Insys Therapeutics sued by N. Carolina

N. Carolina AG Stein files lawsuit against Insys Therapeutics over Subsys

N. Carolina files lawsuit against Insys. Stockwinners.com
N. Carolina files lawsuit against Insys Therapeutics 

North Carolina Attorney General Josh Stein filed a lawsuit against drug manufacturer Insys Therapeutics (INSY) alleging an extensive scheme involving kickbacks, deception and fraud in marketing its drug #Subsys.

Subsys is a spray form of the synthetic opioid fentanyl, which is approximately 50 times stronger than heroin and 100 times more potent than morphine.

Subsys is approved only for adult cancer patients who are already on round-the-clock opioids for pain, but experience additional, breakthrough pain and for whom no other pain medications are effective.

The lawsuit alleges that Insys gave illegal kickbacks to doctors for promoting and prescribing Subsys for non-cancer patients, including through a multi-million dollar speaker program that rewarded physicians who wrote prescriptions for the drug.

Insys employees also allegedly pushed doctors to switch patients who were being prescribed non-equivalent fentanyl prescriptions to Subsys, and often at a starting dose of up to twelve or sixteen times larger than the label directed.

Finally, the suit alleges that Insys deceived health insurers into covering Subsys prescription claiming Insys employees often posed as prescribers or their staff and invented medical histories for patients to ensure the drug would be covered.

Only about 10% of prescriptions for which Insys sought prior authorization from insurers were for patients with breakthrough cancer pain, the only use the FDA had approved.

INSY is down 18 cents to $7.02.


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Shares of Shopify Spooked by Short Sellers

Shopify seeks to defend against short-seller after earnings beat

shop shares spooked by short-sellers. See Stockwinners.com for details

Shares of Shopify (SHOP) dropped in Tuesday’s trading despite the company posting quarterly results that beat analysts’ expectations.

The company continued to defend itself against criticism of short-seller Andrew Left, who has accused the company of being the “hottest new get rich quick scheme on the internet” and “a business dirtier than Herbalife (HLF).”

EARNINGS BEAT

Shopify, a Canadian retail software company, Tuesday morning reported third quarter adjusted earnings per share of 5c on revenue of $171.5M, exceeding analysts’ estimates calling for a loss per share of (1c) on revenue of $165.6M.

Subscription Solutions revenue was up 65% to $82.4M, Shopify said.

Shopify raised its fiscal year 2017 revenue view to $656M-$658M from $642M-$648M, above analysts’ estimates of $648.3M, and forecast fourth quarter revenue to be $206M-$208M, also above the $203.7M consensus.

SHOPIFY AND ANDREW LEFT

Andrew Left, a short-seller who founded Citron Research, published a report on Shopify earlier this month claiming shares “should be down 45% immediately….and that is before the company is caught by the FTC.”

According to Left’s report, Shopify “hides under the shroud of a cloud based e-commerce solution for Small and Medium sized Business,” but is actually the “promoter of the hottest new get rich quick scheme on the internet,” and he believes the FTC “will take notice.”

Additionally, Citron called Shopify “a business dirtier than $HLF [Herbalife],” which has been the target of FTC scrutiny and a well-publicized short held by Bill Ackman.

Left told Reuters a week later that he will “most likely” issue a follow-up report and that he is “looking at many parts” of Shopify’s business.

On its quarterly earnings conference call this morning, Shopify defended itself against Left’s claims, with CEO Tobias Lutke, who has previously called Left a “short-selling troll,” denying his “preposterous,” “unsubstantiated” claims.

“We don’t sell business opportunities — we sell a commerce platform,” Lutke told analysts and investors, adding that Shopify fully complies with FTC rules. Lutke also said the company has not been contacted by the FTC regarding Left’s criticisms.

RESPONSE to EARNINGS

Citron Research posted a response to Shopify’s conference call comments, stating in part: “We have no interest in going back and forth with Shopify, we are releasing this commentary as a response to the numerous media requests we have received. Citron understands Shopify’s platform is effective for small and medium sized businesses to launch e-commerce platforms. We never doubted they have good software for accomplishing this task. That being said, we were unimpressed by the company’s response to Citron’s conclusion that Shopify sells business opportunities through affiliate marketers, and they depend on affiliate marketing to drive their growth metrics. It is impossible to understand the real strength of Shopify’s core business without getting specifics of their true customer acquisition cost. To accomplish that, churn needs to be analyzed, so investors can discount or strip out the dirty/illegal part of their business that will inevitably be curbed by regulators. Immaturity and hubris of management prevents them from addressing these issues…Citron has assembled a comprehensive folder, which we have forwarded to the FTC, and we are certain that the company will face an investigation for selling business opportunities.”

