Pharmas Market with Mike Huckman

Dendreon Makes The List...Again


2,226 percent.  That is the astronomical increase in shares of baby biopharma Vanda so far this year.  And it's the prime historical example of "Biotech Takeouts and Breakouts" Bernstein's Geoffrey Porges uses in a sequel research note to clients he put out today.

On July 31st, Porges wrote the first installment calling for a second half rally in biotech.  Today he writes, "While that rally has yet to materialize, the conditions for it remain favorable, and we believe resolution of political risks in the remainder of 2009 will improve investor sentiment toward the group."  The political risks he's referring to relate to healthcare reform.   Anyway, through a special formula, he and his team identify 28 companies that are potential takeouts, 17 that could break out and three that might be both.  The dual candidates are Abraxis, Protalix and Optimer.  The bigger takeout targets, according to Porges, include Dendreon, Alexion and United Therapeutics.  And his possible higher market value breakouts are Cell Therapeutics, Pharmasset and Allos, which announced this morningthat the FDA has approved its lymphoma drug.

A catalyst for a breakout can be surprisingly positive clinical trial data, an unexpected FDA approval, a lucky break of some kind or a lucrative partnership deal, just to name a few.  Human Genome Sciences, up 766 percent this year, is an example of an upside surprise for drug study results.  VNDA won an out-of-the-blue FDA okay.  And Protalix, up 318 percent year-to-date got a lucky break with the manufacturing misfortune suffered by Genzyme. And, of course, DNDN, up 487 percent this year, is on everyone's radar screen for a corporate hookup. While Dendreon says it's focused on finding a buddy to help sell its experimental prostate cancer treatment Provenge outside the United States, some analysts, including Porges, think DNDN remains a takeout target.  "The company has managed to fund development without a major partner's involvement, largely retaining the value of the asset.  Therefore, the company is an attractive acquisition candidate, though it may attempt to strike a more limited marketing collaboration, " Porges says.