ModSpace sold for $1.1 billion

Williams Scotsman to acquire ModSpace for approx. $1.1B

ModSpace sold for $1.1 billion, Stockwinners
ModSpace sold for $1.1 billion, Stockwinners

WillScot Corporation (WSC) announced that it has entered into a definitive agreement to acquire Modular Space Holdings, the parent holding company of Modular Space Corporation, for an enterprise value of approximately $1.1B. Williams Scotsman will indirectly acquire MS Holdings for a purchase price comprising $1,063,750,000 of cash consideration, 6,458,500 shares of WSC Class A common stock and warrants to purchase 10,000,000 shares of WSC Class A common stock at an exercise price of $15.50 per share, subject to customary adjustments.

The transaction, which is subject to customary closing conditions, is expected to close in 3Q18.

ModSpace, a privately-owned provider of office trailers, portable storage units and modular buildings, had approximately $1.1B of total assets as of March 31, 2018.

ModSpace generated $453M of total revenue, $18M of net income and $106M of Adjusted EBITDA for the twelve months ended March 31, 2018. Once combined, Williams Scotsman will have over 160,000 modular space and portable storage units serving a diverse customer base from approximately 120 locations across the United States, Canada and Mexico.

Williams Scotsman expects to capture $60M in annual cost synergies after integration, with approximately 80% of the forecast synergies expected to be realized on a full run-rate basis by the end of 2019.

Williams Scotsman also expects to benefit from the net operating tax loss carryforwards to be acquired in the transaction, and for the transaction to be accretive to earnings in 2019.

Williams Scotsman expects to expand its “Ready to Work” value proposition across the ModSpace fleet and customer base, a strategy that has driven double-digit organic Adjusted EBITDA growth in Williams Scotsman’s U.S. Modular segment in recent years and proven successful in Williams Scotsman’s acquisitions of Acton Mobile and Tyson Onsite.

Until the transaction closes, both companies will operate independently and execute on their respective strategic priorities. Williams Scotsman has secured committed financing to fund the transaction, which includes an amendment and expansion of its existing revolving ABL credit facility to $1.35B with an accordion feature allowing up to $1.8B of total capacity, a $280M secured bridge credit facility, and $320M unsecured bridge credit facility.

Williams Scotsman expects the permanent financing plan to include a combination of long-term debt and equity or equity-linked securities.

WSC closed at $12.15, it last traded at $14.10.


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Supreme Court ruling moves retail stocks

Physical retailers rise, online retailers drop after Supreme Court tax ruling

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

Shares of brick-and-mortar retailers are rising, while shares of e-commerce firms are slipping, after the Supreme Court ruled that online retailers can be required to collect sales taxes in states where they have no physical presence.

SUPREME COURT RULING

On Thursday, the Supreme Court sided with the state of South Dakota in a fight it brought against Wayfair (W) to require a business that has no physical presence in the state to collect its sales tax.

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

The Supreme Court ruled in a 5-to-4 vote that a 1992 judgement in Quill Corporation v. North Dakota regarding the physical presence rule was “unsound and incorrect,” according to a judgement posted to the high court’s website.

Justice Anthony Kennedy, in writing for the majority opinion, said the Quill decision had distorted the economy and resulted in states losing annual tax revenues between $8B-$33B.

“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote.

“Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

WHAT’S NOTABLE:

Following the ruling, industry trade organization National Retail Federation issued a statement saying,

“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well.

This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

ANALYST COMMENTARY

KeyBanc analyst Edward Yruma called the ruling a negative for Wayfair, arguing that it may reduce some of the price differential that has helped it gain share from traditional peers.

The ruling is also a negative, but to a lesser degree, for eBay (EBAY) and Etsy (ETSY), said Yruma, who views the impact on those two as more related to compliance and implementation.

He adds that the news could be a modest positive for retailers of high-ticket and branded products, such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), La-Z-Boy (LZB), Kirkland’s (KIRK), RH (RH) and Williams-Sonoma (WSM).

PRICE ACTION

At Thursday midday, Target (TGT) rose 1.8%, Walmart (WMT) was up 0.7%, Costco (COST) rose roughly 1.1% while Amazon (AMZN) was down 0.4%, Etsy dropped about 2.5%, eBay fell 1.4% and Wayfair (W) was down 1.2%.

In addition, Avalara (AVLR), a software company focused on automated tax compliance that recently held its initial public offering, gained 17.1%.


