Oct Biomed2008

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Oct Biomed2008

  1. 1. Club Biomed* - 15 October 2008 <ul><ul><li>to study and better understand the biotechnology, pharmaceutical, medical device, and health care delivery industries </li></ul></ul><ul><ul><li>and </li></ul></ul><ul><ul><li>to invest the assets of the Partnership solely in stocks, bonds, mutual funds or other securities (“securities”) in these sectors or an interest bearing cash account for the education and benefit of the Partners. </li></ul></ul><ul><ul><ul><li>*Club Biomed is a partnership. Any member of the tri-institutional community can ask to become a partner and take on the responsibility of contributing to our discussions, making presentations, & investing their assets in the partnership (generally $250 to $1000 per year) </li></ul></ul></ul><ul><ul><ul><li>Do you think Mr. Market is unduly sullen or two optimistic? </li></ul></ul></ul><ul><ul><ul><li>Should we try to take advantage of his recent offers? </li></ul></ul></ul>
  2. 2. Warren Buffett, Benjamin Graham, and Mr. Market <ul><li>2003 edition by Benjamin Graham and Jason Zweig </li></ul><ul><li>&quot;by far the best book on investing ever written” </li></ul><ul><li>---Warren Buffett </li></ul><ul><li>NOTE: Library Shelf </li></ul>
  3. 3. Warren Buffett, Benjamin Graham, and Mr. Market <ul><li>Graham's favorite allegory is that of Mr. Market, an obliging fellow who turns up every day at the share holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but sometimes it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price. </li></ul><ul><li>The point of this anecdote is that the investor should not regard the whims of Mr. Market as a determining factor in the value of the shares the investor owns. He should profit from market folly rather than participate in it. The investor is advised to concentrate on the real life performance of his companies and receiving dividends, rather than be too concerned with Mr. Market's often irrational behaviour. </li></ul>
  4. 4. Dow on a semi-log scale
  5. 6. Plans for today <ul><li>Introducing Mr. Market </li></ul><ul><li>Financial report and minutes </li></ul><ul><li>Review TEVA, ALNY, ISIS, GENZ & HOLX </li></ul><ul><li>“ Clinical DNA Cluster” by Eric and members of the group </li></ul><ul><li>Covance: a company that profits by providing services to Biotech and Pharma </li></ul><ul><li>------- by Ensar and Eleanor </li></ul><ul><li>It there is time, we will discuss areas to explore and try to create groups </li></ul>
  6. 7. Biomed’s July 2008 Holdings
  7. 8. Biomed’s Sept 2008 Holdings
  8. 9. Biomed’s October 2008 Holdings
  9. 10. Biomed’s benchmark portfolio (July 2008)
  10. 11. Biomed’s benchmark portfolio (Sept 2008)
  11. 12. Biomed’s benchmark portfolio (October 2008)
  12. 13. Stocks owned by or studied by Club Biomed from September (to encourage reflection)
  13. 14. Stocks owned by or studied by Club Biomed from September (to encourage reflection)
  14. 16. Number of units owned Number of votes 0-4 0 5-10 1 11-20 2 21-30 3 >30 4
  15. 18. Approval of Minutes
  16. 19. Call for nominations <ul><li>A Financial Partner will be responsible for: </li></ul><ul><ul><ul><ul><li>Keeping a complete set of books, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Evaluating the value of the Partnership before each meeting (see item 7), </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Accepting capital contributions and assigning Units to Partners, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reporting the holdings and value of the Partnership at the beginning of each meeting, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Report on any checks issued from the Partnership account, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Assigning the voting rights and the number of votes to each Partner at the meeting, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Be the official contact for written statements assigning proxy votes, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Counting votes, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reporting the holdings and value of the Partnership on the web site, </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reporting tax liabilities to each Partner (on schedule K1), </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Filing a Partnership Return (Partnership Return Form 1065). </li></ul></ul></ul></ul>
