that have neglected to invest in infrastructure over time. The company has completed more than 250 utility system acquisitions in the last 15 years. In 2015, Aqua’s growth-through-acquisition strategy yielded the largest customer growth rate seen since 2008. The company’s successful growth initiatives included four municipal acquisitions, which contributed to a 1.9 percent customer base increase. A 1.5 to 2 percent increase is anticipated by year-end 2016. In 2015, Aqua invested approximately $365 million to improve its infrastructure systems. The company expects to invest more than $350 million in 2016 and more than $1.1 billion through 2018.”

Reasons to Invest:

Here are few reasons for investors to consider before including WTR to their portfolio:

• Water: it’s a commodity that will never be obsolete and there are no replacements for water in form factor compared to electricity or oil or other type of energy for consumption usage.
• Climate Changes: Rain has been falling less in several regions in the U.S and due to that new innovations will be required to move water to water deprived states.
• Dividend Power: WTR has increased their dividend for 26^th time in 25 year and 2016 marked the 71^st consecutive year of paying a quarterly dividend. This sits well with current shareholders.
• Stock Performance: WTR has outperformed the S&P 500 since IPO execution in early 1980s.
• Growth Potential: Projected growth rate for the next 5 years is 5.25% which is better than several other utilities companies, which falls in the average growth rate of 4.2%
• Market Capture: WTR has a huge market according to the chat below, they have potential to expand operations by penetrating in drought stricken states such as California & Southern States.
• Marco Impact: Water utility companies are recession proof because even doing market turmoil, people will need to consume/use water.

 

 

Risk Profile:

• Sole Growth driver: WTR drives growth through acquisitions and upgrades; this is a potential risk because having only one source of growth going forward could mean company may face difficulties in growing if debt gets expensive or no cash to acquire small utility systems.
• Management Concern: There is a lot to understand about the management structure of the WTR because poor management could corrupt business practices & damage shareholder value.
• Debt issue: The Debt to Cash is significantly high, as currently WTR has 1.8B in debt and only 3.2 million in cash. Hence, if company is hit with any micro/marco level shocks, dividend payments would suffer.

American Water Works:

While American Water Works has not been public company as long as WTR, it has grown rapidly to be considered the largest water utility company in the U.S. The company serves approximately 15 million people across more than 40 states and two Canadian provinces. Similar to WTR, AWK also focus on acquisition tactic for growth.

Financial Summary:

Comparing the financials with WTR, both companies have similar outlook as revenues have increased for past couple of years along with gradual increase in debt burden, allowing company to have little cash reserve. The total debt for the company stands at 6.2B v the cash of 66M.

Reasons to Invest in American Water Works:

Important to note that American Water works has same benefits as WTR in terms of reasons to invest, however there are few others that separate them from their competitors, which also include WTR.

• Experience with desalination: this could be a key expertise in drought regions for expansion as AWK can provide drinkable water through synthesizing ocean water.
• Dividend: AWK has increased its dividend since 2008 IPO
• Stock performance: AWK stock has outperformed S&P 500 by 183.99% since 2008
• Growth: Projected growth rate for next 5 years is between 7-10%
• Investments: AWK has heavily invested in new technology, especially in smart water grid management which helps them being more reliable and efficient in the industry
• AWK has 5 U.S patents and more than 80 competitive research grants.

Hence, these competitive advantages will help AWK stay ahead of the other water utility companies.

Risks:

The set of risks are similar to the WTR. However, they will need more resources to drive the growth past 2020 & poor management could potentially impact stock performance.

Conclusion:

It can be said that both WTR and AWK are in good position to capitalize to grow its market based on the water and wastewater system in the U.S. However, the fragmented US water market is in need for consolidation in the wake of limited access to financing. For example, the funding allocation for clean water fell from US$2.1B in 2010 to US$689 million in 2013 and this could be seen as a potential obstacle for private companies to grow beyond certain level. And investor should focus on investing in these stock for long term returns along with applying fair value mechanism in deciding whether the stock is overvalue or not.