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Heron Therapeutics HTX-001 achieves primary endpoints

Heron Therapeutics HTX-001 achieves primary endpoints in Study 209, 211

Heron Therapeutics HTX-001 achieves primary endpoints, Stockwinners
Heron Therapeutics HTX-001 achieves primary endpoints, Stockwinners
Heron Therapeutics (HRTX) announced positive topline results from two completed Phase 2b studies of HTX-011: Study 209 and Study 211.
HTX-011 achieved the primary endpoints in both studies.
Study 209 was a randomized, placebo- and active-controlled, double-blind, Phase 2b clinical study in patients undergoing primary unilateral total knee arthroplasty to evaluate the analgesic efficacy, safety and pharmacokinetics of HTX-011 locally administered into the surgical site.
Following a dose-escalation phase, 222 patients were randomized to receive: HTX-011 400 mg administered via instillation into the surgical site; HTX-011 400 mg administered via instillation into the surgical site with a low dose of ropivacaine injected into the posterior capsule (HTX-011 combination); bupivacaine 125 mg administered via multiple injections into the surgical site; and placebo.
Ropivacaine and bupivacaine are generically available standard-of-care local anesthetics used in the management of postoperative pain.
This study included a pre-specified hierarchical testing strategy for the primary and key secondary endpoints for the HTX-011 400 mg treatment groups. The primary endpoint was pain intensity as measured by the area under the curve, or AUC, from 0 to 48 hours post-surgery for HTX-011 compared to placebo.
The key secondary endpoint was pain intensity as measured by the AUC from 0 to 72 hours post-surgery for HTX-011 compared to placebo.
The primary and key secondary endpoints were achieved.
Study 211 was a randomized, placebo- and active-controlled, double-blind, Phase 2b dose-finding study in patients undergoing augmentation mammoplasty to evaluate the analgesic efficacy, safety and pharmacokinetics of HTX-011 when administered by instillation into the surgical site or via ultrasound-guided lateral and medial pectoral nerve block before surgery.
The study consisted of three cohorts comparing HTX-011 nerve block to the standard dose of bupivacaine 50 mg, administered as a nerve block, and placebo, and a final cohort comparing both HTX-011 400 mg administered by instillation and HTX-011 400 mg administered as a nerve block to the same two control groups.
A total of 243 patients were enrolled.
The primary endpoint was pain intensity as measured by the AUC from 0 to 24 hours post-surgery compared to placebo. The primary endpoint of the study was achieved.
HRTX closed at $30.70. it last traded at $40.00


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Oracle lower after losing business to Amazon, Microsoft

Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft

Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft , Stockwinners
Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft ,

Shares of Oracle (ORCL) are sliding after JPMorgan analyst Mark Murphy downgraded the stock to Neutral, citing negative results from a survey of Chief Information Officers about their spending.

The analyst noted that the survey showed spending contraction ahead as Oracle’s databases are being unplugged in favor of Microsoft (MSFT) and Amazon (AMZN) databases.

SURVEY SAYS

In a research note this morning, JPMorgan’s Murphy downgraded Oracle to Neutral from Overweight as specific metrics in the firm’s large-scale CIO survey have arced over into negative territory.

The analyst told investors that while Oracle’s shares have risen from the $30s into the high $40s in the last 2 years, the company’s fundamental performance has remained inconsistent. Citing his survey of 154 CIOs, Murphy noted that Oracle received the largest number of indications for planned spending contraction this year, materially more than the second-worst company, which was IBM (IBM) with 25 indications of spending contraction.

Further, while ranking the top 8 or 9 mega-vendors in terms of who will be most critical and indispensable to CIOs’ IT environment in the future, Oracle only received 6.5% of votes, down from 11% in previous surveys, the analyst highlighted.

At the same time, Murphy pointed out that Amazon AWS improved from 9.5% of votes last year to 14.9% of votes this year, creating the appearance of a “sucking sound” out of Oracle and into AWS.

The company also ranked number 8 in terms of association with Digital Transformation projects, disappointing relative to its scale and lagging behind the likes of SAP (SAP), IBM, and Cisco (CSCO), he added, noting that despite Oracle’s efforts to build a Cloud presence, it rated no better than SAP in terms of association with Cloud Computing plans, and is nowhere close to the leaders Microsoft, Amazon, and Google (GOOGL; GOOG) in this respect. Oracle was mentioned by only 2% of the CIOs as the platform that will be “most integral” to their cloud computing plans, Murphy said.

Overall, the analyst questions where Oracle’s business and stock are heading in the next couple of years if the largest-scale CIO survey shows Oracle now has negative spending intentions, is lagging in Digital Transformation projects, is trailing in Cloud Computing plans, its databases are being unplugged in favor of Microsoft and Amazon databases, its applications are being unplugged in favor of Salesforce (CRM) and Workday (WDAY) applications, and customers are weary of its unpopular commercial tactics.

