Laboratory stocks tumble on CMS proposal!

Medical diagnostics stocks slide after CMS proposes cuts

Medical diagnostics stocks slide after CMS proposes cuts. See Stockwinners.com for details

Following the news of the proposed Protecting Access to Medicare Act changes, including a bigger than expected reduction in clinical lab fee schedule spending, Raymond James analyst Nicholas #Jansen downgraded Quest Diagnostics (DGX) to Market Perform.

Meanwhile, his peer at Craig-Hallum told investors that the preliminary PAMA impact is near “the worst-case outcome” for the clinical lab industry.

MOVING TO THE SIDELINES ON QUEST

Raymond James’ Jansen downgraded Quest Diagnostics to Market Perform from Outperform following the preliminary 2018 Clinical Laboratory Fee Schedule, or #CLFS , rates released Friday evening, which he believes were close to the worst-case reduction and create an overhang for the sector.

Based on the proposal, there is a 21.9% reduction expected over the coming years, with 58% of the total codes seeing the maximum 10% reduction in 2018, he explained.

The analyst argued that the CLFS came in steeper than anticipated and will likely make it more difficult for Quest to achieve previously communicated 2020 forecasts.

In a statement over the weekend, Quest Diagnostics said it was “deeply disappointed that CMS has issued draft 2018 Medicare payment rates that are not market-based and derived from flawed market data collection that excluded key components of the lab market,” adding that it plans to “explore all available options, including the courts if necessary.”

BUYING ON WEAKNESS

Commenting on the PAMA news, Craig-Hallum analyst Kevin #Ellich said that the preliminary impact is near the worst-case outcome for the clinical lab industry with a 9%-10% reduction in CLFS spending.

The analyst told investors that he thinks the labs stocks could come under pressure and that he would use the weakness as a buying opportunity for LabCorp of America (LH), NeoGenomics (NEO) and Exact Sciences (EXAS).

Additionally, Ellich pointed out that he expects Quest Diagnostics and LabCorp to manage cuts and gain market share. Meanwhile, SunTrust analyst David MacDonald argued in a research note of his own that the exposure of LabCorp and Quest Diagnostics is “manageable,” and that he recommends buying the shares on any “meaningful” weakness.

FEW WINNERS

Canaccord analyst Mark #Massaro also commented on the #PAMA announcement, saying the cuts were greater than he expected and that he believes the brunt of the cuts will impact “mom and pop” small labs that lack scale.

This environment will allow lab leaders LabCorp, Quest, and even Genomic Health to consolidate weaker players, he contended.

Nonetheless, the analyst noted that he views LabCorp, Quest Diagnostics and GenMark (GNMK) as the “losers” after the news, and Genomic Health (GHDX), VeraCyte (VCYT) and Vermillion (VRML) as among the “few winners.”

PRICE ACTION

In Monday’s trading, shares of Quest Diagnostics have dropped over 7% to below $95, while LabCorp’s stock has slipped nearly 4% to $149 per share.


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Watch PTC Therapeutics into FDA meeting

Watch PTC Therapeutics ahead of FDA panel meeting

Updated with FDA staff comments on September 26, 2017

Watch PTCT ahead of FDA Meeting. See Stockwinners.com Market Radar for details

The U.S. Food and Drug Administration has scheduled an advisory panel meeting for next week to review PTC Therapeutics’ (PTCT) ataluren for the treatment of Duchenne muscular dystrophy.

Commenting ahead of the meeting, Citi analyst Joel Beatty said that U.S. Congressman Collin Peterson is expected to voice his support for the drug.

The analyst argued that PTC Therapeutics could be worth about $59 per share if ataluren, which is marketed with the trade name #Translarna, is approved in the U.S. and about $8 per share if it is not.

TRANSLARNA

PTC Therapeutics’ lead product candidate ataluren is a novel, orally administered small-molecule compound for the treatment of patients with genetic disorders due to a nonsense mutation.

Ataluren is in clinical development for the treatment of Duchenne muscular dystrophy caused by a nonsense mutation, or nmDMD.

The European Medicines Agency has designated ataluren as an orphan medicinal product and the FDA has granted orphan drug designation to ataluren for the treatment of nmDMD.

Back in June, PTC Therapeutics announced that the FDA had notified the company of the tentative scheduling of a Peripheral and Central Nervous Systems Drugs Advisory Committee meeting on September 28 to review the new drug application, or NDA, for ataluren.

The company’s NDA submission was granted standard review by the FDA on March 6, with the FDA setting a Prescription Drug User Fee, or PDUFA, goal date of October 24 for completion of its review of the ataluren NDA.