  17. 20. Stocks & Stockwatchers <ul><li>Teva (TEVA) Jason </li></ul><ul><li>ALNY Eric & </li></ul><ul><li>ISIS Eric & ???? </li></ul><ul><li>GENZ Who did we appoint? </li></ul><ul><li>HOLX Rebeca & ??? </li></ul><ul><li>(interesting stock we are watching for buying opportunity) </li></ul><ul><li>Millenium (MLNM) Yosif, Don, (watching; will make proposal if opportunity) </li></ul><ul><li>SEPR Sebastian (we had an order at 50) </li></ul><ul><li>Stocks Biomed has owned </li></ul><ul><li>Regeneron John & Neil (bought & sold)-lost and rebounded </li></ul><ul><li>Celgene (CELG) Gianina/Anthony (offer at 38-never bought)-great sucess </li></ul><ul><li>Amylin (AMLN) Deirdre (bought & sold winter 2003-4), promise fulfilled & up </li></ul><ul><li>Cephalon (CEPH) Imke (sold July 2004)--we made a little, soared in 2005-6 </li></ul><ul><li>Pfizer (PFE) Steve(24- 35 ) fell, sold & climbed back </li></ul><ul><li>OSIP Neil & John (we bought & sold loosing $) </li></ul><ul><li>NVS Yosif, Rashni, and Haijra made nice paper profit & sold in declining Market </li></ul><ul><li>PTN John, Sebastian, & Don stop loss save part of our shirt </li></ul><ul><li>ZMH bought in April 2007 @ 88. Sold at a loss </li></ul><ul><li>Biogen Idec (BIIB) Dasha, John, Neeta sold at 55 (nice profit) </li></ul>
  18. 21. Stock watch reports <ul><li>TEVA </li></ul><ul><li>ALNY </li></ul><ul><li>ISIS </li></ul><ul><li>GENZ </li></ul><ul><li>HOLX </li></ul>
  19. 22. TEVA
  20. 23. ALNY
  21. 24. ISIS
  22. 25. GENZ
  23. 26. HOLX
  24. 27. COV revisited <ul><li>By </li></ul><ul><li>Ensar </li></ul><ul><li>and </li></ul><ul><li>Eleanor </li></ul>
  25. 28. September 29, 2008 CVD is terminating joint venture plans with WuXi PharmaTech to develop and build a pre-clinical facility in China, which was expected to be completed in '09. No reason was given for termination of the deal. August 6, 2008 CVD agrees to buy Eli Lilly's campus for $50M, and enters into a 10-year service contract worth a minimum of $1.6B. October 6, 2008 Covance Inc. has closed a 10-year, $1.6 billion research agreement with drugmaker Eli Lilly & Co. Covance will gain $90 million in annual business with Lilly under the agreement, along with the $70 million in annual work Covance already did for Lilly.
  26. 30. In addition to adding new jobs and construction, Covance is estimated to ultimately bring $1.2 million annually to the county's coffers in property taxes. County officials forecast that in its first 10 years in operation, Covance will pay $8 million in taxes, minus the county's own $1 million incentive investment. In its plans to take over part of a plot vacated by Eli Lilly & Co. last year, Covance Inc. is bringing to Prince William County 450 jobs, $175 million in investments -- and the wrath of the country's leading animal activist group. PETA Urges Prince William County to Reject Covance's Animal-Testing Laboratory &quot;We don't have any reason to not support their relocation to Prince William,&quot; said Liz Bahrns, a county government spokeswoman. &quot;Covance has corrected its issues. It has paid its fines. It is in good standing with the federal government at this time.&quot;
  27. 31. &quot;These allegations have already been fully investigated by the United States Department of Agriculture and the United States Food and Drug Administration, as [being] well addressed by Covance,&quot; said Mona Terrell, a spokeswoman for Covance, which describes the animal rights group as &quot;extremists.&quot; &quot;PETA's agenda is not solely against Covance, but against the use of animals in biomedical research and the development of life-saving and life-enhancing medicines generally.&quot;
  28. 32. Covance Inc. the world’s largest publicly traded contract research organization, has won the “Best Contract Research Organization” (CRO) award at the 2008 World Vaccine Congress, held in Washington, D.C.  - Covance as best-in-class when it comes to providing services that support vaccine development. Covance Inc posted a 22.7 percent increase in profit due to increased revenue from early- and late-stage clinical testing. The net profit for the second quarter was $50.9 million, or 80 cents per share, up from $41.5 million, or 64 cents per share, a year ago. Covance, one of the world's largest drug development service companies, estimates that it has helped develop one-third of all pharmaceuticals on the market today.