Murphy also lowered his price target on Oracle’s shares to $53 from $55.

WHAT’S NOTABLE

In a research note of his own, Nomura Instinet analyst Christopher Eberle lowered his price target for Oracle to $60 from $64 ahead of the company’s fourth quarter results on June 19.

The analyst trimmed his estimates to account for currency and expectations for more modest revenue acceleration in fiscal 2019. He remains optimistic, however, on Oracle’s transition and model growth reacceleration as the year progresses. Eberle reiterated a Buy rating on the shares.

PRICE ACTION

In Wednesday’s trading, shares of Oracle dropped almost 5% to $46.14.


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Loxo Oncology shares higher on data

Loxo announces positive interim data from LOXO-292 dose escalation trial

Loxo Oncology presents positive data  at ASCO meeting

Loxo Oncology (LOXO) announced interim clinical data from the LOXO-292 global Phase 1 LIBRETTO-001 dose escalation trial.

LOXO-292 is an investigational, highly potent and selective RET inhibitor.

Resonance Energy Transfer (RET),  is a mechanism describing energy transfer between two chromophores.

These data are being presented at the 2018 American Society of Clinical Oncology Annual Meeting.

The LIBRETTO-001 Phase 1 trial contains a dose escalation phase and a dose expansion phase. The dose escalation phase follows a “3+3” design.

LOXO-292 is dosed orally in 28-day cycles. As dose cohorts are cleared, additional patients can enroll in these cleared cohorts.

Intra-patient dose escalation is also permitted as dose cohorts are cleared.

The primary endpoint of the trial is the determination of the maximum tolerated dose or recommended dose for further study.

Secondary endpoints include safety, overall response rate and duration of response. The dose expansion phase is designed to further characterize the overall response rate, durability of response, and safety of LOXO-292 in predefined groups of patients with activating RET alterations.

The data presented at ASCO were based on an April 2, 2018 data cut-off date.

Eighty-two total patients had been enrolled to eight dose escalation cohorts.

Pharmacokinetic analyses during the dose escalation demonstrated dose-dependent increases in LOXO-292 exposure with increasing dose.

Starting at the 40 mg BID dose and the 80 mg BID dose, respectively, LOXO-292 delivered sustained greater thanIC90 RET fusion and greater thanIC90 RET M918T-mutant target coverage, based on cell-based potencies.

Most treatment-emergent adverse events were Grade 1 in severity. The expansion cohorts of the LIBRETTO-001 trial are now open and enrolling at the 160 mg BID dose. This dose was selected for initial expansion based on its promising activity and tolerability profile.

Additional dose exploration above 160 mg BID is ongoing and patients enrolled to the expansion cohorts may dose escalate should a higher dose be advanced.

ANALYST COMMENTS

Citi analyst Yigal Nochomovitz raised his price target for Loxo Oncology to $235 saying the company is the “star of ASCO.” The analyst now believes LOXO-292 has advanced into an advantageous competitive position in RET fusions. He expects the shares to continue to trade up and keeps a Buy rating on Loxo.

Morgan Stanley analyst Matthew Harrison said he expects Loxo Oncology shares to trade near $200 in the wake of data on LOXO-292 presented at the ASCO meeting that he said “sets a high bar for competitors.” The data positions LOXO-292 to rapidly advance to registration, said Harrison, who raised his market share estimate for LOXO-292 to 70% from 60%, increased his LOXO-292 peak sales estimate to $1B from $700M, and lowered his risk-adjustment, all of which drove his price target on Loxo shares to $215 from $170. He maintains an Overweight rating on Loxo Oncology, which is up 13% to $210.50 in pre-market trading.

JMP Securities analyst Konstantinos Aprilakis said the Phase 1 study data presented on LOXO-292 in patients with RET-altered cancers at the ASCO meeting came in “far above expectations” with respect to both efficacy and safety. Citing the overall response rate in RET fusion cancers of 77%, Aprilakis called the efficacy data “exceedingly impressive” and increased his price target on Loxo Oncology to $221 from $182 following the presentation. Aprilakis maintains his Outperform rating on Loxo shares.


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Merck says KEYTRUDA demonstrated long-term survival benefit

Merck says KEYTRUDA demonstrated long-term survival benefit

Merck says KEYTRUDA demonstrated long-term survival benefit, Stockwinners
Merck says KEYTRUDA demonstrated long-term survival benefit

Merck (MRK) announced long-term efficacy data from the Phase 3 KEYNOTE-006 study and the melanoma cohort of the Phase 1b KEYNOTE-001 study investigating KEYTRUDA, Merck’s anti-PD-1 therapy, in patients with advanced melanoma.