Coherus BioSciences Q4 and FY16 Highlights

 

On 13^th March, 2017, Coherus BioSciences, Inc. (NASDAQ:CHRS) reported Q4 and full year financial results.

Operations highlights for Q4

Oncology therapeutic franchise:

• CHS-1701, the biosimilar candidate of pegfilgrastim (Amgen’s Neulasta ®) was confirmed that FDA has accepted the filing of 351 (k) Biologics License Application (BLA) for it.
• Confirmation of acceptance of Marketing Authorization Application (MAA) to European Medicines Agency (EMA) for CHS-1701. This marked as a first EMA submission and acceptance for Coherus.
• Management expects to use cash towards commercial activities of CHS-1701

Immunology (anti-TNF) therapeutic franchise:

• CHS-1420, the biosimilar candidate of adalimumab (Humira®), received decision from the PTAB (Patent Trial and Appeal Board) of the US Patent and Trademark office denying institution of petition for Inter Partes Review (IPR) of AbbVie’s U.S Patent 9,114,166 (“166 Patent) releated to AbbVie’s Humira formulation.
• CHS-0214, the biosimilar of Amgen’s Enbrel ® (etanercept), released results from two PK studies.
• The trial CHS-0214-06 trial compared CHS-0214 vs EU Enbrel, which resulted in achieving the primary PK BE endpoint. The trial, CHS-0214-07 provided additional relative bioavailability data for CHS-0214 candidate. Anticipate filing of Marketing Authorization Application (MAA) in 2H of 2017.
• Partnering discussions for the immunology (anti-TNF) therapeutic franchise are underway, targeting agreement in place in the first half of 2017, subject to a favorable “135 patent IPR decision.

Others:

• CHS-131; completion of additional animal studies on the candidate to validate its mechanism of action, with licensing agreement locked down for 2H of 2017

 

Financial Summary for Q4:

• On 28th October  2016, Coherus BioSciences Inc (NASDAQ:CHRS) entered into a Sales Agreement with Cowen and Company LLC to act as a sales agent for executing the sale of CHRS’s common stock with aggregate gross sales proceeds of up to $100,000,000 from time to time, through an “at the market” equity offering program.
• During the Q4 and in January 2017, CHRS issues 2.2 million shares, which raised $60.8 million in gross proceeds under the “at the market” program, with an average price of $28.10 per share price.

Q4 and FY’16 Financial Results:

Research and Development (R&D):

• Expenses for Q4:16 were $59.0million v $51.4million for Q4:15.
  • The jump in the Q4:16 compare to Q4:15 was largely due to analytical studies for early stage programs (phase I studies) and CHS-0214 programs, on-going CHS-1420 PK and Phase 3 trials for the biosims. This was offset by completion of CHS-1701 BLA-enabling and CHS-0214 phase 3 clinical program.
• R&D for FY’16 were $254.4million v $213.1million for FY’15.
  • The surge in FY’16 expense compare to FY’15 was mainly because of proceedings on clinical programs associated with Phase 3 clinical study in psoriasis for CHS-1420, along with hiring of additional personnel to support both early-stage and late-developments programs. This increase was partially offset by a decrease in costs related to BLA-enabling studies for CHS-1701 and a decrease in costs associated with the CHS-0214 phase 3 trials that were completed in 1H of 2016.

General and administration (G&A):

• Q4:16 expenses were $15.3m v $11m from Q4:15 (Q/Q 39.9% increase).
• G&A expense for FY’16 were $51.6m v FY’15 $36.0m (Y/Y 43.33%)
  • The surge in these expenses were mainly contributed by hiring of personnel to support pre-commercial and accounting activities, stock options costs- which was granted since Q3:15 and legal fees to support the IP strategy.

Net loss:

• Q4:16 ($75.9)m (or $1.71 per share) v ($52.4)m or ($1.35 per share) during Q4:15.
• FY’16 ($127.3)m (or $3.04 per share) v FY’15 ($223.3)m (or $6.01 per share)

Cash and Cash equivalents:

• $124.9m cash total for Q4:16 v $159.7m Q3:16 along with additional raise of $120milion in net proceeds from equity offerings in February and March 2017.

