Category: California Stocks

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Shares of Block lower on short seller report!

Block intends to explore legal action against Hindenburg Research

#Hindenburg Research has published a short report on Block (SQ), formerly known as Square, stating that the firm’s “2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping.

The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.”

The firm, which discloses that it has taken a short position in shares of Block, contends that the company “has misled investors on key metrics, and embraced predatory offerings and compliance worst-practices in order to fuel growth and profit from facilitation of fraud against consumers and the government.”

In addition, it believes “Jack Dorsey has built an empire-and amassed a $5 billion personal fortune-professing to care deeply about the demographics he is taking advantage of. With Dorsey and top executives already having sold over $1 billion in equity on Block’s meteoric pandemic run higher, they have ensured they will be fine, regardless of the outcome for everyone else.”

Block Responds

Block said in a statement: “We intend to work with the SEC and explore legal action against #Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today.

Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price. We have reviewed the full report in the context of our own data and believe it’s designed to deceive and confuse investors. We are a highly regulated public company with regular disclosures, and are confident in our products, reporting, compliance programs, and controls. We will not be distracted by typical short seller tactics.”

Robert Baird

Baird analyst David #Koning comments on a short report that is significantly weighing on Block shares in pre-market trading, noting that the report implies that the company’s CashApp is reasonably easy, or relatively easier than other banking services, for criminals to use and claims that CashApp is somewhat complicit in allowing this type of behavior.

However, the firm believes Block helps many underbanked access the financial markets and “like any organization probably has some clients that are criminals.” The firm views the stock as good value, but is concerned with the prevalence of any criminal activity and how this could impact investor sentiment, estimating that “in a pretty dire case” shedding 20% of accounts could impact about 8% of total gross profit. Baird has an Outperform rating and $92 price target on Block shares, which are down about 20% to $58.07 in early trading following Hindenburg Research’s short report.

KeyBanc

KeyBanc analyst Josh #Beck sees “no merit to the disparaging claims” made against Block by a “smaller outfit” that published a short report and rather views the report as “observations from a relatively novice industry outsider who is not familiar with standard operating practices and principles within the FinTech industry.”

The firm, which said Block is subject to numerous laws and regulations as a financial services provider, believes Block “fully complies with applicable regulations and laws and prevents the maximal amount of fraud possible within a business that is inherently subject to, while not immune to, any instances of fraud.” KeyBanc has an Overweight rating and $100 price target on Block shares, 

Mizuho

Mizuho analyst Dan #Dolev says Hindenburg Research’s short report “makes valid arguments,” such as the slowdown in inflows and sustainability of the instant deposit fees.

While this might increase regulatory scrutiny, other claims and risks around high, unregulated interchange fees and definition of monthly users are well known to investors, the analyst tells investors in a research note. The firm says other aspects of the report, like adding back stock based compensation after Block publicly shifted focus to include non-cash expenses in operating income, “may hold less water.”

Mizuho says the near-term bull case on Blok remains reaching better than expected profits helped by cost control. The long-term bull case remains creating a “unique” closed-loop payments network by connecting merchants and consumers, the firm adds. It has a Buy rating on the stock with a $93 price target.

Raymond James

Raymond James contends that this morning’s short report on Block issued by Hindenburg Research doesn’t include a lot of “new” news or a “bombshell” and argues that the biggest risk is potentially drawing scrutiny from regulators and politicians, which could create an overhang on the stock.

However, given the situation concerning SVB Financial (SIVB) and the current banking fallout, the firm would guess “this is way down the list of priorities” for financial regulators at this time.

The firm, which adds that “while being accused of overstating users certainly isn’t positive,” notes that there are no accusations of fraudulent accounting and the “revenue is real.” Raymond James has a Market Perform rating on Block shares.

RBC Capital

RBC Capital analyst Daniel Perlin made no change to the firm’s Outperform rating or $95 price target on shares of Block. The firm says the short report that was released today focuses on Block’s “underbanked” user base, as being a series of bad actors, enabling the overstatement of its users metrics, as well as BNPL via its acquisition of Afterpay, systematically embracing predatory pricing, the analyst tells investors in a research note.

RBC Capital’s view of the stock is unchanged, but thinks the negative overhang can persist for some time.

Shares of Block are down 20% to $58.10.