KEYTRUDA is not chemotherapy or radiation therapy—it is an immunotherapy and it works with patient’s immune system to help fight certain cancers. KEYTRUDA can cause immune system to attack normal organs and tissues in any area of your body and can affect the way they work.

A new analysis from KEYNOTE-006 demonstrated durable efficacy benefits among patients who completed two years of KEYTRUDA treatment, combined with updated overall survival results across both studies, confirming anti-tumor activity in advanced melanoma patients.

At a median follow-up of 20.3 months after completion of KEYTRUDA in KEYNOTE-006, 86 percent of patients remained progression-free, the co-primary endpoint for the study.

For the primary endpoint of OS in KEYNOTE-006, the four-year OS rate was 41.7 percent in the pooled KEYTRUDA arms vs. 34.1 percent in the ipilimumab arm; in treatment-naive patients, OS rates were 44.3 percent in the pooled KEYTRUDA arms and 36.4 percent in the ipilimumab arm.

In KEYNOTE-001, the five-year OS rate, a secondary endpoint for the study, was 34 percent in all patients and 41 percent in treatment-naive patients.

The safety profile of KEYTRUDA in both studies was consistent with what has been seen in previous trials among patients with advanced melanoma.

KEYNOTE-006 is a global, open-label, randomized, pivotal, Phase 3 study evaluating KEYTRUDA compared to ipilimumab in patients with unresectable stage III or IV melanoma who had either not been treated previously or who had received a prior targeted therapy for BRAF-mutation positive melanoma/ The study randomized 834 patients to receive KEYTRUDA 10 mg/kg every three weeks, KEYTRUDA 10 mg/kg every two weeks, or four cycles of ipilimumab 3 mg/kg every three weeks.

Treatment continued until unacceptable toxicity or disease progression; patients without disease progression could be treated for up to 24 months.

Upon disease progression, eligible patients could receive an additional one year of KEYTRUDA. The co-primary endpoints were progression-free survival and OS; secondary endpoints were overall response rate, duration of response and safety, with an exploratory analysis for health-related quality of life.

With a median follow-up of 45.9 months, the four-year OS rate was 41.7 percent in the pooled KEYTRUDA arms and 34.1 percent in the ipilimumab arm; investigator-reported ORR was 42 percent and 17 percent, respectively.

Median DOR was not reached for KEYTRUDA or ipilimumab; 62 percent of patients in the KEYTRUDA arms and 59 percent of patients in the ipilimumab arm had a response lasting greater than or equal to 42 months.

In treatment-naive patients, the four-year OS rates were 44.3 percent in the pooled KEYTRUDA arms and 36.4 percent in the ipilimumab arm; ORR was 47 percent and 17 percent, respectively.

Median DOR was not reached for KEYTRUDA or ipilimumab; 65 percent of patients in the KEYTRUDA arms and 68 percent of patients in the ipilimumab arm had a response lasting greater than or equal to 42 months. Per study protocol, 18.5 percent of patients completed two years of KEYTRUDA.

With a median follow-up of 20.3 months 86 percent of patients remained progression-free. Eight patients received second-course KEYTRUDA; three discontinued treatment. Among the eight patients, there was one complete response and three partial responses; three patients had stable disease, while the remaining patient had progressive disease.

KEYNOTE-001 is a Phase 1b multicenter, open-label, multi-cohort trial evaluating KEYTRUDA in various advanced cancers, including 655 patients with advanced melanoma. Patients in the melanoma cohorts received 2 mg/kg or 10 mg/kg of KEYTRUDA every three weeks or 10 mg/kg of KEYTRUDA every two weeks until unacceptable toxicity or disease progression.

The primary endpoint was confirmed ORR. The secondary endpoints included PFS, OS and DOR. After median follow-up of 55 months, 35 patients remained on KEYTRUDA therapy.

The investigator-reported ORR, the primary endpoint for KEYNOTE-001, was 41 percent in all patients and 52 percent in treatment-naive patients.

The estimated five-year OS rate was 34 percent in all patients and 41 percent in treatment naive patients. Median OS was 23.8 months in all patients and 38.6 months in treatment-naive patients. Median PFS was 8.3 months and 16.9 months in all patients and treatment-naive patients, respectively. Median DOR was not reached in all responders and in treatment-naive patients; 73 percent of all responses and 82 percent of treatment-naive responses were ongoing at data cut-off.

The longest response observed in all patients was ongoing at 66 months.

The safety profile of KEYTRUDA was consistent with what has been seen in previously reported studies among patients with advanced melanoma. Treatment-related adverse events occurred in 86 percent of patients including 17 percent with grade 3-4 and eight percent who discontinued.