Total Revenue:

• Q4:16 figures stood at $844 thousand, as compared to $10.2m in Q4:15. While the total revenue for FY’16 was $190.1m v $30.0m in FY’15.
  • The increase over the same period was due to increased recognition of collaboration revenue as a result of regaining the full development & commercial rights of CHS-0214 from shire in Europe, Canada, Brazil, the Middle East and other territories.

 

 

Conference Call InformationWhen: Monday, March 13, 2017 at 4:30 p.m. ETDial-in: (844) 452-6826 (toll free) or (765) 507-2587 (International) Conference ID: 66529524Webcast:  http://investors.coherus.com The webcast will be archived on the Coherus website.

Coherus BioSciences Inc- Analysis

The biotechnology industry is constantly reinventing itself, but one of the biggest noises over the last couple of years has been the introduction of biosimilar drugs to the U.S markets.

Biosimilar: Background
Biosimilar drugs are derived from Biologic drugs that are made by a living cell, typically an engineered bacterium or yeast, with collection of compounds from animals such as cows, mice, rabbits, goats and even humans, according to Mary Wahl, who works at Microsoft. This makes them substantially more difficult to manufacture and impossible to make an exact replica unless a company follows the exact same manufacturing procedure as the company that makes the brand-name drug. Meanwhile, small-molecule drugs (which generics mimic) can be easily synthesized by chemicals in a consistent process  by the manufacturers as to make sure that drug has same effective profile every time. One expert told Fortune, if small-molecule drugs are a tricycle, biologics are space ship. Biologic drug, despite its complexity can help with lots of various conditions in the body, like monoclonal antibodies to fight cancer or Neupogen to enhance white cells during chemotherapy treatment.

Therefore, “Biosimilar” term is coined because changes in cell lines, growing conditions, expression times, purification process and several other variables can have minor changes on the drug being developed. Hence, biosimilar candidate is similar but not identical to the brand-name drug it is trying to copy cat.

Due to the complex process, FDA had previously been reluctant in allowing these to be marketed or sold in the USA- giving biotech companies free pass in stacking up billions in profits from the clinical drugs even after their drugs lost patent protection, as there was no clear competitor.  However, that all changed in 2010 after passing of the Affordable Care Act, known as Obamacare, as the bill cleared the pathway for biologics to finally reach U.S. consumers. Ultimately, last year, the FDA gave the green light to the first biosimilar drug, and that opened the flood gates for more biosim candidates.

One small-cap company that is looking to cash on the Biosimilar trend is Coherus BioSciences Inc (NASDAQ: CHRS). That engages in the development and commercializition of biosimilar therapeutics worldwide.Its clinical-stage pipeline consists of two anti-inflammatory agents targeting tumor necrosis factor, a substance in the body that is involved in the inflammatory response; and a long-acting form of granulocyte colony-stimulating factor, a beneficial substance in the body that stimulates production of granulocytes (a type of white blood cell) in order to promote the body’s ability to fight infections.The company was founded by Dennis M. Lanfear and Stuart E. Builder in September 2010 and is headquartered in Redwood City, CA.

While there are several companies focused on creating biosimilar drugs, Coherus BioSciences Inc (NASDAQ:CHRS) is a dark horse, that demands attention from the investors. The company has three crucial biosimilar product candidates, which are CHS-1701, a biosimilar version of Amgen’s (NASDAQ: AMGN) white blood cell boosting drug Neulasta® (Sales of Neulasta® were more than $4.5B in 2015, so even if Coherus could capture a portion of that market away from Amgen, that will be enough to turn this small-cap biotech company into profitable flight). CHS-0214 the copy-cat version of Enbrel as well as CHS-1420 that is targeting AbbVie’s Humira.

At the J.P. Morgan Healthcare Conference in January 2017, Coherus presented its key milestones for 2016 and ensured that it is on track to submit all three of its biosimilar candidates (mentioned above) for regulatory approval during this year. Subsequently, confirming CHS-0214 submission for regulatory approval in the 2H of 2017, along with FDA decision date of June 9^th 2017 for biosimilar candidate of Neulasta and BLA acceptance for Humira’s biosim later this year. Henceforth, these developments at Coherus indicates that the company could be less than a year away from generating powerful revenues if they  could successfully navigate the products through the regulatory process and market their copy-cat Biosimilar versions effectively.