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Investor takes position in Disney, seeks changes

Third Point lays out case for Disney to spin off ESPN

Third Point’s Dan Loeb has sent a letter to Disney CEO Bob Chapek to outline recommendations.

ESPN

Third Point said, “ESPN is a great business that currently generates significant free cash flow, enabling the Company to pay down debt and increase strategic options down the line.

In addition, we realize ESPN content is part of the bundle being offered to subscribers of other products, both in Disney’s Linear and DTC businesses.

Despite these advantages, we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at the parent Company.

The important questions to ask before commencing a spinoff are: Will both companies be better off? Will the needs of customers be better served? Can any synergies that exist between the two companies be replicated by contractual arrangements? Will the transaction contribute to creating long-term value for Disney shareholders?

While acknowledging that broader capital structure considerations may be at issue, we believe that the answer to all four of these questions is affirmative.

Employees of ESPN could be compensated in a security directly tied to their performance.

ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting.

Customers of ESPN and sports leagues would be better served by a focused management team driving a leadership position in sports distribution. We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.

Disney CEO Bob Chapek

Lastly, as a result of this transaction, both companies will attract shareholders seeking the respective qualities of each company, allowing the Disney parent multiple to expand as its earnings growth rate increases and the remaining business is no longer haunted by the specter of cord cutting. While I understand you have considered this idea in the past, we urge the Company to retain advisors to reassess the desirability of the transaction in the current environment, recognizing that a key determination would be the proforma capitalizations, cashflow and credit profile of both companies.”

HULU

Third Point said, “We believe that integrating Hulu directly into the Disney+ DTC platform will provide significant cost and revenue synergies, ultimately reigniting growth in the domestic market.

Daniel Loeb, Third Point

We urge the Company to make every attempt to acquire Comcast’s remaining minority stake prior to the contractual deadline in early 2024.

We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time while noting the seller has already made the decision to prematurely remove their own content from the platform. We know this is a priority for you and hope there is a deal to be had before Comcast is contractually obligated to do so in about 18 months.”

COST CUTTING

Third Point said, “Disney’s costs are among the highest in the industry, and we believe Disney significantly underearns relative to its potential. We urge the Company to embark on a cost cutting program that addresses both margins and the disposal of excess underperforming assets.”

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Rail Traffic Declined Last Week!

North American rail traffic fell 7.5% for the week ending April 16

The Association of American Railroads, AAR, reported U.S. rail traffic for the week ending April 16.

For this week, total U.S. weekly rail traffic was 489,801 carloads and intermodal units, down 8.1% compared with the same week last year.

Total carloads for the week ending April 16 were 221,228 carloads, down 6.8% compared with the same week in 2021, while U.S. weekly intermodal volume was 268,573 containers and trailers, down 9.2% compared to 2021. North American rail volume for the week ending April 16 on 12 reporting U.S., Canadian and Mexican railroads totaled 319,064 carloads, down 6.8% compared with the same week last year, and 354,060 intermodal units, down 8.1% compared with last year.

Total combined weekly rail traffic in North America was 673,124 carloads and intermodal units, down 7.5%.

North American rail volume for the first 15 weeks of 2022 was 9,987,458 carloads and intermodal units, down 3.9% compared with 2021.

Publicly traded companies in the space include CSX (CSX), Canadian National (CNI), Canadian Pacific (CP), Kansas City Southern (KSU), Norfolk Southern (NSC), Trinity Industries (TRN), Greenbrier (GBX), Wabtec (WAB), FreightCar America (RAIL), Union Pacific (UNP) and GATX (GATX).

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Ford does not plan to spin off EV business!

Ford CEO says no plans to spin off electric business or ICE business

Ford (F) CEO Jim Farley said while speaking at the Wolfe Research Auto, Auto Tech and Mobility conference:

Jim Farley, Ford CEO

“I wanted to talk quickly about running a successful ICE (internal combustion engines) business versus a BEV (battery-powered electric vehicle) business as we’re scaling. The customers are different.

The EV customers are not like our ICE customers. Our go-to-market as the result has to be digital, no inventory and remote. It’s different. We can bridge to it today, but we have to go much deeper…

Ford to launch 50 new vehicles in China. See Stockwinners.com

Ford will ensure we have the right structure and talent in place to compete and win in this digital software-enabled vehicle business, but as well to revitalize our ICE business.