Twelve percent of patients experienced a serious TRAE including five percent who discontinued treatment. Immune-mediated adverse events and infusion reactions were reported in 23 percent of patients.

Most cases of immune-related adverse events, including hypothyroidism and pneumonitis, were grade 1 or 2. Hypothyroidism was the most commonly reported immune-mediated adverse event, followed by pneumonitis, colitis and skin disorders.

MRK closed at $60.56. It last traded at $61.65.


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Xcerra sold for $796 million

Cohu to acquire Xcerra in cash, stock deal valued around $796M

Xcerra sold for $796 million, Stockwinners
Xcerra sold for $796 million, Stockwinners

Cohu (COHU) and Xcerra (XCRA) announced they have entered into a definitive merger agreement pursuant to which Cohu will acquire Xcerra for a combination of cash and stock.

The acquisition is expected to make Cohu a global leader in semiconductor test, with combined sales for Cohu and Xcerra in excess of $800M for the last twelve months.

Upon the closing of the transaction, Xcerra shareholders will be entitled to receive $9.00 in cash and 0.2109 of a share of Cohu common stock, subject to the terms of the definitive agreement.

Based on the closing price of Cohu common stock as of May 7, 2018, the transaction values Xcerra at $13.92 per share, or approximately $796M in equity value, with a total enterprise value of approximately $627M, after excluding Xcerra’s cash and marketable securities net of the debt on its balance sheet as of January 31, 2018.

The transaction value represents a premium of 8.4% to Xcerra’s closing price on May 7, 2018, and a premium of 15.4% to Xcerra’s 30-day average closing price.

The transaction is expected to be immediately accretive to non-GAAP earnings per share and generate over $20M of annual run-rate cost synergies within 2 years of closing, excluding stock-based compensation and other charges.

Xcerra shareholders are expected to own approximately 30% of the combined company upon the closing of the transaction. The transaction has been unanimously approved by the boards of both companies.

The transaction is expected to close in the second half of calendar year 2018, subject to approval by both companies’ respective shareholders, antitrust regulatory approvals and other customary closing conditions.


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Starbucks receives $7.15 billion from Nestle

Nestle pays $7.15B to Starbucks for rights to sell packaged coffee, tea

Nestle pays $7.15B to Starbucks for rights to sell packaged coffee, Stockwinners
Nestle pays $7.15B to Starbucks for rights to sell packaged coffee,

Starbucks (SBUX) announced it will form a global coffee alliance with Nestle (NSRGY) to “accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods and Foodservice.”

It added, “With a shared commitment to ethical and sustainable sourcing of coffee, this alliance will transform, expand and elevate both the at-home and away-from-home coffee and related categories around the world.” As part of the alliance, Nestle will obtain the rights to market, sell, and distribute Starbucks, Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea in all global at-home and away-from-home channels.

Nestle will pay Starbucks $7.15B in closing consideration, and Starbucks “will retain a significant stake as licensor and supplier of roast and ground and other products going forward.”

Additionally, the Starbucks brand portfolio will be represented on Nestle’s single-serve capsule systems.

The agreement is subject to customary regulatory approval and is expected to close this summer or early fall.

The agreement excludes ready-to-drink coffee, tea and juice products. Starbucks intends to use the after-tax proceeds from the up-front payment primarily to accelerate share buybacks and now expects to return approximately $20B in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020.

Additionally, the transaction is expected to be earnings per share accretive by the end of fiscal year 2021 or sooner, with no change to the company’s currently stated long-term financial targets.


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DCT Industrial Trust sold for $8.4B

Prologis to acquire DCT Industrial Trust for $8.4B

DCT Industrial Trust sold for $8.4B. Stockwinners
DCT Industrial Trust sold for $8.4B. 

Prologis (PLD) and DCT Industrial Trust (DCT) announced that the two companies have entered into a definitive merger agreement by which Prologis will acquire DCT for $8.4B in a stock-for-stock transaction, including the assumption of debt.

The boards of directors of both companies have unanimously approved the transaction.

The transaction is anticipated to create substantial synergies, including near-term synergies of approximately $80M in corporate general and administrative cost savings, operating leverage, interest expense and lease adjustments, which are forecast to increase annual stabilized core funds from operations per share by 6c-8c.

A combination of revenue synergies and incremental development volume has the potential to generate $40M of additional annual revenue and development profit in the future.

Under the terms of the agreement, DCT shareholders will receive 1.02 Prologis shares for each DCT share they own. The transaction, which is currently expected to close in the third quarter of 2018, is subject to the approval of DCT stockholders and other customary closing conditions.

At closing, it is anticipated that Philip L. Hawkins will join the Prologis board of directors.

PLD closed at $66.58.  DCT closed at $58.75.