PRICE ACTION

Shopify shares trading in New York are down over 11% to $97.22. SHOP has a 52-weeks trading range of $37.74 – $123.94.


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Wayfair Sinks on Short-Seller Report

Wayfair sinks after Citron highlights academic paper with $10.24 valuation

Wayfair sinks after Citron highlights academic paper with $10.24 valuation. See Stockwinners.com for details

Shares of Wayfair (W) are lower after short seller Citron Research highlighted on Twitter an academic paper on the company’s valuation.

The paper states, “We begin by applying the proposed customer-based valuation methodology to data from Overstock (OSTK), an e-commerce retailer selling a wide assortment of products.

We validate the model’s fit, compare the results to alternative methodologies, estimate Overstock’s valuation, then obtain a valuation distribution which accounts for uncertainty in the fitted model parameters. We then apply the methodology to data from Wayfair, a large and fast-growing internet-based home goods seller.”

The paper’s authors, Daniel McCarthy and Peter Fader, estimate that Overstock earned approximately $9 per acquired customer, while Wayfair incurred a loss of approximately $10 per customer in Q1 of 2017.

They write, “While we anticipate that the unit economics of Wayfair’s newly acquired customers will improve in the future as their variable contribution margin is expected to expand, challenging unit economics are a reality for the business, and are an important driver behind their relatively modest valuation.”

They estimate a valuation for Overstock of $16.88 per share and a fair valuation for Wayfair of $10.24 per share.

For Wayfair, the writers explain, “We project revenues over the next 50 years to drive our model for Wayfair’s overall valuation. We assume the long-term growth rate of the labor forces in Canada, the UK, and Germany are equal to their historical averages of 1.2%, 0.9%, and 0.4%, respectively.”

On Twitter, Citron wrote, “Smartest piece EVER written on $W. Not by a short or long. By a team of Ivy League scientists who specialize in predictive models. $10 tgt…Cannot argue with this analysis- target $10 Smarter work than ANYONE on Wall Street has ever done on Wayfair.”

The firm has disclosed publicly in the past a short position in Wayfair.

The online retailer in Friday’s trading is down 7%, or $6.04, to $75.71.


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Otonomy Collapses Following its Drug Failure

Otonomy to immediately suspend all development activities for OTIVIDEX

Otonomy seen rallying up to 95% on positive Meniere's disease data. See Stockwinners.com Market Radar to learn more

Otonomy (OTIC) announced results for its AVERTS-1 Phase 3 clinical trial of OTIVIDEX in patients with Meniere’s disease. The #AVERTS-1 trial was a 16-week, prospective, randomized, double-blind, placebo-controlled trial that enrolled a total of 165 patients with unilateral Meniere’s disease in the United States.

The clinical trial missed its primary endpoint which was the count of definitive vertigo days by Poisson Regression analysis. Patients in both the OTIVIDEX and placebo groups showed similar reductions in the number and severity of vertigo episodes during the three month observation period.

OTIVIDEX patients reported a 58% reduction from baseline in vertigo frequency in Month 3 vs. 55% for placebo patients.

“We are greatly disappointed by these results, and surprised by both the higher placebo response and lower OTIVIDEX improvement than observed in our previous trials.

I would like to thank the many patients and investigators who participated in our Meniere’s clinical program,” said David Weber, Ph.D., president and CEO of Otonomy.

“Based on these results, we are immediately suspending all development activities for OTIVIDEX including the ongoing AVERTS-2 trial.

In addition, the company is undertaking a review of its product pipeline and commercial efforts to identify opportunities to extend its cash runway and build shareholder value.”

As of June 30, 2017, the company held cash, cash equivalents, and short-term investments totaling $150.5M with prior non-GAAP operating expense guidance of $80M-85M for 2017.

The company is withdrawing the spending guidance for the year pending the above-mentioned review.

Note that on August 15th, JPMorgan analyst Anupam Rama gave the drug a 70% chance of approval, and a $28 target price on the stock. OTIC closed at $20.80, last traded at $4.50.