And here, I really want to emphasize the shift that we’re thinking about.

There’s a lot of focus on the digital electric growth opportunity. But we believe we have lots of room on our ICE business for better quality, lower structural costs and radical reduction in complexity.

All electric Ford Mustang

And despite the press speculation, we have no plans to spin off our electric business or ICE business. It’s really more around focus and capabilities, expertise and talent. Those are key for Ford, and this is what we’re working on. Now many companies have studied this.

Some even have a person in charge of EVs here and there. But trust me, Ford will go deeper because we know our competition is Nio and Tesla, and we have to beat them, not match them…

Nio electric car

We believe and we acknowledge that we have upside in our ICE business and it’s critical that we leverage that and we’ve been working on and making progress to get to that 8% EBIT margin as a company…

We believe that both ICE and BEV portfolios are under-earning. Let me say that one more time. This management team firmly believes that our ICE and BEV portfolios are under-earning and that is not price. That is lower structural costs, improving our bill of material for our BEV vehicles and scaling…

Tesla Model 3

The net all of this is we have ample headroom for growth, as you said, Rod, and increased our company EBIT margin target to get to that 8%… And what we want to get across to all of you is that we have a long view of Ford that we have rethought our entire portfolio.”

F last traded at $17.00, down 30 cents.

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Cedar Fair receives take over offer!

Cedar Fair jumps after Bloomberg report of SeaWorld takeover bid

SeaWorld Entertainment (SEAS) has offered to buy Cedar Fair (FUN) for around $3.4B or $60 per share, Bloomberg reports, citing people with knowledge of the matter.

Cedar Fair owns and operates amusement and water parks, and complementary resort facilities in the United States and Canada. Its amusement parks include Cedar Point located on Lake Erie between Cleveland and Toledo in Sandusky, Ohio; Knott’s Berry Farm near Los Angeles, California; Canada’s Wonderland near Toronto, Ontario; Kings Island near Cincinnati, Ohio; Carowinds in Charlotte, North Carolina; Kings Dominion situated near Richmond, Virginia; California’s Great America located in Santa Clara, California; Dorney Park & Wildwater Kingdom in Allentown, Pennsylvania; Worlds of Fun located in Kansas City, Missouri; Valleyfair situated near Minneapolis/St. Paul, Minnesota; Michigan’s Adventure situated near Muskegon, Michigan; Schlitterbahn Waterpark & Resort New Braunfels in New Braunfels, Texas; and Schlitterbahn Waterpark Galveston in Galveston, Texas. 

SeaWorld Entertainment operates as a theme park and entertainment company in the United States. The company operates SeaWorld theme parks in Orlando, Florida; San Antonio, Texas; and San Diego, California, as well as Busch Gardens theme parks in Tampa, Florida, and Williamsburg, Virginia. 

Cedar Fair Properties

The companies are working with advisers on the proposal and deliberations are ongoing, sources told Bloomberg.

It is unclear if the approach will lead to a transaction, they added.

Shares of SeaWorld are little changed at $59.29 following the report while Cedar Fair halted for volatility after jumping 11% to $55.59.

Six Flags Entertainment (SIX), which owns amusement parks like Cedar Fair, is up 5% to $41.60 following the report.

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NeoPhotonics sold for $918M

 Lumentum to acquire NeoPhotonics for $16 per share in cash

Lumentum (LITE) and NeoPhotonics (NPTN) announced that they have entered into a definitive agreement under which Lumentum will acquire NeoPhotonics for $16.00 per share in cash, which represents a total equity value of approximately $918M.

NeoPhotonics Corporation develops, manufactures, and sells optoelectronic products that transmit and receive high speed digital optical signals for cloud and hyperscale data center internet content provider and telecom networks worldwide.

Lumentum Holdings Inc. manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates in two segments, Optical Communications (OpComms) and Commercial Lasers (Lasers). 

Laser chips made by Lumentum

The transaction has been unanimously approved by the boards of directors of both companies.

The purchase price represents a premium of approximately 39% to NeoPhotonics’ closing stock price on November 3, 2021.

Laser chips made by NeoPhotonics

Lumentum intends to finance the transaction through cash from the combined company’s balance sheet.