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Barron’s is bullish on Ensco, bearish on Chipotle

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch,

BULLISH   MENTIONS:

Investors should consider Ensco to benefit from oil-price surge.  Crude-oil prices are set to jump because President Donald Trump is likely to reintroduce harsh sanctions on Iran by mid-May and to benefit from the oil-price surge, investors should consider buying shares in Ensco (ESV), Simon Constable writes in this week’s edition of Barron’s. Other key oil stocks include EOG Resource (EOG), Transocean (RIG), Exxon Mobil (XOM), Halliburton (HAL), ConocoPhillips (COP) and Devon Energy (DVN), he adds.

Netflix may soon pass Disney in Market Value – Any week now, Netflix (NFLX) will surpass in market value Walt Disney (DIS) as investors cheer on the streaming service’s continued subscriber growth, Jack Hough writes in this week’s edition of Barron’s. Investors who buy Disney shares now could have a long wait before they learn whether the streaming push will result in a rebounding price/earnings ratio, but that is where a diversified business model helps, Hough says.

BEARISH  MENTIONS

Chipotle results boosted by potentially short-lived dynamics – Brian Niccol, the new CEO at Chipotle Mexican Grill, got an “enormous” endorsement on Thursday, as shares of the restaurant chain soared 24%, Avi Salzman writes in this week’s edition of Barron’s. But Salzman is still skeptical that investors should buy the rebound. The first-quarter report was boosted by several dynamics that could be short-lived, he argues, adding that even with those results, it is hard to “make a queso” for Chipotle tripling earnings.


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Alexion Pharmaceuticals announced positive topline results of ALXN1210

Alexion says Phase 3 ALXN1210 study shows patients can be switched from Solirs 

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Alexion Pharmaceuticals  announced “positive” topline results of a Phase 3 study of ALXN1210

Alexion Pharmaceuticals (ALXN)  announced “positive” topline results of a Phase 3 study of ALXN1210, the company’s investigational long-acting C5 complement inhibitor, which show that patients with paroxysmal nocturnal hemoglobinuria “can be effectively and safely switched from treatment with Soliris every two weeks to treatment with ALXN1210 every eight weeks.”

The study demonstrated non-inferiority of ALXN1210 to #Soliris in patients with PNH who had been stable on Soliris based on the primary endpoint of change in lactate dehydrogenase levels, a direct marker of complement-mediated hemolysis in PNH, the company said.

It adds that the study also demonstrated non-inferiority on all four key secondary endpoints: the proportion of patients with breakthrough hemolysis, the change from baseline in quality of life as assessed via the Functional Assessment of Chronic Illness Therapy-Fatigue Scale, the proportion of patients avoiding transfusion, and the proportion of patients with stabilized hemoglobin levels.

In addition, numeric results for all five endpoints favored ALXN1210. Notably, no patients treated with ALXN1210 experienced breakthrough hemolysis compared to five patients treated with Soliris, Alexion said.

It noted that ALXN1210 was generally well tolerated with a safety profile that is consistent with that seen for Soliris. “Once again ALXN1210 met the high bar set by Soliris in a second, large Phase 3 study.

Importantly, we now have robust data that patients with PNH can effectively and safely transition from Soliris to ALXN1210,” said John Orloff, M.D., Executive Vice President and Head of Research & Development at Alexion.

“We are very pleased that the totality of the Phase 3 PNH data in more than 440 patients, which included patients who had never received a complement inhibitor and patients who were stable on Soliris and switched to ALXN1210, shows numeric results favoring ALXN1210 across all primary and key secondary endpoints, including breakthrough hemolysis.

We believe that the differentiated profile of ALXN1210 could be a meaningful improvement for patients and clinicians and look forward to moving rapidly to global regulatory filings in the U.S. and EU in mid-2018, followed by Japan later in the year.”


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Vertex initiates Phase 3 studies of its cystic fibrosis drugs

Vertex initiates Phase 3 studies of VX-445, Tezacaftor, and Ivacaftor

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Vertex initiates Phase 3 studies of VX-445, Tezacaftor, and Ivacaftor

Vertex Pharmaceuticals (VRTX) announced that it is initiating two Phase 3 studies of VX-445, tezacaftor and ivacaftor as an investigational triple combination regimen for people with cystic fibrosis.

The first Phase 3 study will evaluate approximately 360 people with CF who have one copy of the F508del mutation and one minimal function mutation and is designed to support the submission of a New Drug Application in the U.S. using data from the study’s 4-week primary efficacy endpoint together with safety data through 12 weeks of treatment.