In regard to the execution/marketing of the products, Coherus has wisely aligned itself with deep-pocketed players such as Baxatla and Daiichi-Sanyo, which should make it easier for it to launch the products if they to find their way to market.

Candidate Developments:

Product 1: CHS-0214

Coherus and Baxalta (NYSE:BXLT) announced at the Conference that CHS-0214, the biosimilar version for Amgen’s Enbrel met its primary endpoint in phase 3 trial- confirming no clinically significant difference between CHS-0214 and Enbrel. Previously, CHS-0214 has successfully completed two phase 3 studies, one in chronic plaque psoriasis,with data being released in November 2015, and the other one in rheumatoid arthritis,data released in January 2016. The data from phase 3 studies along with two pivotal clinical pharmacokinetic studies focused on supporting the MMA.

Product 2: CHS-1420

In another recent Phase 3 trial readout, Coherus’ biosimilar CHS-1420 showed similarity to AbbVie’s Humira in psoriasis patients. Start of this month, Coherus announced that CHS-1420, (a therapy candidate for plaque psoriasis) the biosimilar candidate of adalimumab (AbbVie’s Humira ®), met the primary endpoint in a clinical pharmacokinetic (PK) bioequivalence study that compared CHS-1420 to Humira in healthy subjects. Previously, the phase 3 trial illustrated that CHS-1420 showed similarity to AbbVie’s Humira in psoriasis patients along with similar safety profile as both drugs were well-tolerated.  Management anticipates filing of Biologics License Application (BLA) for CHA-1420 to be accepted by FDA this year.

Product 3: CHS-1701

Last year, Coherus reported top-line results, indicating that the study met all of its co-primary endpoints from its follow-on Pharmacokinetic and pharmacodynamic (PK/PD) clinical study of CHS-1701, a pegfilgrastim (Amgen’s Neulasta ®) biosimilar candidate. Moreover, the safety profiles of CHS-1701 and Neulasta were also considered similar, with no serious adverse event during the study or clinical testing. And recently the commercial plans along with preparations have began, with FDA approval expected.

But it would be wrong to conclude that Coherus BioSciences wholly depend upon those three biosims, just because these products cover large market opportunity. Coherus is much more when we add in the potential Coherus phase 1 product candidates. These include biosimilar versions of in-demand chemotherapy drug, Avastin (GENENTECH INC) and wet age related macular degeneration drug Lucentis (GENENTECH INC), each of which currently generating billion in annual sales.

However, the small biotech faces challenges as it is involved in legal litigation with not only AbbVie for Humira but recently Amgen also took Coherus to court over Neulasta’s biosim. These lawsuits could potentially delay the products from reaching the market within the timeline Coherus has anticipated. Plus, making biosimilar is still significantly expensive and complicate procedure, meaning copycat biosim players only undercut their branded counterparts by 15%-30% along with the lengthy timeframe of actually availing the benefits. For example, in 2009, Novartis launched a Neupogen biosim, and it took four years for that product to overtake the sales of original drug. Therefore, it is essential to investigate the cash in hand held by such biosim companies before investing. And in Coherus case it is well financed right now, with more than $155million as of Sep. 2016 and previously in March 2016, it raised additional $72million from a common share offering. Meaning plenty of capital to advance its candidates along the regulatory phase and be able to stay firm during any upcoming potential setbacks (i.e lawsuits or clinical data failures).

 

How big is the Biosimilar trend?

The biosimilar wave, according to Citigroup is around $110Billion opportunity over the coming decade. And one might speculate on dumping brand name producing drug companies like Amgen or Celgene as this wave will crush their prospects. But even these biotech companies, specifically Amgen has been heavily investing in creating its own biosimilar pipelines in an effort to capture & capitalize with nine biosmis in development phase. According to the Amgen, the worldwide sales of branded drugs copy-cat biosim version currently exceeds more than $52billion. Three other household names that are heavily investing in this space are Pfizer (with purchase of Hospira), Novartis’s Sandoz unit and Biogen, who has a partnership with Samsung to develop biosimilars.