Related to the transaction, Lumentum will provide up to $50M in term loans to NeoPhotonics to fund anticipated growth, which may require increased working capital and manufacturing capacity.

The transaction is expected to close in the second half of calendar year 2022, subject to approval by NeoPhotonics’ stockholders, receipt of regulatory approvals, and other customary closing conditions.

“With NeoPhotonics, we’re making another important investment in better serving our customers and expanding our photonics capabilities at a time when photonics are at the forefront of favorable long-term market trends. At the center of our strategy is a relentless focus on developing a differentiated portfolio with the most innovative products and technology in our industry so that we can help our customers compete and win in their respective markets.

Adding NeoPhotonics’ differentiated products and technology and innovative R&D team is consistent with this strategy and together, we will better meet the growing need for next generation optical networking solutions. We are confident this transaction will make us an even better partner to our customers, while enabling our team to deliver significant, long-term value to our stockholders. We look forward to welcoming NeoPhotonics’ talented team of employees to Lumentum,” said Alan Lowe, Lumentum President and CEO.

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AbbVie’s antidepressant achieves positive results

AbbVie’s cariprazine met primary endpoint in Phase 3 study

AbbVie (ABBV) announced top-line results from two Phase 3 clinical trials, Study 3111-301-001 and Study 3111-302-001, evaluating the efficacy and safety of cariprazine as an adjunctive treatment for patients with major depressive disorder.

Cariprazine, sold under the brand names Vraylar in the United States and Reagila in the European Union, is an atypical antipsychotic which is used in the treatment of schizophrenia, bipolar mania, and bipolar depression.

Drug pipeline looks very promising for Abbvie

In Study 3111-301-001, cariprazine showed a statistically significant change from baseline to week six in the Montgomery-Asberg Depression Rating Scale total score compared with placebo.

The Montgomery–Asberg Depression Rating Scale (MADRS) is a ten-item diagnostic questionnaire which psychiatrists use to measure the severity of depressive episodes in patients with mood disorders. 

Patients treated with cariprazine at 1.5 mg/day achieved improved MADRS total score at week six compared to placebo.

Patients treated with cariprazine at 3.0 mg/day demonstrated improvement in MADRS total score at week six over placebo but did not meet statistical significance.

In Study 3111-302-001, cariprazine demonstrated numerical improvement in depressive symptoms from baseline to week six in MADRS total score compared with placebo but did not meet its primary endpoint for either the 1.5 mg/day or 3.0 mg/day dose.

In a previously published Phase 2/3 registration-enabling study, RGH-MD-75, patients treated with cariprazine flexible doses of 2.0-4.5 mg/day in addition to ongoing antidepressant therapy met the primary endpoint and achieved improved MADRS total scores at week eight compared to placebo.

Based on the positive results of studies 3111-301-001 and RGH-MD-75, and the totality of data reported, AbbVie intends to submit a supplemental New Drug Application with the U.S. FDA for the expanded use of cariprazine for the adjunctive treatment of MDD.

Separately, AbbVie reported Q3 Global Humira sales of $5.425B up 5.6% on reported basis.

In Q3, Global net revenues from the immunology portfolio were $6.674 billion, an increase of 15.3 percent on a reported basis, or 14.9 percent on an operational basis.

Global Humira net revenues of $5.425 billion increased 5.6 percent on a reported basis, or 5.2 percent on an operational basis.

U.S. Humira net revenues were $4.613 billion, an increase of 10.1 percent.

Internationally, Humira net revenues were $812 million, a decrease of 14.6 percent on a reported basis, or 16.7 percent on an operational basis, due to biosimilar competition.

Treatment for Psoriasis

Global Skyrizi net revenues were $796 million. Global Rinvoq net revenues were $453 million.

Treatment for moderate to severe rheumatoid arthritis

ABBV is up $5 to $114.70.

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Hydrogen Fuel Cell Gets a boost from S. Korea

SK Ecoplant to invest $500M in Bloom Energy through expanded partnership

Bloom Energy (BE) and SK Ecoplant, an affiliate of South Korean conglomerate SK Group (SKM), announced the companies are expanding their existing partnership.

The partnership includes purchasing a minimum of 500 megawatts, or MW, from Bloom Energy, representing a $4.5B revenue commitment; co-creating two hydrogen innovation centers; and targeting an equity investment of approximately $500M.