  29. 33. Covance has emerged triumphant in the latest episode of a long-lasting saga over a new US animal testing lab that it is building in Chandler, Arizona. 26-Feb-2008 This week a judge dismissed the final part of a five-part suit, the other four aspects had been dismissed in late January. The dismissal of the last part of the lawsuit, now closes the door on the saga for Covance and opens the door for the firm to begin operating the 300,000-square-foot laboratory early next year.
  30. 34. Some companies -areas & recommendation & S&P <ul><li>Cancer immunology therapy </li></ul><ul><ul><li>Dendreon--was hot in summer, but needs more to get by the FDA and trials are in progress (is it time?) </li></ul></ul><ul><li>Neutraceuticals (promise w/o much science) </li></ul><ul><ul><li>Estee Lauder --5S skin care </li></ul></ul><ul><ul><li>Herbal life--4 S, weight loss </li></ul></ul><ul><li>Big companies </li></ul><ul><ul><li>DNA 4S--great science and proven ability, price down, possible buy-out (timing important) </li></ul></ul><ul><ul><li>Gilead--4S-best aids company, proven record </li></ul></ul><ul><ul><li>Forest labs--4S </li></ul></ul><ul><ul><li>Novartis-4S good science and generics too </li></ul></ul><ul><ul><li>JNJ-nice company with good dividend and broad product mix </li></ul></ul><ul><ul><li>STJ-St Jude- a medical device company with 5S rating and 19 P/E </li></ul></ul><ul><li>Other Infrastructure companies </li></ul><ul><ul><li>Charles River 4S- money from animal models? </li></ul></ul><ul><ul><li>ICON 5S-contract research </li></ul></ul><ul><li>CNS drugs </li></ul><ul><ul><li>Questcor Pharm QCOR--smaller company with 2 druds and others in development with a low P/E !!!!! </li></ul></ul><ul><li>Cancer </li></ul><ul><ul><li>OSI Pharmaceuticals, 4 star that we liked once and sold </li></ul></ul><ul><li>Designer drugs / protease inhibitors </li></ul><ul><ul><li>VRTX-Vertex still losing money, but it has collaborators and promising drugs, including one for Hepatitis C </li></ul></ul>
  31. 35. Will Glaxo Make Their Money Back??
  32. 36. “ It can take up to 12 years or more and over U.S. $800 million to bring a new therapy from discovery to market.” So…..many pharm and biotech are looking more and more to outsource drug development Why should we care?