Investment analysis:

Coherus BioSciences shares fell -2.291% to close the day at $23.45 on 9^th march 2017. And as of September 2016 earnings report, the Enterprise Value (EV) stood at $1,110.9million with EBITDA at $87million along with $1.93 EPS. The highest price CHRS shares have touched in last 12 month was $31.98 and the lowest price hit in that time frame was $14. Price target is an essential factor while computing the analysis of a stock.

 

 Technical analysis glimpse:

Moving averages are used as a strong indicator for technical stock analysis and it helps investors in reflecting where the stock be heading. Using this tool for CHRS, the 200-day moving average price is $27.78 and 50-day moving average is $25.23.

According to 7 analysts, Price Target for CHRS is $46 highest, $38 lowest and $41.14 being the average floating stock price.

The data below illustrates the recommendation trends:-

CHRS performance during the last 12 months improved by 65.78%, while it’s YTD performance was hit by a negative trend of -11.55%, with stock falling -14.87% over last 6 months along with significant drop in the stock price in the January. The financials suggest a strong long term outlook for the CHRS with Sales Q/Q at 2172%, EPS Q/Q 187.70%, ROE 414.30%, ROI 3533.30% and ROA -47.10%.

Investors who succeed in the small-cap biotech market have learned to temper their expectations. Only a small number of these companies succeed, and the constant chance of a big drop is tough on the stomach lining. The San Francisco-based Coherus Biosciences (NASDAQ:CHRS) is a good play for those who believe the biosimilar industry should start breaking out in the next 12 months. Coherus’ stock has been on the rise since reporting positive data for its biosimilar for Amgen’s Neulasta in July 2016. Coherus submitted a biologics license application (BLA) for its Neulasta copycat in August. Since Amgen’s drug generated almost $4.8 billion in sales last year, it’s reasonable to assume that this biosimilar could achieve at least $1 billion in annual sales along with 2 other blockbuster biosims ready to be launched in the USA market.

Coherus Biosciences Inc (NASDAQ:CHRS) is scheduled to be posting its quarterly earnings results after the market closes on Monday, March 13th. Analysts expect Coherus Biosciences to post earnings of ($1.11) per share for the quarter.

Amgen accuses Coherus of stealing its Neulasta secrets

Coherus BioSciences, Inc (NASDAQ: CHRS) had been waiting  anxiously to get a chance for launching their bio-similar of Neulasta, Amgen (NASDAQ: AMGN)- the drug that is used to stimulate white blood cell production after cancer treatment and brought in more than $4.6B last year for Thousand Oaks, California based Amgen. But before Coherus could get any approvals, Amgen is dragging Coherus into a court battle, filling a trade secret action, alleging trade secret misappropriation & other claims against Coherus. According to Amgen, Coherus poached Amgen employees to get at their proprietary knowledge.

In its new lawsuit, Amgen claims Coherus engineered a “massive conspiracy” to steal its information, according to analysts at Barclays. That conspiracy, Amgen says, included recruiting its employees, who then siphoned off secrets and passed them to Coherus.

Coherus allegedly received information on “stolen” USB drives, including “sensitive Amgen standard operating procedures, laboratory notebook pages, validated analytical methods, method development reports, specifications, documents reflecting process optimization work, cost calculators and pricing and contracting strategies,” the analysts say.

But Coherus CEO Denny Lanfear “categorically” rejected the allegation & stated that action is without merit, while suggesting that Amgen’s lawsuit represents baseless litigation to delay Coherus from entering the pegfilgrastim market as a serious competitor.

Coherus’ Neulasta biosimilar, now known as CHS-1701, is scheduled for FDA decision on 9^th of June. Meanwhile, in the lawsuit, Amgen seeks several injections against Coherus, plus restitution and damages. One of the Barclays analysts wrote that this suit could have negative impact on Coherus as its regulatory approval date gets closer.