Since the start of their strategic partnership three years ago, Bloom Energy and SK ecoplant have transacted nearly 200 MW of projects together totaling more than $1.8B of equipment and expected service revenue.

Fuel Cells powered solely by Hydrogen

Over the next three years the companies will expand this existing business with contracts for at least an additional 500 MW of power between 2022 and 2025, representing approximately $4.5B in equipment and future service revenue.

Bloom Energy and SK ecoplant agreed to create Hydrogen Innovation Centers in the United States and South Korea.

The intent is to accelerate the global market expansion for Bloom Energy’s hydrogen fuel cell and hydrogen electrolyzer products.

The agreement also reflects both Bloom Energy and SK ecoplant’s enhanced commitment to a zero-carbon future and the further implementation of environmental, social and governance practices.

In addition, Bloom Energy and SK ecoplant agreed to strengthen their alliance through expanding business cooperation in global markets, which may include exclusive distribution rights in select new markets.

SK ecoplant will invest $255M in Bloom Energy by acquiring 10M shares of zero coupon, non-voting redeemable convertible preferred stock at a price of $25.50 per share.

SK ecoplant has the option to acquire a minimum of an additional 11M shares of Class A common stock at a 15% premium to the prevailing stock price at the time, which must be no later than November 30, 2023 and is subject to a maximum ownership of 15%.

Upon completion of SK ecoplant’s purchase of its second tranche, SK ecoplant will add a member to the Bloom Energy board of directors. SK will give an irrevocable proxy to vote its shares to Bloom Energy.

The investment is subject to customary closing conditions and regulatory approvals and is expected to close within 45 days.

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Flying Prescriptions Are Coming!

Walgreens to deploy Wing drone deliveries in Dallas-Fort Worth area

In a blog post by Alphabet’s (GOOG, GOOGL) Wing, the company said, ” Today we’re unveiling a new model for drone delivery that will allow us to expand into densely-populated metropolitan areas in the United States.

Wing will stage delivery drones at retail locations; ready to fly directly to customers.

The aircraft will arrive in small containers that serve as tiny hangars, allowing each store to quickly and easily deploy a small, dedicated fleet from its parking lot, on its roof, or in small spaces adjacent to the building.

When this model launches, Walgreens (WBA) will be the first U.S. retailer to use this new approach.

Walgreens team members will process orders and load packages onto the delivery drones, and Wing will oversee operation of the delivery service.

Our first lightweight, co-located operation will be set up at a Dallas-Fort Worth area Walgreens store in its parking lot, serving parts of the city of Frisco and town of Little Elm.

In addition to the Walgreens store, Wing has teamed up with Hillwood to prepare a separate drone delivery facility within Frisco Station, an urban, mixed-used development located in Frisco.

Hillwood has a long track record supporting forward-thinking, innovative transportation initiatives across the region, most notably at its Alliance Texas development and its designated Mobility Innovation Zone.

We look forward to working with Hillwood as we deploy a facility at Frisco Station that has all the usual delivery capabilities, but will be dedicated to exploring new use cases, community demonstrations, school field trips and public tours…

In preparation for this launch, we’ve been conducting test flights since June at Hillwood’s AllianceTexas Flight Test Center, a drone testing facility in Fort Worth.

We’ll begin a small number of practice flights next week in Frisco and Little Elm, and hope to set up delivery demonstrations to get feedback from the community in the coming weeks.

In the coming months, we expect to launch a commercial service there that would be the first of its kind in a major U.S. metro.”

Google Wing delivers a package

Wing is a subsidiary of Alphabet Inc. that develops technology of drone-based delivery of freight. The company completed their first real-world deliveries in 2014. The company has operations in Australia, the United States, and Finland. 

In July 2018, Project Wing graduated from Google X to become an independent Alphabet company. As of January 2019, Wing began delivering take-out food and beverages out of its test facility in Bonython, Australia as part of a pilot program. In April 2019 Wing became the first drone delivery company to receive an Air operator’s certificate from the Federal Aviation Administration to allow it to operate as an airline in the USA.

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When It rains, It pours!

Workhorse Group suspends deliveries of C-1000 vehicles, recalls 41 that it had delivered

Workhorse Group Inc. (WKHS) shares plunged on Wednesday to their lowest in fifteen months after the beleaguered electric-vehicle maker said it will suspend deliveries of its vans and recall units it has already delivered.

