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From Wells (later in the day - I tried to find all dashes that needed to be added):
Re "minus sign." I think I have figured it out. Apparently the "copy" function in my computer does not pick up dashes in the reports. I had not noticed it until today when had to a add a couple dashes after copying it from the report. I missed others I guess. Sorry.
From Wells:
SLCA/FMSA - US Silica (SLCA) has been a huge success after its IPO a couple years ago. Pretty highly priced based on both TTM earnings and projected earnings, but growing very nicely now. The biggest player in the silica mining market is IPOing next week - Fairmount Santrol (FMSA). Not cheap at 20-25 times TTM earnings but growing very nicely and in a hot area (fracking supply). I think I will try to get some FMSA (I know the founding families). It will be interesting to watch.
As expected Abbvie (and Medtonics) execs will not pay capital gains taxes personally:
http://online.wsj.com/articles/medtronic-abbvie-to-reimburse-executives-for-inversion-triggered-taxes-1409348492
From Wells re $GILD:
How about a survey on the price of the GILD Sov-Led daily pill? One later on the ABBV/ENTA treatment after GILD's is determined.
From Wells:
Roche pays $74/sh for ITMN
http://finance.yahoo.com/news/roche-intermune-reach-definitive-merger-160000866.html
Medivir earnings - http://finance.yahoo.com/news/medivir-interim-report-january-june-064400327.html
Market has already priced in huge earnings this year disappearing next year. Will be interesting to follow if there is a pop in next ten days and whether there will be a drop later.
Major issues are whether (1) there will be any continued use of Olysio after the all-orals from GILD and ABBV hit the market; (2) how long Olysio will have major sales ex-US given the delayed use there after drugs are approved; (3) how its nuc does in clinic and whether there will any market left by time it could get through clinic; and (4) what it will do with all the cash generated by Olysio this year (and next ex-US) - should have 40-50% of market cap in cash.
From Wells:
$GILD. Closed out the first set of in-the-money options bought in Feb-April. Profits ranged from 10% (the 80s) to 220% (the 62.50s). Total was about 110% return. Exercised half of the 62.50s so that I can hold some for long term tax treatment (maybe). Next set of options (60s) due 01/15 and some more due 01/16 (60s and 70s). May buy some Nov. 80s or 85s if we see a correction back to the 80s. May also buy more 01/16s if there is a bigger correction. Still think that it is a least a $112-120/sh stock. Big issue remains pricing for all-oral from both GILD and ABBV. We will know the GILD within 60 days, but the biggest issue (for both companies) is the ABBV pricing. JMO.
OT - Timing the market - interesting article:
http://online.wsj.com/articles/calling-a-stock-market-top-is-only-half-the-battle-1407514856
From Wells:
Somewhat OT - Eaton and tax inversions - on front page of today's paper (hard copy):
http://www.cleveland.com/open/index.ssf/2014/07/eaton_corp_gets_millions_in_us.html
From same Wells report:
From Wells:
Re $GILD and $ABBV: From a Wells report on a "Bus Tour" in Boston:
$GILD - average estimates and ranges for earnings, Sovaldi sales, and price targets of the 11 or less analysts providing numbers - first number is average (with number of analysts) and then range of estimates:
Earnings
3Q - $1.82/sh (11); $1.58-1.98/sh
4Q - #2,27/sh (11); $1.87-2.69/sh
'14 - $7.92/sh (11); $7.45-8.30/sh
'15 - $8.93/sh (11); $7.61-9.70/sh
'16 - $9.50/sh (10); $7.58-11.50/sh
'17 - $10.40/sh (9); $8.68-12.90/sh
'18 - $10.64/sh (7); $7.40-13.20/sh
'19 - $9.73/sh (6); $6.87-12.16/sh
'20 - $9.37sh (5); $6.31-11.96/sh
Sovaldi sales
3Q - 2.843B (8); 2.241-3.341B
4Q - 3.835B (7); 3.050-4.529B
'14 - 12.279B (11); 11.442-12.997B
'15 - 13.763B (9); 11.849-16.616B
'16 - 13.901B (9); 11.0-19.981B
'17 - 14.367B (7); 11.0-22.292B
'18 - 14.894B (6); 8.471-21.735B
'19 - 13.576B (6); 7.219-19.132B
'20 - 12.295B (5); 7.616-18.461B
Price Target
After 2Q - 112.33 (12); 76-165
After Q1 - 103.61 (13); 65-142
My comments:
1) Estimates are pretty bunched for rest of '14 and '15. I think the '14 estimates are a little low - maybe .5B and .25/sh. I think that the '15 estimates are still quite low, average maybe $2B and $1/sh - mostly based upon OUS pickup of sales.