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March to the End Continues

Sears announces plans to close another 28 Kmarts as SSS drop 11.5%

Sears jumps after announcing latest licensing deals for Kenmore, DieHard brands. See Stockwinners.com Market Radar for details

Shares of Sears Holdings (SHLD) gained in Thursday’s trading after the company’s results were better than analysts were expecting despite a decline in comparable store sales. Sears also announced plans to close an additional 28 Kmart stores.

EARNINGS

Before the market open, Sears reported an adjusted loss per share for the second quarter of ($1.16), which beat analysts’ ($2.48) consensus. Revenue for the quarter of $4.365B also beat estimates of $4.21B, but comparable store sales declined 11.5%.

Kmart comparable store sales decreased 9.4%, with a 6.8% decline excluding the impact of the consumer electronics and pharmacy categories, while Sears comparable store sales declined 13.2%, with a 12.1% decline excluding consumer electronics category, the company said.

Sears said in a statement that the retail environment “remained challenging” in the quarter, noting softness in store traffic and elevated price competition.

Chairman and CEO Edward Lampert said that the third quarter has historically been Sears’ most difficult quarter over the past few years, the company is “encouraged” that July was the best month of the quarter in terms of SSS performance.

COST-CUTTING  EFFORTS

#Lampert said the company is making “significant” progress in its restructuring program. Earlier this year, Sears said there was “substantial doubt” related to its ability to continue as a going concern. The company cited its cost cutting efforts, as well as debt financing actions in the filing.

In May, Sears reported a smaller than expected quarterly loss, saying that while Q1 was challenging, it was committed to returning to “solid financial footing.”

Sears has been trying to cut costs by closing stores, and said that so far this year, it has closed about 180 stores previously announced for closure and an additional 150 stores previously announced for closure are expected to be closed by the end of the third quarter.

Additionally, Sears announced plans today to close an additional 28 Kmart stores “later this year.” Sears said on its earnings call that it is “committed” to evaluating strategic options across its real estate portfolio to unlock value, including in-store partnerships and sub-division opportunities.

WHAT’S  NOTABLE

Earlier this week, Sears signed two licensing agreements intended to expand the reach of its Kenmore and DieHard brands internationally. The licensing deals followed Sears’ recent decision to launch a Kenmore dedicated brand presence on Amazon.com (AMZN).

The Kenmore appliance brand page went live on Amazon last week, marking Amazon’s first and only dedicated brand page for home appliances.

The company also announced the integration of the full line of Kenmore Smart appliances with Amazon Alexa.

RETAIL  ENVIRONMENT

Additionally, Sears and other mall-based retailers and department stores have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping on sites such as Amazon.

Macy’s (M), Kohl’s (KSS) both recently reported declining quarterly comp sales, though Kohl’s EPS and revenue narrowly beat estimates.

J.C. Penney (JCP) reported a larger than expected loss for the latest quarter, with its comp sales dropping 1.3%.

Nordstrom (JWN) said in June that members of its founding family formed a group to explore the possibility of pursuing a “going private” transaction, but WWD recently said that the retailer is not in negotiations with “anybody” regarding a potential sale.

PRICE ACTION

Shares of Sears are up almost 6% to $9.05 in late morning trading. Following the merger of Kmart and Sears a few years ago, SHLD traded at $100+ per share. Since the merger, shares have drifted lower, toward zero, as Lampert is dismantling the company and selling it piece by piece. He started with selling the real estate assets and now DieHard and Kenmore are sold.


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Depomed Tumbles on Results, Downgrades

Analyst says sell Depomed as challenging opioid environment seen persisting

Depomed Tumbles on Results, Downgrades. See Stockwinners.com Market Radar to read more.

Shares of Depomed (DEPO) are plunging after the company reported weaker than expected second quarter results and lowered its guidance. Reacting to the announcement, Janney Capital and Morgan Stanley downgraded the stock to Neutral and Underweight, respectively.

RESULTS

Last night, Depomed reported second quarter earnings per share of 8c, which was below consensus of 9c, and announced revenue of $100M for the quarter, beating the expected $99.42M. The company also said it sees 2017 revenue of $400M-$415M, compared to consensus of $418M and the company’s prior view of $410M-$430M issued in May.

MOVING TO THE SIDELINES

In a post-earnings note to investors, Janney Capital analyst Ken Trbovich downgraded Depomed to Neutral from Buy after another “disappointment.” While the company had pre-released second quarter results just weeks ago and had reaffirmed its full year guidance, Depomed surprised by lowering its full-year outlook for revenues and raising its expense guidance, the analyst pointed out.

