U.S. Silica to Expand in West Texas

The $225M project will be funded from cash on hand and cash flow

The 3,200-acre site has over 30 years of reserves of fine grade 40/70 and 100 mesh sand

 

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U.S. Silica Holdings announced that its Board of Directors has approved the construction of a new, state-of-the-art frac sand mine and plant in West Texas to serve the rapidly-growing Permian Basin.

The new facility is expected to produce approximately 4M tons annually and is part of the company’s previously announced plan to add approximately 8M-10M tons of new Brownfield and Greenfield capacity to meet surging frac sand demand.

The $225M project will be funded from cash on hand and cash flow from operations and is expected to be supported by long-term supply contracts with leading oilfield companies, which include cash pre-payments.

Construction will begin immediately and initial production is scheduled for late in the fourth quarter of 2017.

The 3,200-acre site has over 30 years of reserves of fine grade 40/70 and 100 mesh sand with excellent physical properties.

“We believe we’ve selected one of the most advantaged sites in West Texas with good availability of water, easy access to Interstate 20 and a location that is equidistant to the hearts of both the Delaware and Midland Basins,” said Bryan Shinn, president and chief executive officer.

“Our focus is serving our customers.  Those customers told us clearly that they want more local sand supply in the Permian to support future well completions.  Their willingness to negotiate long-term supply agreements for this new capacity and to potentially commit their own capital to the project demonstrates the confidence they have in U.S. Silica and the tightness of the frac sand market now and in the future.”

Shinn added that the Company expects to enter into similar agreements for other capacity expansion projects currently underway.

Stocks to Watch

SLCA last tradad at $36.31. Hi-Crush Partners (HCLP) and Emerge Energy (EMES), and Smart Sand Inc. (SND).

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New Changes to S&P 400, 500, 600 Indices

S&P MidCap 400 constituent Everest Re (RE) will be added to the S&P 500

S&P SmallCap 600 constituent Pinnacle Financial Partners (PNFP) will replace Everest Re

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S&P Dow Jones Indices will make the following changes to the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices effective prior to the open of trading on Monday, June 19:

S&P MidCap 400 constituent Everest Re (RE) will replace Mead Johnson Nutrition (MJN) in the S&P 500.

S&P SmallCap 600 constituent Pinnacle Financial Partners (PNFP) will replace Everest Re Group in the S&P MidCap 400, and Armada Hoffler Properties (AHH) will replace Pinnacle Financial Partners in the S&P SmallCap 600.

Reckitt Benckiser Group (RBGLY) is acquiring Mead Johnson Nutrition in a deal expected to be completed soon, pending final conditions.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Coherus Biosciences Tumbles on FDA Decision

Coherus announced receipt of a “complete response letter” from the FDA, rejecting the company’s current application for CHS-1701

JPMorgan argues that the CRL “appears very much addressable”

COHERUS BIOSCIENCES LOGO

Biosimilar researcher #Coherus Biosciences (CHRS) announced this morning that the FDA rejected its current application for CHS-1701, which aims to mimic Amgen’s (AMGN) Neulasta.

The stock fell heavily on the news, but Wall Street analysts argued that issues raised by the FDA appear resolvable.

BACKGROUND:

Coherus Biosciences is a developer of “biosimilars” — nearly identical copies of original biologic drugs — whose product pipeline includes CHS-1701, a biosimilar of Amgen’s Neulasta, and CHS-1420, a biosimilar of AbbVie’s (ABBV) Humira.

FDA REJECTION:

Early Monday, Coherus announced receipt of a “complete response letter” from the FDA, rejecting the company’s current application for CHS-1701.

According to Coherus, the letter primarily focused on a request “for a reanalysis of a subset of subject samples with a revised immunogenicity assay, and requests for certain additional manufacturing related process information. The FDA did not request a clinical study to be performed in oncology patients.”

COMPANY SEES ONE-YEAR TIMELINE:

On a conference call this morning, Coherus executives outlined a roughly one-year timeline for potential approval, stating: “We anticipate that we will need a Type 1 meeting… FDA scheduling guidance is 30 days for such meetings. We believe that we can generate responses to the CRL within six months… The agency can take up to six months to evaluate resubmission.”

REDUCED CASH PLANS:

Coherus also announced during its call this morning that “we have developed a revised financial plan for 2H17 which calls for an average use of cash of $40M per quarter… which is a significant reduction from 1H.

Further, we project quarterly cash use of $30M-$35M per quarter for 1H18… We believe we can operate at this rate into 2H18 or until product approval.”