Dan Lanfear also added that Coherus is keen on introducing competition & offering biosimilar products at competitive prices with and lower than those sustained by Amgen and other large pharma companies. And according to the data, bio-similar have reached the U.S market with 15% discount to the brands from large Pharmaceutical companies.

Amgen is also locked in a court battle over Sandoz’ biosimilar version of its Neulasta predecessor, Neupogen, with case scheduled for arguments before the U.S Supreme court next month, and it is certain that high court’s decision is expected to influence future bio-similar patent fights & launch dates.

About Coherus BioSciences, Inc.

Coherus is a leading pure-play, global biosimilar company that develops and commercializes high-quality therapeutics for major regulated markets. Biosimilars are intended for use in place of existing, branded biologics to treat a range of chronic and often life-threatening diseases, with the potential to reduce costs and expand patient access. Composed of a team of proven industry veterans with world-class expertise in process science, analytical characterization, protein production, sales & marketing and clinical-regulatory development, Coherus is positioned as a leader in the global biosimilar marketplace. Coherus is advancing three late-stage clinical products towards commercialization, CHS-1701 (pegfilgrastim biosimilar), CHS-0214 (etanercept biosimilar) and CHS-1420 (adalimumab biosimilar), as well as developing a robust pipeline of future products in four therapeutic areas, oncology, immunology (anti-TNF), ophthalmology and multiple sclerosis. For additional information, please visit www.coherus.com.

Information on Bio-similar Products:

A biosimilar product is a biological product that is approved based on a showing that it is highly similar to an FDA-approved biological product, known as a reference product, and has no clinically meaningful differences in terms of safety and effectiveness from the reference product. Only minor differences in clinically inactive components are allowable in biosimilar products.
Please visit for more: www.fda.gov/Drugs

Cowen and Company 37th Annual Health Care Conference

Cowen and Company 37th Annual Health Care Conference

37^th Annual Health Care Conference
Monday, March 6 through Wednesday, March 8, 2017
The Boston Marriott Copley Place, Boston, Massachusetts

Webcast

http://www.cowen.com/conferences/conferences-overview/

 

Below are the several big biotechnology names that presented at the event and following slide deck link are attached by the companies in conjunction with this event.

Amgen Inc. (NASDAQ: AMGN)

Amgen Cowen HCC Presentation

Allergan, Plc (NYSE: AGN)

PDF Link

Bristol-Myers Squibb (NYSE: BMY)

Bristol-Myers Squibb Cowen HCC

Stemline Therapeutics, Inc. (NASDAQ: STML)

STML Cowen HCC 2017

Pfizer Inc.  (NYSE: PFE)

PFE Cowen HCC 2017

GlaxoSmithKline plc (GSK) (LSE: GSK, NYSE:GSK)

GSK Cowen HCC 2017

Ozanimod and Gilenya in MS

Multiple sclerosis has become an increasingly competitive and crowded market for big drug companies- putting them in a vulnerable position to pricing pressures. And currently, GILENYA, Novartis (SIX: NOVN, NYSE: NVS) is leading the way with Celgene (NASDAQ: CELG) Ozanimod recently passed the Phase III “SUNBEAM” trial to put itself for the launch by end of this year. Henceforth, we look at how GILENYA stands once Ozanimod enters this market.

GILENYA Background:

Gilenya (Fingolimod) is a S1P receptor modulator, which is indicated for treatment of relapsing-remitting multiple sclerosis in patients, whose disease has failed to respond to beta-interferon or is severe and getting worse rapidly. The drug is used to reduce the frequency of clinical exacerbation as well as to delay the accumulation of physical disability.

