Cara Therapeutics Sharply Higher on FDA Action

FDA has granted Breakthrough Therapy designation to I.V. CR845 for the treatment of moderate-to-severe uremic pruritus in chronic kidney disease patients undergoing hemodialysis

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Cara Therapeutics announced that the FDA has granted Breakthrough Therapy designation to I.V. CR845 for the treatment of moderate-to-severe uremic pruritus in chronic kidney disease patients undergoing hemodialysis.

Cara Therapeutics, Inc. (CARA) is a biopharmaceutical company. The company is focused on developing and commercializing new chemical entities designed to alleviate pain and pruritus by selectively targeting peripheral kappa opioid receptors.

“The FDA’s decision to grant Breakthrough Therapy designation is recognition of both the significant unmet medical need among CKD patients with UP and the potential of I.V. CR845 to address it,” said Derek Chalmers, Ph.D., D.Sc., President and Chief Executive Officer of Cara Therapeutics.

“We have already initiated our Phase 3 program and look forward to working closely with the FDA to bring this potential new treatment option to hemodialysis patients as quickly as possible.”

Breakthrough Therapy designation is granted to expedite the development and review process for new therapies addressing serious or life-threatening conditions, where preliminary clinical evidence indicates that the drug candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

CARA closed at $24.25. Shares are up $2 in pre-market trading.

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FDA Grants Thermo Fisher Pre-Market Approval for Oncomine Test

Thermo Fisher says FDA grants premarket approval for Oncomine Dx Target Test that simultaneously screens tumor samples for three FDA-approved therapies for non-small cell lung cancer

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Thermo Fisher ( $TMO ) announced that the FDA has granted premarket approval for its #Oncomine Dx Target Test, which the company called the first next-generation sequencing-based test that simultaneously screens tumor samples for biomarkers associated with three FDA-approved therapies for non-small cell lung cancer.

LabCorp’s ( $LH ) Diagnostics and Covance Businesses, NeoGenomics (NEO) Laboratories, and Cancer Genetics (CGIX) are among the first laboratories that will offer the Oncomine Dx Target Test as a service to oncologists, Thermo Fisher said.

All tests will be run on Thermo Fisher’s Ion PGM Dx System, which received FDA 510k clearance in parallel for use on formalin-fixed, paraffin-embedded tissue samples.

Thermo Fisher developed the Oncomine Dx Target Test in collaboration with Novartis (NVS) and Pfizer (PFE).

“This first iteration of the test is just the beginning since the diagnostic claims of the Oncomine Dx Target Test may be expanded in the future based on the existing panel.

Thermo Fisher has entered into discussions with several pharmaceutical companies looking to use the panel for FDA-approved targeted therapy applications beyond lung cancer,” the company noted.

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Republicans draft of ACA replacement bill Boosts Hospitals, Insurers

Funding for Medicaid will be phased out from 2020 to 2024 and additional cuts would begin in 2025

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Shares of hospital and health insurance stocks are rising this afternoon after Senate Republicans released a draft of their Affordable Care Act replacement bill.

WHAT’S NOTABLE

The draft includes cuts to #Medicaid and restructures the program from an open-ended government funding commitment to a limited federal payments system.

The bill also repeals billions of tax dollars used to expand coverage and abolishes the ACA’s mandates to purchase coverage.

Under the draft, federal funding for Medicaid will be phased out from 2020 to 2024 and additional cuts would begin in 2025, as the cap on Medicaid payments begins to grow at a slower rate.

While the bill retains some of the ACA’s tax credit structure, which assists citizens in buying private coverage, senators have reshaped the credits so they are less generous and less costly to the government. The bill is expected to be voted on next week.

COMPANIES TO WATCH

Publicly traded hospital operators include HCA Holdings (HCA), LifePoint (LPNT), Tenet Healthcare (THC), Community Health (CYH) and Quorum Health (QHC) and health insurance providers include Aetna (AET), Anthem (ANTM), Centene (CNC), Cigna (CI), Humana (HUM), Molina Healthcare (MOH), UnitedHealth (UNH) and WellCare (WCG).