NOT WORST CASE

Keeping an Outperform rating and $38 target on Coherus, Credit Suisse analyst Alethia Young says the news isn’t a worst case scenario and that she is “cautiously optimistic” on timelines. Understanding how long the requested reanalysis will take is key, she says, and her conversations today with Coherus revealed a “high degree” of management confidence in running an analysis that would ultimately lead to FDA conversations in about six months. Young highlights that the CRL didn’t identify “major issues” like misguided trials or manufacturing problems, but she reiterates her view that shares could trade to $12-$15 on the event. Approval remains the key positive catalyst for Coherus and that driver is now likely shifted until mid-2018 or the second half of next year, the analyst contends, adding that shares could be range bound until further clarity on the reanalysis. For Amgen, Young says today’s news is positive, as she doesn’t expect another biosimilar competitor until perhaps 2019 at the earliest.

COWEN SAYS NO ISSUES WITH DRUG:

Cowen analyst Ken Cacciatore says the CRL issues “appears resolvable” with a total delay of likely one year. The rejection didn’t seem to raise any specific criticism of CHS-1701 and instead reflected FDA desire to use the most advanced testing possible. It is likely, says Cacciatore, that the agency concluded during other recent reviews that a stricter test should be used and that it is now “asking everyone” to adopt enhanced standards. While unfortunate for Coherus, the FDA is “likely just being complete and thorough,” the analyst argues. Accounting for the company’s expectations for a one-year delay, Cacciatore says Coherus is now “on track” for possible 2H18 approval and launch.

OVERREACTION:

JPMorgan’s Chris Schott argues that the CRL “appears very much addressable,” and continues to believe CHS-1701 will be one of — if not the — first Neulasta biosimilar. Today’s selloff is an overreaction, the analyst says, calling Coherus an “attractive” pure play in biosimilars with upside to $30-plus given 2018 approval for 1701.

PRICE ACTION:

Shares of Coherus are down 25.5% to $15.38 in afternoon trading, while Amgen is up 0.25%.

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Senator Warren Calls for Investigation of TransDigm

Warren is seeking information on how the company prices parts for which it is the sole supplier to the government

She is the third law maker who has called for investigation of TransDigm

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Massachusetts Senator Elizabeth Warren has sent a letter to the U.S. Department of Defense urging an investigation into TransDigm’s pricing model following similar requests by other U.S. representatives, CNBC reports, citing the letter.

“As a member of the Senate Committee on Armed Services, I have also been monitoring reports that suggest TransDigm WorldWide has used a variety of tactics to avoid sharing cost information with the government for parts for which it is the sole source supplier…These reports further show that TransDigm has unreasonably raised prices on many parts shortly after completing acquisitions of the companies that produce them,” she wrote.

TransDigm Group (TDG) designs, produces, and supplies aircraft components in the United States. The company’s Power & Control segment provides mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, databus and power controls, hoists, winches and lifting devices, and cargo loading and handling systems.

Warren’s call for a probe into the aerospace component supplier follows similar requests from U.S. Representatives Ro Khanna and Tim Ryan.

“I look forward to working with your office, and the Department of Defense to ensure that our service members continue to receive the best made equipment while also ensuring that taxpayers continue to receive fair value,” wrote Warren to the Secretary of Defense, Jim Mattis.

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CIM Commercial declares special dividend

CIM Commercial Trust declares $1.98 cash dividend

CIM Commercial bought $576 million of its shares

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#CIM Commercial Trust Corporation $CMCT announced that it has repurchased in a privately negotiated transaction 26,181,818 shares of its common stock from a fund managed by an affiliate of CIM Group, the manager of CMCT.

The aggregate purchase price was $576,000,000, or $22 per share.

In order for all common shareholders to participate in the economic benefit of the share repurchase in an equitable manner, CMCT’s Board of Directors has declared a special cash dividend of $1.98 per common share.

The amount of the special cash dividend per common share was calculated based on the spread between $22.00, the repurchase price, and the volume-weighted average price per common share for the 20 trailing trading days through June 9, 2017 of $15.82 per common share.

The dividend will be paid on June 27, 2017 to common shareholders of record as of June 20, 2017. The Fund has informed CMCT that it waived its right to receive this special cash dividend on the common shares that it owns. The repurchase and special cash dividend are part of CMCT’s previously stated goal of focusing on increasing the net asset value and cash flow per share of common shares while providing liquidity to common shareholders at prices reflecting the underlying fundamentals of CMCT’s portfolio.

In conjunction with the share repurchase and declaration of the $1.98 per share special cash dividend, CMCT has adjusted its recurring quarterly common dividend to conform with the dividend program of its public REIT peers, which we believe have distributed 40% to 50% of funds from operations and 2.0% to 2.5% of consensus net asset value estimates on an annual basis.

Accordingly, the Board today declared a quarterly cash dividend of $0.125 per common share, representing approximately 45% of 2017 Q1 FFO and, on an annualized basis, 2.1% of net asset value.

CMCT closed at $15.55. Shares have a 52-week trading range of $14.54 to $19.29.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.