2) Estimates for '16 are much wider and much less knowable, but still probably low by the same $2B and $1/sh.
3) Estimates past '16 are just some-what educated guesses, and there are significant risks that they are too high and significant possibility that they are way too low. For valuation purposes, I am willing to use them for now.
4) Price target average is not unreasonable. It is around $10/sh higher than in April, which seems right. Whether it gets close to 112 is another matter. If it does, I think there will be more increases in the targets.
$GILD - 7/24 reports from 12 analysts - Goldman, Credit Swisse, Wells, RBC, BMO, JPM, Nomura, Citi, UBS, Jefferies (no numbers), Deutsche Bank (limited numbers), and Morgan Stanley - 4/23 numbers in () - summary stats may come in later post:
Goldman
Sovaldi sales: '14-12.4B(10.4B); '15-13.2B(10.9B); '16-11.3B(10.1B); '17-11.0B(10.7B)
Earnings: '14-$7.90/sh($6.25/sh); '15-$8.72/sh($6.36/sh); '16-$8.28/sh($6.61/sh); '17-$8.71/sh($7.40/sh)
Credit Swisse
HCV franchise sales: '14-11.6B(9.1B); '15-12.1B(9.7B); '16-13.9B(12.6B); '17-13.5B(13.2B); '18-13.0B(12.0B); '19-11.5B(10.65B); '20-10.1B(9.4B)
Earnings: '14-$7.81/sh($6.52/sh); '15-$7.61/sh($6.56/sh); '16-$8.48/sh($7.85/sh); '17-$8.68/sh($8.51/sh); '18-$7.40/sh($6.80/sh); '19-$6.87/sh($6.32/sh); '20-$6.34/sh($5.89/sh)
Wells Fargo
HCV regimens: '14-12.4B(9.4B); '15-13.9B(11.7B); '16-14.6B(12.6B); '17-15.7B(12.7B); '18-15.8B(13.9B): '19-15.0B
Earnings; '14-$8.04/sh($6.55/sh); '15-$9.04/sh($7.57/sh); '16-$10.25/sh($8.67/sh); '17-$11.56/sh($9.78/sh); '18-$11.30/sh($9.38); '19-$10.83/sh
RBC
HCV: '14-12.1B/(9.5B); '15-14.0B(11.5B); '16-11.0B(9.9B)
Earnings: '14-$7.80/sh($6.15/sh); '15-$8.50/sh($7.00/sh); '16-$7.58/sh($7.18/sh)
BMO
HCV: '14-12.415B(8.075B); '15-14.414B(8.819B); '16-14.739B(9.854B); '17-14.634B(10.662B); '18-15.665B(11.579B); '19-16.995B(12.579B); '20-18.461B(13.702B )
Earnings: '14-$7.65/sh($5.98/sh); '15-$8.38/sh($6.25/sh); '16-$8.94/sh($7.00/sh); '17-$9.55/sh($7.77/sh); '18-$10.09/sh($8.35/sh); '19-$10.99/sh($9.08/sh); '20-$11.96/sh($9.87/sh)
JP Morgan
Sovaldi: '14-11.4427B/(8.336B); '15-11.849B(9.488B); '16 - 12.100B(10.724BB
Earnings: '14-$7.45/sh($5.61/sh); '15-$8.35/sh($6.52/sh); '16-$9.05/sh($7.54/sh)
Nomura
Hep C: '14-12.575B(9.092B); '15-16.616B(12.599B); '16-19.951B(15.131B); '17-22.232B(15.736B); '18-21.735B(15.830B); '19-19.132B/(15.037B); '20-16.933B/(14.453B)
Earnings: '14-$8.03/sh($5.01/sh); '15-$9.70/sh($7.24/sh); '16-$11.50/sh($8.92/sh); '17-$12.90/sh($9.83/sh); '18-$13.20/sh($10.45/sh); '19-12.16/sh($10.25/sh); '20-$11.27/sh($10.15/sh)
Citi
Sovaldi; '14-12.997B($9.4B); '15-13.656B; '16-14.080B; '17-13.344B; '18-14.551; '19-11.520B; '20-9.031
Earnings: '14-$8.30/sh($6.29/sh); '15-$9.27/sh($7.71/sh); '16-$9.80/sh; '17-$10.23/sh; '18-$11.07/sh; '19-$9.52/sh; '20-$8.98