Workhorse Group (WKHS) provided an update to its ongoing review of the Company’s business and go-forward operating and commercial plans to transition from an advanced technology start-up to an efficient manufacturing company.

The electric van, called the C-1000, would require additional testing and modifications to existing vehicles in order to certify them under federal motor vehicle safety standards, the company said in a statement.

The Company stopped delivery of its C-1000

The Company has identified a number of enhancements in the production process and design of the C-1000 to address customer feedback, primarily related to vehicle dynamics to increase the vehicles’ payload capacity.

As Workhorse has identified these enhancements and continued its review and redesign of the C-1000, the Company has decided to suspend deliveries of C-1000 vehicles and recall 41 vehicles it has already delivered.

As part of these efforts, the new leadership team has determined that additional testing and modifications to existing vehicles are required to certify the C-1000 vehicles under Federal Motor Vehicle Safety Standard.

The Company expects to complete testing in the fourth quarter of 2021.

Workhorse intends to provide an update on its operating and commercial plans on its upcoming third quarter 2021 earnings call.

The Company has filed a report with the National Highway Traffic Safety Administration regarding the need for additional testing and vehicle modifications to certify its C-1000 vehicles under FMVSS, and intends to fully coordinate with NHTSA.

The Company has not received any customer reports of safety issues related to this matter in any of the C-1000 vehicles previously delivered by Workhorse.

Additional details will be available in the Company’s filing with NHTSA.

Accordingly, the Company’s previous statements related to the C-1000’s compliance with NHTSA standards cannot be relied upon and the Company has so notified the Securities and Exchange Commission.

#Cowen analyst Jeffrey #Osborne lowered his price target on the company to $7.50 from $8.50, and also reduced his estimates for 2021 and 2022 after the announcement, saying a “turnaround appears more challenging.” The analyst also expects working capital to likely be challenged due to prepayments for batteries and other critical materials.

According to some reports, the company is being investigated by the U.S. Securities and Exchange Commission, as well as disappointment related to losing out on a U.S. Postal Service contract that many had expected Workhorse to win.

WKHS closed at $7.41. Shares have a 52-week high of $42.96.

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RAPT Therapeutics shares soar on data

RAPT Therapeutics, Inc. (RAPT) announced positive topline results from its randomized placebo-controlled Phase 1b clinical trial of RPT193 as monotherapy in 31 patients with moderate-to-severe atopic dermatitis (AD).

Atopic dermatitis (eczema) is a condition that makes your skin red and itchy. It’s common in children but can occur at any age. Atopic dermatitis is long lasting (chronic) and tends to flare periodically. It may be accompanied by asthma or hay fever.

After four weeks of treatment, patients with moderate-to-severe AD who received RPT193 showed a 36.3% improvement from baseline in the Eczema Area and Severity Index (EASI) score, a standard measure of disease severity, compared to 17.0% in the placebo group.

Notably, in the two-week period following the end of treatment, the RPT193 group showed continued improvement and further separation from placebo with a 53.2% improvement in EASI at the six-week time point compared to 9.6% in the placebo group. This continued improvement may be related to RPT193’s mechanism of action, which is upstream of other agents targeting cytokines or signaling pathways.

Emma Guttman-Yassky, M.D., Ph.D., the Waldman Professor of Dermatology and System Chair Department of Dermatology at the Icahn School of Medicine at Mount Sinai, and member of RAPT’s Scientific Advisory Board, added, “I am very excited about these results as they not only demonstrate clinically meaningful improvement after just four weeks of treatment, but also further improvement for two weeks after completion of treatment. This may suggest that this novel mechanism of action targeting CCR4 on Th2 cells could have prolonged, disease-modifying effects, which could differentiate it from other agents. Along with being an oral drug that seems to have promising clinical activity and a well-tolerated safety profile, RPT193 could fill a high unmet medical need for AD patients.”

Cantor Fitzgerald

Cantor Fitzgerald analyst Alethia Young raised the firm’s price target on Rapt Therapeutics to $71 from $51 and reiterates an Overweight rating on the shares. The stock in midday trading is up 110%, or $19.60, to $38.17. This morning’s RPT193 data update “was robust with clear clinical benefit compared to placebo on all exploratory endpoints,” Young tells investors in a research note.