POLITICAL SUPPORT

Earlier this month, Citi analyst Joel Beatty said he had found comments online from U.S. Congressman Collin Peterson that voice support for approval of PTC Therapeutics’ DMD treatment.

The document appeared to have been posted in response to the FDA’s request for comments regarding its advisory panel meeting scheduled for September 28, and is written in the form of a speech to be given at the meeting, Beatty told investors in a research note.

The analyst confirmed with the Congressman’s office that a legislative assistant plans to read the letter on behalf of Representative Peterson at the advisory meeting.

The comments mentioned a constituent with DMD who will be in the audience and for whom “access to ataluren has allowed him to live and thrive well into his 20s with no side effects,” Beatty cited the statement as saying.

The analyst believes political support could play a role in the FDA’s review of ataluren.

Back in June, Beatty had told investors that he was increasing his probability of approval to 25% from 20% following the advisory meeting announcement, but said he still viewed U.S. approval at less than 50/50.

The analyst also pointed out that he believes PTC Therapeutics is worth about $59 per share if Translarna is approved in the U.S. and about $8 per share if Translarna does not receive a U.S. approval.

JP  MORGAN

JPMorgan analyst Anupam #Rama says he remains “somewhat cautious” on shares of PTC Therapeutics (PTCT) with the FDA’s Peripheral and Central Nervous Systems Drugs Advisory Committee convening on September 28 to review the company’s Translarna for the treatment of non-sense mutation Duchenne muscular dystrophy.

Translarna has an FDA action date of October 24. The analyst cites the drug’s “mixed” Phase 2 and Phase 3 data sets and prior refuse-to-file letter for his “somewhat cautious” stance.

For Sarepta Therapeutics (SRPT), Rama sees a net positive read-through from a favorable panel, on the potential for an accelerated path forward for golodirsen in Exon 53 DMD.

Further, a negative panel is likely to be viewed as Translarna-specific, playing out as a net neutral for Sarepta, the analyst tells investors in a research note. He does not see “major fundamental downside risk” for Sarepta shares going into PTC’s panel. Rama keeps a Neutral rating on PTC

FDA STAFF COMMENTS

In the briefing documents, FDA staff wrote: “The Office of Clinical Pharmacology has reviewed the information contained in NDA 200896. The OCP review team does not consider the exposure-response analyses and in vitro data as supportive evidence of effectiveness. See Link for the complete comments and response!

PRICE ACTION

In Monday’s trading, shares of PTC Therapeutics are up 11 cents to $18.64.

Since June 6, the day PTC reported the FDA’s tentative scheduling of the advisory committee meeting, the stock is up 34%.


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NewLink Genetics Higher on Collaboration with AstraZeneca

NewLink Genetics enters clinical collaboration with AstraZeneca

NewLink Genetics enters clinical collaboration with AstraZeneca. See Stockwinners.com Market Radar

NewLink Genetics (NLNK) announced that it has entered into a clinical collaboration agreement with AstraZeneca (AZN) to evaluate the combination of indoximod, NewLink Genetics’ small molecule IDO pathway inhibitor, and durvalumab, AstraZeneca’s anti-PD-L1 monoclonal antibody, along with standard of care chemotherapy for patients with metastatic pancreatic cancer.

The primary objective for this randomized placebo-controlled, Phase 2 study is to evaluate the efficacy and safety of the immuno-oncology-based combination compared to gemcitabine/ABRAXANE alone.

Patients will also be enrolled into a smaller cohort evaluating the combination of #durvalumab with gemcitabine/ABRAXANE.

The Phase 2 trial will be funded equally by both companies, with NewLink Genetics serving as the study sponsor. NewLink Genetics’ share of the aggregate expense of the trial is not expected to have a material effect on its financial position.

On September 7th, NLNK shares jumped 45% after firm reported data from its ongoing phase 2 trial of IDO-inhibitor indoximod in advanced melanoma. NewLink Genetics thinks that combining indoximod with PD-1 drugs can deliver even better outcomes for patients because IDO-inhibitors prevent cancer cells from hijacking proteins that suppress immune system responses, and PD-1 drugs improve the ability of T-cells to spot and destroy cancer cells.

PRICE  ACTION

NLNK has a 52-weeks trading range of $5.90 – $25.17. Shares last traded at $11.55 in pre-market trading, up 55 cents on the news.


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Intercept issues statement

Intercept issues statement regarding Ocaliva safety, dosing in PBC patients

stockwinners.com ICPT

Intercept Pharmaceuticals (ICPT) provided comment on the Ocaliva Dear Healthcare Provider, or DHCP, letter issued on September 12, and the subsequent drug safety communication issued by the FDA on September 21.