  33. 37. Who do they service? 1. Biotech 2. Environmental: ecotoxicology, environmental fate, plant metabolism, genetic & animal toxicology 3. Food & Dietary Supplements: quality, purity, consistency, stability, safety, efficacy 4. Pharma 5. Research: make Abs, animal supplier 6. Vaccines: DNA, recomb. protein, bacterial, viral
  34. 39. The bad stuff:
  35. 40. Early Development services– 47% of revenue Late-stage development services- 53% of revenue During the year ended December 31, 2007, the Company served in excess of 300 biopharmaceutical companies. Covance Inc., leading contract research organization (CRO)
  36. 41. Covance Charles River DOW / S&P500
  37. 42. <ul><li>CVD reported 1st quarter 2008 earnings of $0.73 per share. </li></ul><ul><li>Beat last year's 1st quarter results by 21.7%. </li></ul><ul><li>Revenue increased by 15%. </li></ul><ul><li>Expect low -mid teen growth in revenue, 20% annual growth in EPS </li></ul><ul><li>CVD was named primary provider of a new client, a top-10 pharma, which should result in significant revenues. </li></ul>
  38. 43. CVD's PE ratio is among the highest of any stock in the Biotechnology & Drugs industry and signals that investors have high hopes for this company's future business prospects
  39. 44. Income Statement 2.64 2.24 1.88 1.52 1.21 Diluted Normalized EPS 2.69 2.28 1.91 1.57 1.23 Basic Normalized EPS Normalized Income   176 145 120 98 76 Net Income   246 201 178 143 116 Income Before Tax 229 193 175 140 117 Operating Income 1,403 1,213 1,075 916 858 Total Operating Expense Operating Expenses   1,632 1,406 1,250 1,056 974 Total Revenue Revenue and Gross Profit 12/31/2007 12 Months 12/31/2006 12 Months 12/31/2005 12 Months 12/31/2004 12 Months 12/31/2003 12 Months 12 Month  Period Ending: Currency is US Dollar
  40. 45. Balance Sheet 64 64 63 62 63 Ttl Comm. Shares Outs. 1,560 1,298 1,057 925 808 Total Liabilities & Shareholders � Equit y 1,110 923 732 638 564 Total Equity Shareholder Equity   450 374 325 287 244 Total Liabilities 0 0 0 0 0 Total Debt 0 0 0 0 0 Total Long Term Debt 358 290 253 219 190 Total Current Liabilities Liabilities   1,560 1,298 1,057 925 808 Total Assets 104 44 64 22 6 Construction in Progress 525 487 429 394 371 Machinery/Equipment 430 370 292 259 230 Buildings 770 640 547 509 450 Total Current Assets Assets 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12 Month  Period Ending: Currency is US Dollar
  41. 46. <ul><li>Global pharmaceutical R&D spending in 2007 - $65 billion to $70 billion </li></ul><ul><li>Growing at about 8%-10% annually for the past decade. </li></ul><ul><li>The CRO market is estimated to be about $16 billion, 23% R&D spending. </li></ul><ul><li>CRO market has been expanding about 10%-12% a year, </li></ul><ul><li>slightly ahead of the growth of R&D spending over the past several years, as pharmaceutical companies are increasingly outsourcing </li></ul>Market
  42. 47. <ul><li>Covance and WuXi PharmaTech Form a Joint Venture to Provide World-Class Preclinical Services in China Tuesday June 24, 4:15 pm ET </li></ul><ul><li>Operations will be located at ~300,000 square-foot-facility in Suzhou, China, expected to be completed in 2009 and designed to meet the Food and Drug Administration and worldwide regulatory standards. </li></ul><ul><li>Will provide GLP toxicology, drug metabolism and bioanalytical chemistry services. </li></ul><ul><li>The benefit to Covance is clear: </li></ul><ul><li>It gains a presence in China, where scientists' wages are considerably cheaper. </li></ul><ul><li>Higher margins should help it compete for pharma and biotech business. </li></ul>
  43. 48.   Covance Opens Top-Tier Research Clinic June 16, 2008 - Covance Inc., announced today that it has relocated and significantly upgraded its clinical pharmacology research unit in Evansville, Indiana. The $12.4 million facility is a premier clinical research unit for conducting first-in-human studies and other complex trials requiring special attention. Goldman favors Covance shares over Charles River Tuesday June 24, 2:22 pm ET
  44. 49. Covance has emerged triumphant in the latest episode of a long-lasting saga over a new US animal testing lab that it is building in Chandler, Arizona. 26-Feb-2008 This week a judge dismissed the final part of a five-part suit, the other four aspects had been dismissed in late January. The dismissal of the last part of the lawsuit, now closes the door on the saga for Covance and opens the door for the firm to begin operating the 300,000-square-foot laboratory early next year.