UBS
HCV: '14-$12.4B(8.478B); '15 - 11.211B; '16 - 13.721B - no change WRONG
Earnings - '14-$8.28/sh($6.26/sh); '15-$9.71/sh($7.90/sh); '16-$10.97/sh($9.58/sh); '17-$12.25/sh($11.14/sh); '18-$12.49/sh($11.57/sh)
Jefferies - no new estimates
(HCV: '14 - 9.548B; '15 - 12.282B; '16 - 17.174; '17 - 17.855
Earnings; '14 - $6.04/sh; '15 - $7.69/sh; '16 - $11.19/sh; '17 - $12.07)
Deutsche Bank - limited new numbers
Sov: '14-11.7B(10.638B); ('15 - 14.596B; '16 - 16.599B; '17 - 17.528B; '18 - 15.720B; '19 - 14.787B; '20 - 14.822; '21 - 14.825; '22 - 14.506B; '23 - 13.702B; '24 - 13.702B; '25 - 12.275B; '26 - 12.850B; '27 - 12.415B)
Earnings: '14-$7.4/sh($6.65/sh); '15-$.78($9.76/sh); ('16 - $11.74/sh; '17 - $13.27/sh; '18 - $13.12/sh; '19 - $12.99/sh; '20 - $13.92/sh; '21 - $14.34/sh; '22 - $14.28/sh; '23 - $13.81/sh; '24 - $14.04/sh; '25 - $14.42; '26 - $14.08/sh; '27 - $15.04)
Morgan Stanley
Sov -'14-12.894B; '15-14.073B; '16-13.649B; '17-10.045B; '18-8.471B; '19-7.219B; '20-7.016B
Earnings: '14-$8.17/sh; '15-$9.19/sh; '16-$10.18/sh; '17-$9.32/sh; '18-$8.96/sh; '19-$8.05/sh; '20-$8.20
Other comments (summarized by me):
Goldman - (1) outer year sustainability of hep C and HIV sales are questions; (2) models $4.7-5.9B of buybacks over 4 years; (3) target price moves from $70 to $76 based on DCF analysis
Credit Swisse - (1) Big issues of HCV market dynamics, esp. price, "What's next," and capital allocation; (2) net income helped by lower than expected tax rate; (3) retaining $110 price target based on 14.5X '15 eps
Wells Fargo - (1) compellingly valued due to significant HCV opportunity and multiple potential blockbuster shots on goal in pipeline; (2) Q3 reduction in Sov sales and then significant pickup in Q4; (3) potential for considerably lower costs for all-oral and likely availability of competitor will help reduce payer concerns; (4) price target goes to $110-112 from $98-101
RBC - (1) 3 levers for p/e expansion - business development, capital allocation, pipeline; (2) thinks ABBV prices around $84K and market expects competitors to be rational with no price wars, (3) base case of $102/sh on 12x '15 est of $8.50/sh, with upside of $120 and downside of $77, (4) market will open from 393K under care to 1.4M patients
BMO -(1) price target of $165 (20 x $8.94, discounted @ 20%); (2) Q3 Sov sales @ 3.341B
JP Morgan - (1) Q3 est $1.63/sh; (2) positives - aggressive adoption of all-oral in 2H14, phase 3 in 3Q14 for TAF, upward bias in '14 and '15 for Sov, attractive valuation at 10.5'15 est and 3 yr EPS Cagr of 65%; (3) stated 17% Sov use with Olysio (wrong); (4) $110 target on 12/15 on 13x est. of $8.35
Nomura - (1) price unlikely to go higher based on Q2 HCV sales, as guidance implies no growth in 2H14, (2) price discount to S&P ('15 p/e 10.9x vs 14.9x) Gild top value pick, (3) $141 target price