The analyst took the drug’s probability of success in atopic dermatitis to 50% from 25% previously, and increased her peak sales estimates. Young sees a “large unmet need” for a safe and effective oral treatment which is separate from the injectable market, and models peak sales of $4B in atopic dermatitis by 2035. She views Rapt’s risk/benefit profile as potentially best-in-class for an oral treatment.

RAPT is up 107% to $37.70.

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FDA Approves Biogen’s Alzheimer’s Drug

FDA approves Biogen Alzheimer’s drug, says benefits outweigh risks

The FDA approved Biogen’s (BIIB) Aduhelm to treat patients with Alzheimer’s disease.

“This approval is significant in many ways. Aduhelm is the first novel therapy approved for Alzheimer’s disease since 2003.

Perhaps more significantly, Aduhelm is the first treatment directed at the underlying pathophysiology of Alzheimer’s disease, the presence of amyloid beta plaques in the brain.

The clinical trials for Aduhelm were the first to show that a reduction in these plaques – a hallmark finding in the brain of patients with Alzheimer’s – is expected to lead to a reduction in the clinical decline of this devastating form of dementia,” the FDA said in a statement.

Eli Lilly announces Alimta label expanded by FDA, Stockwinners
Eli Lilly is a partner with Biogen

It added, “We ultimately decided to use the Accelerated Approval pathway – a pathway intended to provide earlier access to potentially valuable therapies for patients with serious diseases where there is an unmet need, and where there is an expectation of clinical benefit despite some residual uncertainty regarding that benefit.

Brain of an Alzheimer patient

In determining that the application met the requirements for Accelerated Approval, the Agency concluded that the benefits of Aduhelm for patients with Alzheimer’s disease outweighed the risks of the therapy.”

The FDA said in its approval statement: “Additionally, FDA is requiring Biogen to conduct a post-approval clinical trial to verify the drug’s clinical benefit. If the drug does not work as intended, we can take steps to remove it from the market. But hopefully, we will see further evidence of benefit in the clinical trial and as greater numbers of people receive Aduhelm. As an agency, we will also continue to work to foster drug development for this catastrophic disease.”

STIFEL

Stifel analyst Paul Matteis reiterates his Buy rating on Biogen shares following the FDA granting accelerated approval of aducanumab, now to be called “Aduhelm,” for the treatment of Alzheimer’s disease.

Approval based on amyloid plaque as a “surrogate” is “definitely unexpected” and appears to be a way for FDA to work around the contentious advisory committee meeting, argues Matteis, who adds that the approval “is a big win.” How investors will risk-adjust revenues that are modeled after completion of a Phase 4 trial and how insurers will treat access for a drug approved based on a biomarker are “highly interesting” questions that will now “be debated at a materially higher stock valuation,” added Matteis. Biogen shares remain halted for trading at midday following news of the FDA approval.

JEFFRIES

Jefferies analyst Andrew Tsai said news of Biogen (BIIB) being granted FDA approval for aducanumab is likely to spark investor enthusiasm across all Alzheimer’s names and he believes the longer-term setup for Athira Pharma (ATHA) looks more attractive now. Given what he views as “the FDA tailwind,” he would buy on strength as he believes the FDA’s aducanumab decision “clearly has a positive readthrough” to Athira, whose Phase I data suggests ATHA-1017 could produce “a profound cognitive benefit” in Phase 2/3 studies expected to read out in 2022, Tsai tells investors.

In that context, he thinks a 25%-50% short-term move for Athira shares “seems reasonable” relative to the company’s current market cap.

Shares of Biogen (BIIB) remain halted while Eli Lilly (LLY), who has an Alzheimer’s disease drug in its pipeline, is up 4% to $210.78 following the news.

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Johnson & Johnson files for FDA approval of it’s Covid-19 Vaccine

 J&J submits FDA application for emergency use authorization for COVID-19 vaccine

Johnson & Johnson (JNJ) announced that Janssen Biotech, Inc., has submitted an application to the U.S. Food and Drug Administration requesting Emergency Use Authorization for its investigational single-dose Janssen COVID-19 vaccine candidate.

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JNJ files for approval of Covid-19 vaccine

The company’s EUA submission is based on topline efficacy and safety data from the Phase 3 ENSEMBLE clinical trial, demonstrating that the investigational single-dose vaccine met all primary and key secondary endpoints.