Safety concerns:

According to the various specialists, Gilenya has tolerability issues; most notably a slowing heart rate (bradycardia or bradyarrhythmia) which forces doctors to monitor patients after the first dose is taken. Adding to that, the risk of serious heart rate effects increases when Gilenya is taken with certain drugs (Methadone, Citalopram, Ketaconazole) or when patient has low potassium/magnesium. Subsequently, it is certain that taking more than the 0.56mg dose won’t trigger any further benefits/improvement, but will only cause more side effects. Moreover, according to the researchers in Japan, it can remain in your blood for up to 2 months after completion of the course- this is risky for the immune system as it will not be as responsive as it should be during the standard drug withdrawal period. Gilenya can also trigger the risk of serious infections and diminish the way vaccines work in our body as to prevent certain diseases, notably, the chicken pox vaccine. It can lower the number of white blood cells (lymphocytes) in the body before it goes back to the standard levels within 2 months of stopping the treatment. Lastly, Gilenya have chances of causing Progressive multifocal leukoencephalopathy (PML), which is a rare brain infection that usually leads to death or severe disability. PML usually happens in people with weakened immune systems.

Drug Verdict:

Gilenya is an oral medication that has a lot of side effects, but it reduces the number of flare-ups, slows physical changes, and decreases the number of new brain lesions in relapsing MS.

Ozanimod Background:

Ozanimod is a selective S1P receptor modulator. It is developed to act by retaining certain white blood cells in the body’s lymph nodes, preventing them from entering the central nervous system by keeping them out of circulation.

Upsides from successful trails:

Ozanimod was found to reduce the frequency of MS relapse in SUNBEAM (phase III trial), and meeting its primary endpoint in reducing ARR, while keeping the overall safety and tolerability profile stable with the previous phase II trials. And in contrast to GILENYA, Ozanimod was well tolerated with no cardiac effects were observed and liver toxicity was minimal. With Celgene conducting a second phase III study of ozanimod in MS patients (results expected in Q2). From the investor’s perspective, Celgene’s Ozanimod puts the project on track for approval in MS, which gives some justification to the $7.2B paid to acquire Ozanimod’s originator, Receptos.

Safety Confirmation pending:

Despite shining in the Phase III trial, safety data still thin on the ground, as it is unclear whether ozanimod will get a favourable label than rival S1P modulator Gilenya (Novartis). According to Mark Schoenebaum, Evercore ISI analyst, there was a single incidence of bradycardia in a patient (phase II RADIANCE MS data) with a history of issue and patients average overall reducation in heart rate was less than 2bpm compare to 8.1bpm for Gilenya.

Henceforth, Celgene will need to confirm detailed safety data from both SUNBEAM and phase III portion of RADIANCE as to prove that there is a safety competitive advantage over Gilenya, if ozanimod is to hit the peak $4-6B in sales in the MS + ulcerative colitis combined, which was projected by CELG at time of Receptos purchase.

Another  advantage would be when studies confirms that ozanimod does not require first-dose monitoring, allowing CELG to grab shares from Gilenya- ultimately challenging Gilenya generics, which could be in the market by 2019 latest.

Celgene in the S1P modulator market:

Once ozanimod get approved within the projected time-frame, it will have a head start on several other S1P selective modulators. Such as Ponesimod from J&J is due to report data from the Optimum phase II trial in RMS by 2019, while Novartis’s siponimod is in phase III trial in another form of MS- with completion date of December 2020.

Project	Company	Mechanism	Status	2020e sales ($m)
Gilenya	Novartis	Pan S1P modulator	Marketed	1,375
Ozanimod	Celgene	S1P 1 & 5 modulator	Phase III	2,127
Siponimod/ BAF 312	Novartis	S1P 1 & 5 modulator	Phase III	865
Ponesimod	Actelion/J&J	S1P agonist	Phase III	88
Amiselimod/MT-1303	Mitsubishi Tanabe	S1P 1 antagonist	Phase II	1

Source: EvaluatePharma.

Therefore, for now things are looking to outperform as expected by the street and investors will hope that further positive results in MS could push towards achieving its 2020 sales guidance of $21B.

Bruce Cree, Associate Professor of Neurology, Multiple Sclerosis Center, University of California stated that safety and efficacy results from SUNBEAM are consistent with the long-term results from the phase II trial (RADIANCE). The data add to the growing body of evidence supporting the use of Ozanimod as disease modifying therapy for relapsing forms of multiple sclerosis.