Ocaliva was approved in the U.S. in May 2016 for the treatment of patients with primary biliary cholangitis, or PBC, with an inadequate response to, or intolerant of the standard of care, UDCA.

PBC is a rare and life-threatening progressive liver disease that primarily afflicts women and is a leading cause of liver failure with resulting need for liver transplant in women. #Ocaliva therefore represents an important treatment option for patients with PBC and since its approval more than 3,000 patients have been treated with Ocaliva in the U.S. alone.

More than 150 patients are enrolled in ongoing open label phases of Intercept’s Phase 2 and Phase 3 clinical trials and have been on OCA treatment for periods ranging from approximately three to seven years.

Recommended dosing in the label for Ocaliva in earlier stage PBC patients with no or mild hepatic impairment starts at 5 mg once daily, increasing after three months to 10 mg once daily based on tolerability and treatment response.

However, in late stage patients with moderate or severe hepatic impairment, recommended dosing starts at 5 mg once weekly, with the possibility to gradually increase to a maximum of 10 mg twice weekly. The reason for this less frequent dosing is that systemic and hepatic concentrations of Ocaliva are predicted to significantly increase in such patients and dose-related liver adverse reactions have previously been documented in PBC patients participating in clinical trials.

In the course of Intercept’s post-marketing pharmacovigilance activities, deaths have been reported in PBC patients with moderate or severe hepatic impairment.

In an analysis performed by Intercept and in consultation with the #FDA, Intercept concluded that these patients were prescribed once daily doses of Ocaliva, which is seven times higher than the recommended weekly dose in such patients.

As a result, Intercept issued the #DHCP letter and the FDA subsequently issued their own safety communication to reinforce recommended label dosing.

Both communications remind healthcare providers of the importance of the recommended reduced dosing of Ocaliva in PBC patients with moderate or severe hepatic impairment, while reiterating the importance of close monitoring of PBC patients for progression of their disease and the occurrence of liver-related adverse reactions.

ANALYST’S  COMMENTS

Credit Suisse analyst Alethia Young thinks Intercept’s stock reaction is overdone and general uncertainty is what continues to put pressure on the stock, after concerns associated with their lead asset, Ocaliva that is currently on the market for primary biliary cholangitis patients.

The analyst argues that shares are under pressure now due to lack of comment/clarity from management, and thinks shares will recover as management provides further discussion post safety letter, clarity is given around black box warning risk, and any relevant updates that ongoing NASH trial has been reviewed recently for safety imbalances. Young reiterates an Outperform rating and $201 price target on the shares.

PRICE  ACTION

ICPT has a 52-weeks trading range of $60.97 – $172.75. ICPT shares were trading around $105 when the company issued the DHCP letter. On Friday, shares closed at $61.50. In pre-market trading on Monday, shares traded at $66.22 or up $4.63 as shares get a dead-cat bounce.


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Alliance Automotive Group sold for $2 billion

Genuine Parts to acquire Alliance Automotive Group for approximately $2B

Alliance Automotive Group sold for $2 billion. See Stockwinners.com Market Radar for details

Genuine Parts Company (GPC) and Alliance Automotive Group, a leading European distributor of vehicle parts, tools and workshop equipment, announced that they have entered into a definitive agreement under which Genuine Parts Company will acquire Alliance Automotive Group from private equity funds managed by Blackstone (BX) and AAG’s co-founders.

The acquisition is valued at a total purchase price of approximately $2B, including the repayment of AAG’s outstanding debt upon closing.

The transaction has been approved by the Board of Directors of GPC and is expected to close in the fourth quarter of 2017, subject to the satisfaction of customary closing conditions and applicable regulatory approvals.

AAG is expected to generate gross annual billings of approximately $2.3 billion (US$) including supplier direct billings, or $1.7 billion of revenue on a U.S. GAAP basis in 2017.

Additionally, the Company expects the acquisition to be immediately accretive to earnings in the first year after closing.

For 2018, incremental diluted earnings per share is estimated at $0.45 to $0.50 and adjusted earnings per share is estimated at $0.65 to $0.70, which excludes the amortization of acquisition-related intangibles.

The Company expects to incur one-time transaction costs in the fourth quarter of 2017.

The Company intends to finance the transaction, including the pay-off of AAG’s existing debt arrangements, with approximately $2 billion of debt financing. This will include the combination of new term loan agreements, new multi-currency debt and an upsized revolving credit facility.


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