PRICE ACTION

HCA was up 3.8%, LifePoint rose 3.3%, Tenet was up 8.7%, Community Health rose 8.4% and Quorum was up 8.3% in afternoon trading. Aetna, Anthem and Centene also rose 1.3%, 1% and 3.6%, respectively. Cigna was up 1.1%, Humana rose 1.5%, Molina gained 2.6%, UnitedHealth was up 1.5% and WellCare was up 3.5%.

Chinese Internet Stocks Tumble

Chinese internet stocks fall following report of streaming ban

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Shares of Chinese internet companies Sina (SINA), Weibo (WB), Phoenix New Media (FENG), YY (YY) and Momo (MOMO) are falling following reports that Chinese regulators are cracking down on online videos and streaming in an effort to police online content.

WHAT’S NEW

The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China has ordered internet platforms Sina Weibo, Phoenix New Media’s iFeng and ACFUN to stop all video and streaming services as China increases its efforts to cut down the dissemination of “vulgar content.”

The regulator said the companies do not have the necessary license to stream content and were “not in line with national audiovisual regulations and propagating negative speech.” The move is seen as a blow to Sina Weibo which has invested in livestreaming companies and announced a partnership in December with the National Football League to stream games.

It is unclear if the ban on streaming is temporary or permanent.

WEIBO CONFIRMS RECEIPT OF NOTICE

Following the report, Weibo announced that it became aware of a public notice issued by The State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China stating that the SAPPRFT had recently requested the local competent authorities to take measures to suspend several companies’ video and audio services due to their lacking of an internet audio/video program transmission license and posting of certain commentary programs with content in violation of government regulations on their sites, and Weibo is named as one of these companies.

The company said it is “communicating with the relevant government authorities to understand the scope of the notice” and “intends to fully cooperate with the relevant authorities.”

PRICE ACTION

Sina was down 7.5% to $85.07, Weibo fell 9.6% to $69.57, Phoenix New Media was down 2.2% to $2.69, YY dropped 3.5% to $56.90 and Momo fell 2.5% to $37.75 in morning trading.

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AMD EPYC’s Gain, Intel’s Loss

AMD processors seen as threat to Intel in the data center

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The shares of Advanced Micro Devices (AMD) are climbing after the company announced the launch of its EPYC series data center processors.

Analysts were upbeat on the processors, as research firms Canaccord and Craig-Hallum raised their price targets on AMD and Bank of America Merrill Lynch said the processors could create a positive “turning point” for the company.

Meanwhile, Merrill Lynch downgraded Intel (INTC) to Neutral from Buy, citing increased competition from AMD and Nvidia (NVDA).

AMD TARGETS HIKED 

Craig-Hallum analyst Christian #Schwab raised his price target on AMD to $17 from $16, stating that the company’s list of customers and partners, which includes Microsoft (MSFT), Baidu (BIDU) and Dell, is “strong.”

AMD emphasized that #EPYC offers better performance and lower prices than competing chips from Intel, according to Schwab, who said he’s more confident in AMD’s data center business following the product launch. He reiterated a Buy rating on the stock.

Meanwhile, Canaccord’s David Evanson said AMD has “built the foundation to re-emerge as a solid competitor in the enterprise, cloud and storage tiers of the server market. Evanson, who raised his price target on AMD shares to $20 from $17, said the “unique” combination of CPU and GPU technologies embodied in AMD’s processors add value to customers’ deep learning and AI endeavors. He kept a Buy rating on the shares.

TURNING POINT

BofA analyst Vivek Arya says that EPYC could be a “turning point” for the company’s data center business, as the product appears to provide “significantly better price per performance” compared to competing products from Intel. It seems that the product will enable AMD to gain market share in the server market, added Arya, who kept a $16.50 price target and a Buy rating on AMD. Increased competition from AMD in servers and market share gains by Nvidia in accelerators and artificial intelligence could limit Intel’s ability to raise prices in the future as it has done historically, wrote Arya, who downgraded Intel to Neutral from Buy.

Over the last five years, about a third of Intel’s revenue growth from data center companies has been derived from price increases, Arya noted.

Meanwhile, Intel has had to raise its operating spending to cater to large cloud customers and has been forced to increase its investments in memory products, according to the analyst, who trimmed his price target on Intel to $38 from $42.

PRICE ACTION

In Wednesday trading, AMD rose nearly 8% to $13.63 while Intel fell 1.5% to $34.33.