The second Phase 3 study will evaluate approximately 100 people with CF who have two copies of the F508del mutation, the most common genetic form of the disease, and is designed to support the submission of an application for approval in patients with two copies of the F508del mutation in the U.S. using data from the study’s 4-week primary efficacy endpoint together with 24-week safety data generated from the Phase 3 study in patients with one F508del mutation and one minimal function mutation.

The initiation of the study in people with two copies of the F508del mutation is supported by data announced today from a Phase 2 study that showed an incremental mean absolute improvement in percent predicted forced expiratory volume in one second of 11.0 percentage points from baseline through week four of treatment when VX-445 was added in people with CF who have two F508del mutations and were already receiving tezacaftor in combination with ivacaftor.

In the Phase 2 study, the VX-445 triple combination regimen was generally well tolerated, and the majority of adverse events were mild to moderate in severity.

VRTX closed at $158.81.


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Wabtec higher on potential GE Transportation deal

Wabtec rises as analyst says buy on potential GE Transportation deal

Wabtec higher on potential GE Transportation deal, Stockwinners
Wabtec higher on potential GE Transportation deal, Stockwinners

Shares of Wabtec (WAB) are on the rise after Stifel analyst Michael Baudendistel upgraded the stock to Buy following a media report saying the company was in discussions to acquire GE Transportation from General Electric (GE).

Also commenting on the deal, Stephens analyst Justin Long told investors the transaction could be a significant catalyst for Wabtec.

POTENTIAL GE TRANSPORTATION SALE

On Friday, Bloomberg reported that General Electric was in talks to sell its century-old locomotive business to rail-equipment maker Wabtec.

The transportation unit could be worth as much as $6.8B in a sale, the report noted, adding that a deal has not been reached and talks may still fall apart. GE may also pursue an initial public offering or other strategic option for the business, sources said.

BUY WABTEC

In a research note to investors, Stifel’s Baudendistel upgraded Wabtec to Buy from Hold, while raising his price target on the stock to $99 from $75, citing Bloomberg’s report on a potential acquisition of GE Transportation.

While acknowledging that a standalone IPO or an acquisition by a machinery company are also possibilities, the analyst argued that a deal would be transformative for Wabtec.

Further, Baudendistel pointed out that he believes there is strategic rationale for the deal and the possibility improves his perspective on the reward-to-risk ratio for the shares. Wabtec would be buying the business at a cyclical low point, he contended.

Additionally, the analyst noted that Wabtec’s recent results have improved on growth in the aftermarket revenue, an area that held back 2017 results.

‘SIGNIFICANT’ CATALYST FOR WABTEC

Meanwhile, Stephens’ Long told investors in a research of his own this morning that he is “a bit surprised” by the news given the potential size of the transaction, which he estimates to be around $8B.

That said, the analyst noted he thinks it would be a “great strategic fit” primarily due to GE Transportation’s services business that features technologically advanced rail-related products.

Additionally, Long believes the deal could be “highly accretive” to Wabtec earnings per share, with his “best guess” putting the deal probability at over 50%. The analyst reiterated an Overweight rating on Wabtec’s shares.

PRICE ACTION

In Monday’s trading, shares of Wabtec have gained almost 2% to $88.98, while General Electric’s stock has advanced about 1% to $14.62.


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Generic drug makers tumble on pricing

Generic drug makers under pressure following Aceto, Novartis news

Generic drug makers tumble on pricing, Stockwinners
Generic drug makers tumble on pricing

On Wednesday, Aceto (ACET) withdrew its guidance, citing the continued intense competitive and pricing pressures in the generic industry.

On Thursday, Novartis (NVS) reported that net sales at its generic unit Sandoz dropped 4% in the quarter.

Following both announcements, Wells Fargo analyst Davis #Maris told investors that he is not ready to call the bottom in generics pricing and sees a negative read-through for companies with large U.S. commodity generic exposure, such as Teva (TEVA) and Mylan (MYL).

Generic drug makers tumble on pricing, Stockwinners
Generic drug makers tumble on pricing, Stockwinners

GUIDANCE SUSPENSION, DIVIDEND REDUCTION

Last night, Aceto’s chairman Al Eilender said, “Given continued headwinds in the generics market, the Board has taken decisive action by bolstering the company’s senior leadership, engaging in proactive discussions with its secured lenders, and initiating a thorough evaluation of strategic alternatives.

” Strategic alternatives to be considered may include the sale of a key business segment, a merger or other business combination with another party, continuing as a standalone entity or other potential alternatives.

The company’s Board also anticipates a significant reduction of its dividend going forward and announced the appointment of Rebecca Roof as Interim CFO and the resignation of CFO Edward Borkowski, who has decided to pursue another opportunity.

