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Arena Pharmaceuticals, Inc. Message Board

bearofbleecker 358 posts  |  Last Activity: 10 hours ago Member since: Jul 27, 2000
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  • Reply to

    There is not enough panic right now

    by scottmmoore826 Feb 7, 2015 12:14 PM
    bearofbleecker bearofbleecker Feb 7, 2015 12:22 PM Flag

    I gather that in wishing for a 13% share price decline, you smart investors do not yet own GILD.

  • bearofbleecker bearofbleecker Feb 7, 2015 12:29 PM Flag

    There used to be a feature on SA which disclosed the credentials of the authors. I seldom visit it anymore because I don't find much useful analysis there. ( Anyway, it always seemed to me that some of the most worthwhile posts there were by the civilians, rather than by those with a background in finance.) Importantly, the SA posters are paid per view, so it makes sense to post articles supportive of the retail investor's viewpoint. I recall that as ARNA sank slowly into the sunset, the only longs who were making money on it were those who posted pump pieces on SA.

  • Today's Barron's has a feature article by Jack Hough, "Abbie Vie: Big Pharma at a Discount Price". Hough argues for a higher valuation for ABBV, based on its relatively low p/e, pipeline potential, and, surprisingly, the prospect that the expected decline in Harvoni sales can be partly replaced by new revenue from Viekira. He projects Viekira peak revenues of $3.4B next year, eventually sliding to $2.6B by 2019. This seems to be wildly out of line with the Credit-Suisse analyst's projections for the entire HCV market. C-S has slashed their projections for GILD's 2019 HCV revenues from $12.56B to $9.2B. This is based upon gradually declining prices and increased competition, mostly from MRK rather than ABBV. If C-S is correct, then Hough's figures mean that ABBV would have market share in 2019 equivalent to 28% of GILD's, which seems farfetched to me. If things follow true to form, the Barron's article should result in a modest pop for ABBV tomorrow - perhaps a more sizable pop if traders use it as an opportunity to attack shorts. This might be an opportune point to exit for some.

  • Reply to

    Just reread the Crdit Suisse report

    by hopalong_hooha Feb 7, 2015 12:43 PM
    bearofbleecker bearofbleecker Feb 7, 2015 2:54 PM Flag

    Credit-Suisse's price targets for GILD had been modest until 2013 -- often below the price that the stock was trading for at the time. The imminent launch of Sovaldi and Harvoni caused them to become more sanguine. In Nov '13, with the stock at 71.08, they raised their pt to 90. In Dec '13 (just a month later), with the stock at 72.81, they raised it again to 110. In Oct.'14, with the stock at 113.45, they raised their pt to 130. Now, with the stock at around 100, they have lowered their pt to 115. They base this on 13.8x their 2016 estimate of $8.31 eps. Interestingly, they project eps peaking at $8.42 in 2015 before declining to $8.31 in 2016 and $8.16 in 2017. The decline in eps would have been steeper if they had not included the effect os share buybacks. They revised their estimates for HIV revenues upward over those years by 4%(although still projecting HIV revenues to gradually drop), and increased their estimates for "other" lines by 11%.

  • Reply to

    Just reread the Crdit Suisse report

    by hopalong_hooha Feb 7, 2015 12:43 PM
    bearofbleecker bearofbleecker Feb 7, 2015 3:03 PM Flag

    Some of the confusion here may be due to the fact that before their downgrade, C-S had issued a report immediately after earnings, which maintained the price target of 130, based on 14.1x 2016 eps estimate of $9.21.

  • Reply to

    GILD Clear runway for the next 2 years

    by a_longhaul Feb 7, 2015 2:49 PM
    bearofbleecker bearofbleecker Feb 7, 2015 3:08 PM Flag

    Whatever you think of his analysis, Mehrota, the C-S analyst, is a star at the moment. He said what no one else had said - at least publicly - and he moved the stock.

  • Reply to

    GILD Clear runway for the next 2 years

    by a_longhaul Feb 7, 2015 2:49 PM
    bearofbleecker bearofbleecker Feb 7, 2015 4:06 PM Flag

    I think other reductions in estimates will follow, in effect justifying the move downward in most of the price targets. But I'll be curious to see how those who moved their price targets up rationalize it. We should note that the Credit-Suisse revaluation involves not only lower markups on Harvoni, but new estimates for HIV products, calculations of the effect of share buybacks, an allowance for the institution of the dividend, etc. They had those interns up for some all-nighters.