#Trbovich noted that the revised guidance seems to be an admission that the challenges facing its business are far greater to overcome than fixing the sales force realignment implemented by the prior CEO.

Further, the analyst argued that the new CEO’s hope for demonstrating separation for negative industry trends for opioids by year-end has been replaced by the possibility it happens sometime next year. He also cut his fair value estimate on the stock to $8 from $18.

SELL DEPOMED

Meanwhile, Morgan Stanley analyst David #Risinger downgraded Depomed this morning to Underweight, a sell-equivalent rating, as he fears it will continue to underperform given pressures on the company’s number one franchise, Nucynta, an opioid for pain.

The analyst pointed out that opioid prescription market declines are driving lower Nucynta sales than expected, even though it has gained some market share. Government officials have been voicing increasing concerns about the opioid crisis in America, and they are intent on driving use down, Risinger said, adding that it appears that Nucynta will continue to be under pressure.

Moreover, the analyst highlighted that IMS prescription market trends indicate that short-acting opioids are declining 8% year over year and long-acting opioids are declining 11% year over year. While saying it is unclear if new management appointed earlier this year and the company’s board can unlock value, Risinger noted he learned that activist board member Gavin #Molinelli of #Starboard will shift from the Board Member seat he assumed in March 2017 to “Board Observer” on August 15.

He also lowered his price target on Depomed’s shares to $5 from $12.

OPIOID ENVIRONMENT

On June 8, Depomed and Insys Therapeutics (INSY) were under pressure after the Food and Drug Administration requested that Endo Pharmaceuticals (ENDP) remove its opioid pain medication, reformulated Opana ER, from the market. After careful consideration, the agency is seeking removal based on its concern that the benefits of the drug may no longer outweigh its risks, the FDA stated. This was the first time the agency has taken steps to remove a currently marketed opioid pain medication from sale due to the public health consequences of abuse.

PRICE ACTION

In Tuesday morning trading, shares of Depomed dropped $3.01, or 32.5%, to $6.22.

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FDA Issues Tobacco Regulations

FDA ‘providing targeted relief’ on some tobacco regulation timelines

FDA announces new 'comprehensive plan' for tobacco, nicotine regulation. See Stockwinners.com Market Radar

The U.S. Food and Drug Administration announced a new comprehensive plan for tobacco and nicotine regulation that will serve as a multi-year roadmap to better protect kids and significantly reduce tobacco-related disease and death.

As part of the plan, the agency is also providing targeted relief on some timelines described in the May 2016 final rule that extended the FDA’s authority to additional tobacco products.

The agency intends to extend timelines to submit tobacco product review applications for newly regulated tobacco products that were on the market as of Aug. 8, 2016. This action will afford the agency time to explore clear and meaningful measures to make tobacco products less toxic, appealing and addictive.

The agency plans to issue this guidance describing a new enforcement policy shortly.

The approach places nicotine, and the issue of addiction, at the center of the agency’s tobacco regulation efforts.

Under expected revised timelines, applications for newly-regulated combustible products, such as cigars, pipe tobacco and hookah tobacco, would be submitted by Aug. 8, 2021, and applications for non-combustible products such as ENDS or e-cigarettes would be submitted by Aug. 8, 2022.

Additionally, the FDA expects that manufacturers would continue to market products while the agency reviews product applications.

WHAT’S NEW

The FDA announced a new comprehensive plan for tobacco and nicotine regulation that will serve as a multi-year roadmap to “better protect kids and significantly reduce tobacco-related disease and death.”

The approach shifts focus to nicotine and the issue of addiction as the center of the agency’s tobacco regulation efforts. The aim, according to the agency, is to ensure that the FDA has the proper scientific and regulatory foundation to efficiently and effectively implement the Family Smoking Prevention and Tobacco Control Act.

Commenting on the matter, FDA commissioner Scott Gottlieb said, “Unless we change course, 5.6M young people alive today will die prematurely later in life from tobacco use. Envisioning a world where cigarettes would no longer create or sustain addiction, and where adults who still need or want nicotine could get it from alternative and less harmful sources, needs to be the cornerstone of our efforts – and we believe it’s vital that we pursue this common ground.”

TOBACCO STOCKS FALL

Publicly traded companies in the tobacco products space include Altria Group (MO), British American Tobacco (BTI), Philip Morris (PM) and Reynolds American (RAI). Altria Group is down 5% on the news.