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Oil Stocks Downgraded

Oil entered the first bear market since August as concerns worsen over a global supply glut

The number of downgrades may, from a contrarian point, signal oil’s bottom

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A number of oil related stocks are down this morning after brokers downgraded several oil related stocks. Oil entered the first bear market since August as concerns worsen that OPEC is failing to ease a global supply glut.

Adding to an oversupplied market are Libya, which is pumping the most in four years, and shale drillers that are staging the longest drilling ramp-up on record. Meanwhile traders are hoarding an increasing amount of oil in tankers. All that crude is hindering efforts by the Organization of Petroleum Exporting Countries and its allies to reduce stockpiles to the five-year average.

The American Petroleum Institute (API) reported a draw of 2.72 million barrels in United States crude oil inventories, compared to analyst expectations that the EIA would report a 2.0-million barrel draw for the week ending June 16. This week’s inventory draw almost completely offsets last week’s API-reported crude inventory build of 2.75 million barrels.

Gasoline inventories rose this week by 346,000 barrels, as refiners continue to take crude oil out of inventory and turn it into gasoline. Surveyed analysts were close on gasoline predictions this week, expecting a 400,000-barrel build for the fuel, but even though the API report was close to projections, the three-week rise in inventories mean that demand for the fuel is not sufficient to cut into inventories as one would expect this time of year.

The Energy Department reports its inventory data at 10:30 a.m. today.  Based on the number of downgrades, it may be a bottom for oil prices!

Crude oil last traded at $43.70 per barrel.

Here is a list of oil stocks downgraded today:

Downgrades

AON Aon plc to Neutral from Buy at Janney Capital
APA Apache to Sell from Neutral at Seaport Global
AREX Approach Resources to Sell from Neutral at Seaport Global
AXAS Abraxas Petroleum to Neutral from Buy at Seaport Global
AXTA Axalta Coating to Underperform from Buy at BofA/Merrill
BAS Basic Energy to Neutral from Buy at Seaport Global
BBG Bill Barrett to Sell from Neutral at Seaport Global
BHI Baker Hughes to Neutral from Buy at Seaport Global
BP BP to Underperform from Neutral at Macquarie
CHK Chesapeake to Underperform from Neutral at Macquarie
CIR CIRCOR to Sell from Neutral at Seaport Global
CLR Continental Resources to Sell from Buy at Seaport Global
CPE Callon Petroleum to Neutral from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CRZO Carrizo Oil & Gas to Sell from Buy at Seaport Global
CVE Cenovus Energy to Underperform from Neutral at Macquarie
CVX Chevron to Neutral from Outperform at Macquarie
CXO Concho Resources to Neutral from Buy at Seaport Global
DO Diamond Offshore to Sell from Neutral at Seaport Global
DOV Dover to Neutral from Buy at Seaport Global
DVN Devon Energy Neutral at Seaport Global
E Eni SpA to Neutral from Outperform at Macquarie
ECA Encana to Neutral from Outperform at Macquarie
ECR Eclipse Resources to Neutral from Buy at Seaport Global
EGN Energen to Sell from Neutral at Seaport Global
ESES Eco-Stim Energy to Neutral from Buy at Seaport Global
ESTE Earthstone Energy to Neutral from Buy at Seaport Global
ESV Ensco to Sell from Neutral at Seaport Global
FI Frank’s International to Underweight from Equal Weight at Morgan Stanley
FI Frank’s International to Sell from Neutral at Seaport Global
GST Gastar Exploration to Neutral from Buy at Seaport Global
HAL Halliburton to Neutral from Buy at Seaport Global
HK Halcon Resources to Neutral from Buy at Seaport Global
HP Helmerich & Payne to Sell from Neutral at Seaport Global
HP Helmerich & Payne to Underweight from Equal Weight at Morgan Stanley
ICD Independence Contract Drilling to Equal Weight at Morgan Stanley
JONE Jones Energy to Neutral from Buy at Seaport Global
KEG Key Energy to Neutral from Buy at Seaport Global
LONE Lonestar Resources to Neutral from Buy at Seaport Global
LPI Laredo Petroleum to Neutral from Buy at Seaport Global
MRC MRC Global to Neutral from Buy at Seaport Global
MRO Marathon Oil to Sell from Neutral at Seaport Global
NBL Noble Energy to Sell from Neutral at Seaport Global
NBR Nabors Industries to Equal Weight from Overweight at Morgan Stanley
NBR Nabors Industries to Neutral from Buy at Seaport Global
NE Noble Corp. to Neutral from Buy at Seaport Global
NFX Newfield Exploration to Sell from Buy at Seaport Global
OAS Oasis Petroleum to Neutral from Buy at Seaport Global
OII Oceaneering to Sell from Neutral at Seaport Global
OII Oceaneering to Underweight from Equal Weight at Morgan Stanley
OIS Oil States to Equal Weight from Overweight at Morgan Stanley
PDCE PDC Energy to Neutral from Buy at Seaport Global
PDS Precision Drilling to Equal Weight from Overweight at Morgan Stanley
PES Pioneer Energy to Neutral from Buy at Seaport Global
PQ PetroQuest to Neutral from Buy at Seaport Global
PTEN Patterson-UTI to Neutral from Buy at Seaport Global
RDC Rowan Companies to Sell from Neutral at Seaport Global
RDS.A Royal Dutch Shell to Neutral from Outperform at Macquarie
REPYY Repsol to Neutral from Outperform at Macquarie
RES RPC, Inc. to Neutral from Buy at Seaport Global
RICE Rice Energy to Neutral from Buy at Seaport Global
SD SandRidge Energy to Neutral from Buy at Seaport Global
SM SM Energy to Neutral from Buy at Seaport Global
SN Sanchez Energy to Sell from Buy at Seaport Global
SNDE Sundance Energy to Neutral from Buy at Seaport Global
SPN Superior Energy to Neutral from Buy at Seaport Global
SRCI SRC Energy to Neutral from Buy at Seaport Global
WFT Weatherford to Neutral from Buy at Seaport Global
WLL Whiting Petroleum to Sell from Neutral at Seaport Global
WLL Whiting Petroleum to Neutral from Outperform at Macquarie
WPX WPX Energy to Sell from Buy at Seaport Global
XEC Cimarex Energy to Sell from Neutral at Seaport Global