  45. 50. <ul><li>The outsourcing trend for biotech and Big Pharma is definitely higher and increasing. </li></ul><ul><li>Whether or not a drug is approved, money will be spent doing trials. </li></ul><ul><li>CROs like Covance really have a good chance to benefit from the clinical trial boom that is ongoing right now. </li></ul>
  46. 51. Planning for next fall <ul><li>A topic from the DNA sequence group in October </li></ul><ul><li>Forrest (Robbie and Ryan) in October </li></ul><ul><ul><li>Does anyone else want to join them? </li></ul></ul><ul><li>Anthony Gotto on the role of the scientific advisory board--he declined </li></ul><ul><li>Steve Gross on his experience with clinical trails </li></ul>
  47. 52. Evaluating a company -the Club Biomed way <ul><li>Category and history of company </li></ul><ul><li>Existing products /patent positions/ability to extend product line and profits from them </li></ul><ul><li>Promised products and potential income. Scientific and discovery strategy? Where and how many are in the pipeline? Clinical trials? FDA approval? marketing strategy & competition </li></ul><ul><li>Size of market and competition in the market </li></ul><ul><li>Ability to market product </li></ul><ul><li>Financial analysis Profits and loss, promised profits, cash flow, financial position, balance sheet, potential liability problems </li></ul><ul><li>Quality of people (leadership, advisory board, scientists, clinicians, marketing) </li></ul><ul><li>Alliances and cooperative agreements </li></ul><ul><li>Impact of government policies on company success </li></ul>
  48. 53. Some companies -areas & recommendation & S&P <ul><li>Infrastructure companies </li></ul><ul><ul><li>Charles River 4S- money from animal models? </li></ul></ul><ul><ul><li>ICON 5S-contract research </li></ul></ul><ul><ul><li>Cavance--5S, growing profits </li></ul></ul><ul><li>Cancer immunology therapy </li></ul><ul><ul><li>Dendreon--was hot in summer, but needs more to get by the FDA </li></ul></ul><ul><li>Neutraceuticals (promise w/o much science) </li></ul><ul><ul><li>Estee Lauder --5S skin care </li></ul></ul><ul><ul><li>Herbal life--4 S, weight loss </li></ul></ul><ul><li>Big companies </li></ul><ul><ul><li>DNA 3S--great science and proven ability, price down </li></ul></ul><ul><ul><li>Gilead--4S-best aids company, proven record </li></ul></ul><ul><ul><li>Forest labs--4S </li></ul></ul><ul><ul><li>Novartis-4S good science and generics too </li></ul></ul><ul><li>Bread and Butter Biotech </li></ul><ul><ul><li>Exelixis--4S--cance therapy with bid pipline </li></ul></ul><ul><ul><li>Sciele--4S--successful marketer with low P/E </li></ul></ul><ul><ul><li>LifeCell--liked by Jay walk, wound healing </li></ul></ul><ul><li>Another foreign generic </li></ul><ul><li>DrReddy--4S--nice sales profits from India </li></ul><ul><li>A drug distributor with high profits </li></ul><ul><ul><li>McKesson 5S dividentd stock with growth </li></ul></ul><ul><li>A favored imaging company </li></ul><ul><ul><li>Hologic--5 S--Breast screening and other women’s health care </li></ul></ul><ul><li>Miscellaneous </li></ul><ul><ul><li>Genezyme--4S, collaborating with ISIS, making money </li></ul></ul>
  49. 54. Is the World Ready for Libido in a Nasal Spray? Now entering Phase 3 clinical trials: the first real, honest-to-God, horny-making, body-shaking, equal-opportunity aphrodisiac.

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