Citi - (1) will leverage cash flow of $130B in next ten years for acquisitions, (2) access for Sov is broader than expected, (3) target of $111 based on 12 x '15e of $9.27 - substantial discount based on long-term uncertainty about longevity of hep C revenue stream
UBS - (1) top pick among large caps based on de-risking and value creating things over 12 months, most upside to '14-'15 estimates, lowest p/e on '15 est, TAF providing opportunity to extend HIV franchise, and under appreciated oncology program; (2) $115 price target, with $142 upside and $60 downside
Jefferies - (1) 70% of usage with interferon-free regimen indicating payer tolerance for expensive combinations and raises questions on pricing flexibility, (2) EU reimbursements in small countries has led to pricing in high $60K range, higher than $55K used in model, (3) maintains $84 target, but new estimated sales and earnings to come
Deutsche Bank - (1) 10% switching from Atripla and Truvado adds $3/sh to model; (2) Street expecting $65K for 8 week all-oral, but probably more and if price at $84K, it would add $22/sh to model; (3) Q3 model $2.2B of US Sov, $592M OUS (and $849M in Q4), (4) target $142
Morgan Stanley - (1) risks to sustainability of HCV franchise, (2) expect muted stock reaction given high expectations, (3) price target of $81, with bull case at $145 and bear case of $34 (see chart in my twitter post)
From today's WSJ re tax inversion "plays":
http://online.wsj.com/articles/three-ways-investors-can-play-the-inversion-boom-1406306929
Idelalisib approved, boxed warning for liver tox, brand name zydelig
See Twitter
$ABBV-$SGPG is the biggest tax inversion so far by far. I think most long-term investors don't understand that the transaction is taxable for the shareholders of the "former" US company. Since the spin-off from ABT was not taxable, I assume there are a huge number of investors with practicably no tax basis. The tax receipts will be in the $B, with very many unhappy shareholders. $MYL and $SLXP will also produce a lot of capital gain taxes, but nothing like ABBV.
From Wells:
$MVIRB $JNJ $GILD $ABBV - so first big earnings is tomorrow AM from $JNJ - I am still at $1.2B +/- for WW sales of Olysio - have all the MVIRB that I want for the time being - will probably hold through its earnings in August unless the sales are much lower than I expect - TWT
ABT to sell branded developed markets generic business to MYL for $5.3B - another tax inversion (for MYL which will become a Dutch company):
http://finance.yahoo.com/news/abbott-sell-developed-markets-branded-103000982.html
From Wells (re $GILD - note number of new scripts wrong - probably 2491):
$REGN +7.41%; $ALXN +4.19%; $CELG +3.05%; $BIIB +2.99%; $GILD +2.87%
Big day for Big Bio
From Wells ($GILD):