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CA Could Be Taken Private

Companies have approached banks to finance a BMC purchase of CA

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BMC Software Inc. and CA Inc. are considering a potential deal that would see the software companies combine as part of a transaction to take CA private, reports Bloomberg.

CA, Inc. provides software and solutions that help organizations to plan, develop, manage, and secure applications and enterprise environments in the United States and internationally.

The companies have approached banks about putting together a debt package to finance a BMC purchase of CA, said the people, who asked not to be identified because the information isn’t public. Talks are at an early stage and there is no guarantee a deal will be reached, the people said.

BMC was taken private by Bain Capital and Golden Gate Capital in 2013 in a deal valued at about $6.9 billion. The firms, which took a $750 million dividend from the company in 2014, may also put in new equity to help finance the deal, the people said.

RBC Capital analyst Matthew Hedberg says “a deal is unlikely given its scale.” However, he adds that a deal “could make sense” for CA, ” given a challenging multi-year mainframe renewal portfolio, struggle for organic growth and pending 606 adoption.” The analyst adds that ” there could likely be significant cost synergies as the businesses are similar.”

CA closed at $31.58. The issue has a 52-weeks trading range of $30.01 – $34.99.

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Chipotle Warns of High Costs, Shares Slide

Chipotle falls after signaling continued high costs to win back consumers

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Shares of Chipotle Mexican Grill (CMG) fell Tuesday after the restaurant chain “clarified” its second quarter outlook, appearing to confirm that costs related to food, marketing, and promotion will remain elevated as it seeks to regain consumer trust following its 2015 food scares.

CHIPOTLE WARNS ON COSTS

In a regulatory filing after Monday’s close, Chipotle “clarified” its financial outlook in connection with an investor meeting, saying that “for Q2, we continue to expect food costs to be approximately 34.2% of sales, and marketing and promotion costs to be up approximately 20-30 basis points versus Q1 to 3.6%-3.7% of sales. As a result, we expect other operating costs as a percentage of sales for Q2 to be at or slightly higher than reported for Q1. For the full year, we continue to expect comparable restaurant sales increases in the high single digits.”