  • Reply to

    Today's Barron's feature article on ABBV

    by bearofbleecker Feb 7, 2015 1:32 PM
    bearofbleecker bearofbleecker Feb 7, 2015 5:49 PM Flag

    correction: ABBV's drug in decline is obvious Humira, not Harvoni

  • bearofbleecker bearofbleecker Feb 7, 2015 6:37 PM Flag

    Hi traderrook, At one time I was a much more active trader and a fairly active shortseller. However, I feel that it's generally hard to succeed shorting stocks in a rising market -- look at the dismal performance of the large long/short hedge funds last year. Mostly I now concentrate on trying to pick winning categories. Over recent years, I've done very well with pharma stocks. But I am now suspicious of all the large cap pharmas for a number of reasons:
    (1) I believe that the ESRX deal with ABBV was a watershed. It obviously resulted in the net discount on Sovaldi/Harvoni moving from 22% to 46% in a single quarter. The era of "whatever the traffic will bear" pricing is over.
    (2) There is substantial political risk in the current pricing structures. The media agitation over high drug prices continues and the Obama budget argues for letting HHS negotiate for prescription drug prices. What if Paul Ryan, in the interest of controlling health spending, were to back this proposal?
    (3) The rise of biosimilars. AN FDA panel recently recommended 14-0 the approval of Sandoz's Zarxio, a biosimilar to Amgen's Neupogen. With biosimilars, the hurdle to approval is much lower than with generics. Pfizer just paid $15B for Hospira, and they didn't do it to get into the IV market, but to get their biosimilar expertise.
    (4) There is a lot more competition. In addition to the forthcoming competition from MRK and BMY, the Credit-Suisse analyst predicts the
    arrival of half a dozen new HCV drugs a few years out. There are lots of
    protease inhibitors, monoclonal antibodies, etc. and therefore lots of
    potential combo therapies for lots of diseases.
    I still think there's money to be made in early stage pharmas. But I'm staying away from the big guys.

  • Reply to

    Today's Barron's feature article on ABBV

    by bearofbleecker Feb 7, 2015 1:32 PM
    bearofbleecker bearofbleecker Feb 7, 2015 7:04 PM Flag

    No, I posted because I thought the article might be of interest to those here who follow ABBV... many apparently own both stocks. Whether you generally give credence to the Barron's writers or not, their articles do move stocks in the very short term. ( Incidentally, as I'm sure you know, a lot of the pieces cited under "Barron's says ..." - not this one - are actually just research pieces from various analysts reprinted by Barron's.) We all have stories of missed opportunity like your Cephalon tale. We tend to remember the bonanzas we missed more than the disasters we dodged. Just as we often hear, "I could have bought that house for $100,000 in 2002 - now it's worth over a million." Rather than "I almost bought that house for a million in 2005 - someone just got it out of foreclosure for $250,000."

  • bearofbleecker bearofbleecker Feb 7, 2015 7:39 PM Flag

    It's interesting that the Baker Brothers Advisors, perhaps the most successful biotech fund (I crib a lot of ideas from their 13f's) pulled out of GILD a long time ago. In the process, they missed a big runup; however, their investment style is early stage biopharmas. When a company reaches a certain size, they bail. Similarly, I think a lot of growth funds have been invested in GILD and now, with the institution of the dividend and buybacks, will have to reevaluate their positions. At the same time, GILD will become more attractive to the less aggressive growth-with-income funds. By the same token, many here have expressed pleasure over the new dividend and stock buyback program (Company executives pointed out that eps in the next few years will be driven more by buybacks than by revenue increases.) But I don't think most of the investors here invested in GILD for a 2% dividend and stability. I certainly didn't. We were invested for the run to 120. ..or beyond. In other words, I think GILD will have to attract a new class of much more conservative shareholders.

  • bearofbleecker bearofbleecker Feb 7, 2015 7:52 PM Flag

    ETF's are pretty boring. And, for my part, the caution I feel toward GILD here extends to a lot of the larger pharmas. It also seems to me that with ETF's, you get the bad companies along with the good. Of course, if you believe in the theory that all asset prices fairly reflect everything that's known at any one time, this may bother you less. Also, with ETF's you are paying a premium - which is why the biggest glossiest ads on CNBC are from the ETF assemblers. If I were going to buy into an ETF here on the basis of category strength, it would probably be one of the financial ETF's. I think the banks are in a sweet spot with economic growth, rising interest rates, and a Republican congress. If I were looking for a contrarian recovery play, I'd consider a European ETF, such as the VGK. It's up about 3% over the last month, and frankly, if Europe can't get up off the mat, we'll all be in trouble.

  • Reply to

    Today's Barron's feature article on ABBV

    by bearofbleecker Feb 7, 2015 1:32 PM
    bearofbleecker bearofbleecker Feb 7, 2015 8:13 PM Flag

    Take six scrabble tiles, including at least two vowels, and assemble them at random. You can be almost certain that someone has patented a drug under that name.

  • Reply to

    Today's Barron's feature article on ABBV

    by bearofbleecker Feb 7, 2015 1:32 PM
    bearofbleecker bearofbleecker Feb 8, 2015 3:17 PM Flag

    I'm guessing that the state prison systems will opt for the cheaper drug. And that the cons will get the idea that one of those four pills gives you a mild high and sell them.

  • Reply to

    CS laughing to the bank

    by a_longhaul Feb 8, 2015 3:03 PM
    bearofbleecker bearofbleecker Feb 8, 2015 3:30 PM Flag

    Jus to point out that C-S was, until this downgrade, among the most bullish investment banks on GILD, with their projections above consensus. I don't think Goldman-Sachs has ever moved their price target from 85.