The Company expects to have product available to ship immediately following authorization. “Today’s submission for Emergency Use Authorization of our investigational single-shot COVID-19 vaccine is a pivotal step toward reducing the burden of disease for people globally and putting an end to the pandemic,” said Paul Stoffels, M.D., Vice Chairman of the Executive Committee and Chief Scientific Officer at Johnson & Johnson.

“Upon authorization of our investigational COVID-19 vaccine for emergency use, we are ready to begin shipping. With our submission to the FDA and our ongoing reviews with other health authorities around the world, we are working with great urgency to make our investigational vaccine available to the public as quickly as possible.”

Johnson & Johnson intends to distribute vaccine to the U.S. government immediately following authorization, and expects to supply 100 million doses to the U.S. in the first half of 2021.

JNJ last traded at $161.99.

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Slack Technologies sold for $27.7 billion

Salesforce acquires Slack in cash and stock deal worth $27.7B

Salesforce (CRM) and Slack Technologies (WORK) have entered into a definitive agreement under which Salesforce will acquire Slack.

Under the terms of the agreement, Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7 billion based on the closing price of Salesforce’s common stock on November 30.

The boards of each of Salesforce and Slack have approved the transaction and the Slack board recommends that Slack stockholders approve the transaction and adopt the merger agreement.

The transaction is anticipated to close in the second quarter of Salesforce’s fiscal year 2022.

Salesforce goes shopping

Salesforce has also entered into a voting agreement with certain stockholders of Slack common stock, under which each such stockholder has agreed to vote all of their Slack shares in favor of the transaction at the special meeting of Slack stockholders to be held in connection with the transaction, subject to certain terms and conditions.

The Slack shares subject to the agreement represent approximately 55% of the current outstanding voting power of the Slack common stock.

Salesforce expects to fund the cash portion of the transaction consideration with a combination of new debt and cash on Salesforce’s balance sheet.

One year chart of Slack Tech. stock price

Salesforce has obtained a commitment from Citigroup, Bank of America, and JPMorgan Chase for a $10B senior unsecured 364-day bridge loan facility.

Salesforce said, “Slack will be deeply integrated into every Salesforce Cloud.

Five year chart of Salesforce stock price

As the new interface for Salesforce Customer 360, Slack will transform how people communicate, collaborate and take action on customer information across Salesforce as well as information from all of their other business apps and systems to be more productive, make smarter, faster decisions and create connected customer experiences.”

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Inphi Corp. sold for about $155 per share

Marvell to acquire Inphi in cash and stock deal

Marvell Technology Group (MRVL) and Inphi Corporation (IPHI) announced a definitive agreement, unanimously approved by the boards of directors of both companies, under which Marvell will acquire Inphi in a cash and stock transaction.

Israel’s Marvell buys rival Inphi Corp.

In conjunction with the transaction, Marvell intends to reorganize so that the combined company will be domiciled in the United States, creating a U.S. semiconductor powerhouse with an enterprise value of approximately $40B.

Under the terms of the definitive agreement, the transaction consideration will consist of $66 in cash and 2.323 shares of stock of the combined company for each Inphi share.

Inphi sold to Marvell

Upon closing of the transaction, Marvell shareholders will own approximately 83% of the combined company and Inphi stockholders will own approximately 17% of the combined company.

Marvell intends to finance the transaction with cash on hand, and additional financing. Marvell has obtained debt financing commitments from JPMorgan Chase Bank, N.A.

The transaction is not subject to any financing condition and is expected to close by the second half of calendar 2021, subject to the approval of Marvell shareholders and Inphi stockholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

“Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Matt Murphy, president and CEO of Marvell.

“Inphi’s technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products, including 400G data center interconnect optical modules, which leverage their unique silicon photonics and DSP technologies.

We believe that Inphi’s growing presence with cloud customers will also lead to additional opportunities for Marvell’s DPU and ASIC products.”

“Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Matt Murphy, president and CEO of Marvell.

“Inphi’s technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products, including 400G data center interconnect optical modules, which leverage their unique silicon photonics and DSP technologies. We believe that Inphi’s growing presence with cloud customers will also lead to additional opportunities for Marvell’s DPU and ASIC products.”

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