PIPER MAKES ONLY MINOR TWEAKS:

Piper Jaffray’s Nicole Regan highlighted that the news follows a “solid” Q1 report and says the Q2 guidance update necessitates only “relatively minor” tweaks to her quarterly models. The analyst maintains her earnings predictions for both 2017 and 2018, adding that the firm’s latest checks generally reflect the consensus opinion that trends are now “headed in the right direction,” likely helped by Chipotle’s TV campaign. Regan reiterated an Overweight rating and $530 target on the stock while noting that its next catalyst is “stringing together a series of steady quarterly improvements.”

MAXIM PREFERS DEEPER PULLBACK

While keeping a Hold rating and $440 target on Chipotle, Maxim’s Stephen Anderson cut his Q2 profit estimate to $2.62 from $2.87 per share on the company’s likely higher costs, adding that he had previously expected food expenses to improve as promotional activity and commodity prices eased. The analyst models double-digit comparable sales growth for the quarter while warning of impacts from the Easter holiday shift and Chipotle’s recently-disclosed data breach, saying he still prefers to wait for a “deeper pullback” before recommending the stock.

DEUTSCHE HIGHLIGHTS MARGIN CONCERNS

Writing that margin recovery “remains under pressure,” Deutsche Bank analyst Brett Levy says food, marketing, and other operating costs continue to form an “apparent drag on restaurant-level profits.” Levy lowered his second quarter EPS view by 20c to $2.04 and highlighted that management indicated sequential expense pressures are expected to persist and could near 100 basis points of additional costs versus the prior consensus forecast for restaurant-level margins. The analyst keeps a Sell rating on the shares, arguing that Chipotle “faces an uphill battle” to regain lost sales while lifting margins

PRICE ACTION: Shares of Chipotle remain down 6.7% to $428.31 in late day trading.

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Solar Stocks that Could be Taken Over

Goldman sees Vivint as top target when M&A heats up in solar space

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As the potential for increased mergers and acquisitions in the U.S. solar space ramps up, Goldman Sachs analyst Brian Lee views Vivint Solar (VSLR) as a main target for possible deals citing restructuring potential in the residential solar business.

M&A RIPENING

Lee said the transaction pipeline in the U.S. solar sector appears to be picking up, a trend he views as likely to continue, and estimated that approximately $3B of announced solar deals could be on track to close in the second half of 2017.

The emergence of contracted cash-flow based models, the restructuring of business models, low-cost financing and declines in solar equity prices are increasing the likelihood of mergers and acquisitions, the analyst wrote.

RANK 1:

Based on the potential for increased M&A, Lee upgraded Vivint to Buy from Neutral and raised his price target for the shares to $6 from $3.50. Lee assigned Vivint Goldman’s highest M&A rank of 1, representing a 30% to 50% probability of a deal, up from 3, as he sees increased restructuring potential in the residential solar business.

He added the company’s renewed financing breadth, concentrated equity ownership and aggressive shift to cash/loan volumes strengthens its turn-around potential and position as an M&A target.

Lee said management has previously said it is open to a sale and Goldman’s hypothetical sensitivity analysis suggests potential mid-teens returns for an acquirer if mix shift continues.

OTHER RANK INCREASES

Lee also assigned a rank of 1 to 8point3 Energy (CAFD), up from 4, saying while the firm has not viewed the company as an attractive acquisition candidate due to high leverage and its dual-parent ownership structure, an announcement by First Solar (FSLR) and SunPower (SPWR) to explore strategic alternatives could result in a sale of the company. He added risk-reward for potential buyers is attractive at current equity prices.

Lee kept a Buy rating on the name and raised his price target to $16 to $15.

In addition, he notes Sunrun (RUN) is trading below tangible book value following underperformance but Goldman’s hypothetical sensitivity analysis suggests potential returns above 15% for an acquirer if mix shift persists. Lee ranks the company at a 2, up from a 3, reiterates a Buy rating and raises his price target to $10 from $9.

PRICE ACTION

In Tuesday trading, Vivint rose 19% to $5.18, 8point3 Energy increased 9% to $13.82, and Sunrun rose 8.3% to $6.34.

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