  • bearofbleecker bearofbleecker Feb 9, 2015 8:53 PM Flag

    First of all, stocks are both my livelihood and my hobby. I watch them every day. This isn't practicable for most normal people. I have often thought that if Cramer were really interested in the success of he ordinary investor, he would tell them: "Put 50% of your assets in market-weighted funds with low maintenance fees. Put 30% of your assets in high-quality bond funds. Keep 20% of your assets in cash (to buy into the dips). That is all." Of course, this is bad television and rather boring. However, it will generally capture more return than most mutual funds or hedge funds. 20 years ago, my wife put a small IRA in my charge, and, not wanting to blow it, I put 50% in a blue chip bond fund and 50% in a blue chip stock fund. I have never made a single trade in this account, and yet it has multiplied over 5 times. (This ain't brain surgery.) I have done somewhat better than that by following my own lights. At times, I have been over 50% in cash. At times, I have had virtually all my portfolio in utility stocks and closed end bond funds and closed end muni bond funds. At times, I've been heavily over weight in pharma stocks. And at times, I've been basically short. Knowing that I'm about to run out of my allotted space, I'll continue this below:

  • bearofbleecker bearofbleecker Feb 9, 2015 9:12 PM Flag

    I have seen persuasive evidence that you have to own 30-40 stocks to protect your portfolio from the possibility of any one stock imploding. I think most investors should start with a base of a market-weighted fund. The Vanguard VTSMX, a total stock market fund, would be a good beginning. At this point, I would also add a European component, for example, the VGK. This is essentially the risk-off part of your portfolio. It should return about 8% a year, inclusive of dividends. I think these market-weighted funds should be at least 50% of the average investor's portfolio. Now comes the fun part: You should own a high-tech company. APPL or INTC would seem like logical choices. You should own a bank (for when interest rates go up). WFC seems like the class of the group - if you want something a little riskier, try BAC. You should own an airline. I like DAL, but you can take your pick. You should own an auto company. F looks good here. (4% dividend, and probably the best play on European recovery.) You should own a telecom. I like VZ (also a nice dividend.) Maybe a social media company. FB seems like the most solid to me. I guess you should own an energy company, but I have never liked companies who constantly deplete their assets. My oddball pick is CLMT, a specialty refiner which pays a very high dividend. (There are a lot of MLP's whose high dividends make them a logical choice for your IRA.) You should have a retailer. I like WMT or COST, but you can trade up to M or even JWN. Now comes the controversial part: (cont.)

  • bearofbleecker bearofbleecker Feb 9, 2015 9:25 PM Flag

    I have done very well with pharma stocks over the past few years. I did particularly well with GILD last year. However, I am unpopular on this board because I now believe that the large pharms are running into serious headwinds. There's nothing wrong with owning some GILD (although I am short it at the moment.) There is something wrong with having a large chunk of your portfolio in this single stock. I think the best chance for appreciation going forward is in the smaller pharmas. My practice is to begin with a small stake and, when, it goes green, add more. Here are the ones I own now. I have noted their price changes from Aug. 18, when GILD first broke through 100::
    INCY (51.68 - 75.81)
    XNCR (10.46 - 14.70)
    TTPH (17.67 - 33.21)
    OTIC (19.28 - 31.02)
    RLYP (24.95 -32.13)
    CHRS (13.05 -32.36)
    IRWD (12.85 - 15.99)
    Skeptics will say, "Sure - you only own winners. Right." To which I'd reply, "Why should I own losers?" I've done very well with PCYC, MDVN, and JNJ, but are out of them for the moment. I may come back to CLDX and some others, but I've pared my pharma holdings down. I think stocks like these might constitute 15% or so of a portfolio. I hope this has been helpful. Good luck to you.

  • Reply to

    Why it goes up so mash in After Hours.

    by matthyatt511 Feb 9, 2015 6:13 PM
    bearofbleecker bearofbleecker Feb 9, 2015 9:28 PM Flag

    The trades that take it up after hours are tiny. I could take it up 20-30 cents myself just by buying a few hundred shares at the ask.

  • bearofbleecker bearofbleecker Feb 9, 2015 11:50 PM Flag

    Yes, the truth is, most of us want to get up in the morning, turn on CNBC, and have something a little more interesting to look at than the S&P. I manage my sister's portfolio and I have a good chunk of it in a Vanguard total market fund. I don't own any ETF's myself - aside from the VGX, because I think Europe might be coming back and I don't know European companies very well.( I do own some NXPI, which is a bellwether of the European market and a terrific company.) I was assuming that the poster, unlike myself, had a life outside the stock market. When I was growing up in Boston and anyone bought a new car, a bigger house, etc. the rumor would be, " I hear he put all of his money into Polaroid", or DEC or Wang. All of which are now defunct. When I moved to New York, the suddenly prosperous had "put it all on Xerox". When I moved to San Francisco, they had "bet the farm on Microsoft". Or Intel. Every dog has its day. Mutatis mutandis. (All of the wisdom of the world was figured out by the Greeks and Romans.)

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