Additionally, Aceto said that, in light of the persistent adverse conditions in the generics market, it is negotiating with its bank lenders a waiver of its credit agreement with respect to its total net leverage and debt service coverage financial covenants in the fiscal third quarter, and that the financial guidance issued on February 1, should no longer be relied upon.

The company also anticipates recording non-cash intangible asset impairment charges, including goodwill, in the range of $230M-$260M on certain currently marketed and pipeline generic products as a result of continued intense competitive and pricing pressures.

NOVARTIS RESULTS

This morning, Novartis reported first quarter core earnings per share of $1.28 and revenue of $12.69B, with consensus at $1.29 and $12.57B, respectively. The company also announced Sandoz net sales of $2.5B in the first quarter as 6 percentage points of price erosion, mainly in the U.S., were partly offset by volume growth of 2 percentage points. U.S. sales declined 18% mainly due to continued competitive pressure, the company added.

NEGATIVE READ-THROUGH

In a research note this morning, Wells Fargo’s Maris told investors that he thinks Aceto and Sandoz’s news show that the data continues to be negative for U.S. generic industry pricing. He sees a negative read-through for companies with large U.S. commodity generic exposure, such as Teva and Mylan.

Further, the analyst noted that he is not yet ready to call the bottom in generics pricing and believes those that have are “premature.”

WHAT’S NOTABLE

Citing a rapid degradation of the company’s asset-light business model in the wake of continued pressures for commoditized generics, Canaccord analyst Dewey Steadman downgraded Aceto two notches to Sell from Buy.

The company’s core human health business has been under significant pressure and has been unable to swiftly adapt to market conditions, he added. The analyst also lowered his price target on the shares to $2 from $10.

PRICE ACTION

In Thursday’s trading, shares of Aceto have plunged almost 62% to $2.85, while Novartis’ stock has dropped about 3% to $79.25. Also lower, shares of Teva and Mylan have slipped 2.5% and 0.25%, respectively.


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Amazon higher on Prime members

Amazon rises as Prime reaches 100M paid members

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Amazon higher on Prime members

Amazon’s (AMZN) CEO Jeff Bezos told investors that the company has exceeded 100M paid members globally and has shipped more than 5B items with Prime worldwide.

The good news for the e-commerce giant may not end there, as Morgan Stanley analyst Brian Nowak told investors that his analysis shows that Amazon has gained 1.5% of U.S. apparel market share in 2017 and may achieve number one U.S. apparel market share in 2018 as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

100M PAID MEMBERS

According to a regulatory filing, Amazon said that it has exceeded 100M paid Prime members globally 13 years post-launch.

In 2017, Amazon shipped more than 5B items with Prime worldwide, and more new members joined Prime than in any previous year — both worldwide and in the U.S., the company said, adding that members in the U.S. now receive unlimited free two-day shipping on over 100M different items. The company expanded Prime to Mexico, Singapore, the Netherlands, and Luxembourg, and introduced Business Prime Shipping in the U.S. and Germany.

Additionally, CEO Jeff Bezos informed shareholders that Amazon Music now has tens of millions of paid customers, with Amazon Music Unlimited expanding to more than 30 new countries in 2017.

GAINING APPAREL MARKET SHARE

In a research note to investors this morning, Morgan Stanley’s Nowak said his analysis shows that Amazon gained 1.5% of U.S. apparel market share in 2017, largely at the expense of department stores.

According to his work around Amazon’s apparel gross merchandise value, the analyst estimates the e-commerce giant continues to be the second largest U.S. apparel retailer, trailing only Walmart (WMT), as the company has grown to about 7.9% of the overall U.S. apparel market, excluding shoes, or $21.1B apparel gross merchandise value.

Further, #Nowak told investors he expects Amazon to achieve the number one spot in 2018, as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

The analyst pointed out that Amazon’s 2017 share gains look to have come largely at the expense of department stores, estimating Sears (SHLD), Macy’s (M) and J.C. Penney (JCP) lost 0.8% share in 2017, with shareholding remaining roughly flat for Target (TGT) and Kohl’s (KSS).

L Brands (LB) lost share due to the elimination of its swimwear and apparel categories, he contended.

Additionally, his U.S. apparel market deep-dive indicated that Walmart and Costco (COST) showed “impressive gains” despite a weak industry backdrop. Among the Softline retailers, Gap’s (GPS) Old Navy, Ross Stores (ROSS) and Nordstrom’s (JWN) Nordstrom Rack also added 10-15 bps of market share in 2017, he added.

Nowak reiterated an Overweight rating and $1,550 price target on Amazon shares.

PRICE ACTION

In Thursday’s trading, shares of Amazon have gained 2% to $1,554.90.


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