To me, this drug looks like the safest in the class,” Dr Jeffrey A. Cohen, MD, Director, Mellen Center for Multiple Sclerosis Treatment and Research, Cleveland Clinic, OH

Resources:

Click to access gilenya.pdf

http://www.ms-uk.org/celegen%E2%80%99s-ozanimod-successful-reducing-relapse-rates-020317

Top Stock Picks

The pick for this month is posted below. The Pick is Not a recommendation.

We only recommend a constructive diversified portfolio approach for investing, since a single stock investment can be very risky.

The Monthly Stock Pick for February:  AKAO

The Monthly Stock Pick for January 2017:  CLVS +46%

The Monthly Stock Pick for December:  ARRY +9%

The Monthly Stock Pick for November:  CLCD +16%

The Monthly Stock Pick for October:  SGEN -4%

The Monthly Stock Pick for September:  TSRO +18%

The Monthly Stock Pick for August:  MDVN (acquired) +26%

US Household Debt rose to $12.6T: the biggest jump in a decade

 

• The data released by FRB: G.19, consumer credit releases by the Fed and the quarterly NY Fed report on Household Debt and Credit Developments revealed that total US household debt jumped in Q4 driven by increases in credit card debt, auto and student loans, and a Q4 surge in mortgage origination, and as of December 31, 2016, stood at $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016.

• Total household debt is 0.8%/$99B shy of Q3 2008 peak and measured as percentage of GDP, household borrowing today is 67% of nominal GDP, compared with 85% in 2008

 

• Mortgage balance: largest component of the household debt: increased by $130B in Q4 and stands at $8.48T.
• Non-housing debt: $22B increase I auto loans, $32B increase in Credit cards balances and $31B student loan bal increase
• Non-housing Debt: $22B increase in the auto-loans, $32B increase in Credit cards and $31B rise in the Student loan balances.

• Nutshell: the debt for ordinary American is growing at a fast pace; mostly contributed by non-housing debt.

• Biggest driver for the household debt:
  • The rise of student loans and Auto loans; where decade ago there was less than $500B in student loans, as college tuition surged, sum surpassed $1T for first time since 2013 and currently stands over $1.4T.
  • Car loans: During Q4, $142B auto loans were originated, making 2016 the highest auto loan origination year in 18 year history.
  • Plus credit cards limit increased for 16^th consecutive quarter.

 

• Delinquency Rates:
  • The rates were fairly stable in the last quarter of 2016, with small uptick in severely derogatory balances were offset by a small improvement in 30 days delinquent balances.
    • Dec 31^st : Outstanding debt in some stage of delinquency stood at 4.8%
    • Of the $607B of debt that is delinquent, $412B is seriously delinquent (90+ days)
  • Auto-loans: delinquent by 30+ grew to $23.27B, the most since $23.46B in Q3 of 2008.
    • The Serious Delinquent auto loans with payments were 90+ days past due jumped to $8.24B in Q4:16.
  • All eyes remain on the delinquent student loans, where trend continues to deteriorate with every quarter passing.

 

Summary:

Housing Debt:

• $617B newly originated mortgages in Q4:16 [highest since Q3:07]
• Mortgage delinquencies for 90+ days ( Serious Delinquency) were mostly unchanged with 1.6% of the balance.
• Between October 1^st and December 31^st, about 79,000 individual had a new foreclosure notation added to their credit reports
• Delinquency transition rates for current mortgage accounts improved slightly, with 1.0% of current balances transitioning to delinquency from 1.2% in Q3:16.
• In early delinquency, 18% transitioned to 90+ days delinquent, while 37% became current.

 

Student Loans, Credit Cards, and Auto Loans

• Outstanding student loans stood at $1.31T as of Dec 31^st 2016
• 2% of aggregate student loan debt reflects 90+ days delinquent
• Auto loans increased by $22B and is on steady rise
• Auto loan delinquency rates deteriorated, with 3.8% reflects 90+ days delinquent on December 31^st (0.2% above Q3)
• Credit Card balances increased by $32B, to $779B, while 90+ credit card delinquency rates were unchanged at 7.1%
• Credit Inquiries: Number of credit card inquiries within six months (an indicator of consumer credit demand) declined from previous quarter to 171 million.

 

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