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Chipotle Tumbles as Health Woes Continue

Chipotle Mexican Grill shuts Virginia restaurant down after reports of illnesses

Chipotle Mexican Grill spokesman Chris Arnold says the company is aware of a "small number" of illnesses linked to a store in Sterling, Virginia

Chipotle has shut down a location in Sterling, Virginia, after eight reports were made to the website iwaspoisoned.com stating that at least 13 customers fell sick after eating there from July 14-15, according to Business Insider.

The company’s executive director of food safety, Jim Marsden, told Business Insider: “We are working with health authorities to understand what the cause may be and to resolve the situation as quickly as possible.

The reported symptoms are consistent with #norovirus. #Norovirus does not come from our food supply, and it is safe to eat at Chipotle.”

Norovirus is different from E. coli, the bacteria that led to a widespread outbreak at Chipotle restaurants in 14 states two years ago.

Cases of norovirus stemming from restaurants can often involve a worker who failed to wash his or her hands after going to the bathroom.

The virus is highly contagious and causes symptoms like stomachaches, nausea, diarrhea, and vomiting. It’s the most common cause of food-borne illnesses in the US with more than 21 million cases annually.

Chipotle (CMG) has dealt with norovirus cases in the past. In December 2015, nearly 120 Boston College students fell sick after a norovirus outbreak at a restaurant close to campus.

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Stocks to Watch – Beleaguered Signet Jewelers Names New CEO

Amid recent struggles and sexual harassment allegations, Signet Jewelers names new female CEO

 

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Shares of Signet Jewelers (SIG) are in focus in morning trading after the company said Chief Executive Officer Mark Light would be succeeded by named Virginia Drosos on August 1.

The appointment comes after the company reported quarterly earnings below expectations in May, disclosed the resignation of its COO, announced plans to outsource its credit portfolio and faced sexual harassment allegations.

CEO APPOINTMENT

Signet, the owner of Zale and Kay Jewelers, announced this morning that Mark Light, who has served as CEO of Signet since 2014, has decided to retire after more than 35 years with the company due to health reasons. Signet’s board of directors has appointed Virginia “Gina” Drosos, who has served as an independent director of the company’s board since 2012, as the company’s new CEO. Drosos has over 29 years of executive leadership experience in the beauty and consumer goods industries, most recently serving as president and CEO of Assurex Health, Signet said in a statement.

RECENT COO RESIGNATION, DISAPPOINTING EARNINGS AND OTHER WOES

Light’s departure follows the recent resignation of Chief Operating Officer Bryan Morgan due to violations of company policy “unrelated to financial matters.”

Additional details regarding Morgan’s resignation have not been reported. In January, Signet announced several senior organizational changes to drive growth, including promoting Morgan to COO from executive vice president, Supply Chain Management and Repair.

In May, Signet, which has been struggling with declining revenue over the past four quarters as demand for its jewelry has weakened, reported first quarter earnings that fell below analysts’ expectations. Light said at the time that Signet had a “very slow start” to the year as headwinds in the overall retail environment were exacerbated by a slowdown in jewelry spending and company-specific challenges.

Additionally, Signet announced plans to outsource its credit portfolio. The company has also said it would step up efforts to restore its reputation following allegations of sexual harassment at its Sterling Jewelers unit and diamond swapping allegations.

In May, Signet said it reached an agreement with the EEOC to resolve claims related to pay and promotion of female retail sales workers.

Signet has said allegations of sexual harassment have no merit, calling them “distorted and inaccurate.”

PEERS IN THE NEWS

Other publicly traded retailers of fine jewelry include Tiffany & Co (TIF), which in May reported quarterly sales that fell below analysts’ forecasts as well as a decline in comparable store sales.

Last week, Tiffany named Alessandro Bogliolo, who spent 16 years at Bulgari SpA and once served as that company’s COO, as its new CEO. Bogliolo is expected to take over as Tiffany’s CEO by October 2, the company said, and he will also join the company’s board.

The company increased the size of its board of directors earlier this year, adding three independent directors and ousted former CEO Frederic Cumenal in February following pressure from activist investor JANA Partners amid declining sales and profits.

PRICE ACTION

Signet (SIG) shares are down roughly 1.9% to $58.764 in Monday’s trading. Shares are down nearly 37% year-to-date.

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