Why Did My Stock Just Die?
CAPS Rating(out of 5)
|Ligand Pharmaceuticals (NAS: LGND)|
|Amylin Pharmaceuticals (NAS: AMLN)|
|GT Advanced Technologies (NAS: GTAT)|
With the markets rising 101 points yesterday, or almost 1%, stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
Shares of Ligand Pharmaceuticals took a hit yesterday because of what seemed to be less than inspiring results that missed estimates on the top and bottom line, but there's a potential for reversal based on GlaxoSmithKline reporting generally positive results on Promacta hepatitis C therapy, a drug on which it collaborates with Ligand.
The global hepatitis market was valued around $5 billion in 2009 and could be worth as much as $15 billion by 2019. It's become a very hot field; Roche recently bought Anadys Pharmaceuticals for $230 million for its hep C drug pipeline, and Inhibitex (NAS: INHX) got a boost from positive mid-stage trials on its INX-189 therapy.
Glaxo reported Promacta had a 23% cure rate in hep C patients, versus 14% for the placebo, but it also said the drug produced more serious side effects. It didn't release the full results and was studying them further to determine if it warranted filing an application with the FDA. If it was approved for the expanded indications (Promacta is currently authorized for sale to raise platelet counts), it could generate as much as $2 billion annually, a blockbuster in anyone's book, including Ligand's, which would receive more than 9% in royalties on sales over $1.5 billion on top of tiered royalties on lesser amounts.
Considering the drop it took yesterday, I've rated Ligand to outperform the market averages over the next few years based primarily on the results Glaxo has shown and the other drugs in its pipeline. That puts me in the good company of 90% of the other CAPS members rating the pharmaceutical, but put Ligand Pharmaceuticals on your watchlist and see if it can yet live up to its potential.
In living color
It was a separation that Amylin Pharmaceuticals investors should have been seen coming, particularly after Eli Lilly (NYS: LLY) hooked up with German drugmaker Boehringer Ingelheim to sell a competing diabetes drug. The rocky relationship was mired in the regulatory morass of drug approval and slack sales, and it ultimately degenerated into litigious sniping.
After failing to transform once-a-day diabetes treatment Byetta into once-weekly Bydureon, it seems Lilly lost the will to soldier on and looked overseas to partner with Boehringer. Amylin took it as a snub and filed a lawsuit against Lilly for anti-competitive behavior. They reached a settlement yesterday that returns the rights to Amylin but has it paying Lilly $250 million in cash up front and over $1 billion based on future sales, if it gets approved. With Bydureon due for another FDA decision in January, it could be seen as a lack of confidence on Lilly's part that it will be any more successful this time around.
Amylin is going to face higher costs to market Bydureon on its own if it gets approved, and Lilly will likely become a tough competitor if its own treatment makes it to market. Yet with both Byetta and Bydureon on the market at the same time, Amylin has a unique prospect with the two drugs.
The CAPS community remains solidly behind the pharmaceutical, with 89% of those rating Amylin believing it will still beat the Street. Let us know in the comments section below or on the Amylin Pharmaceuticals CAPS page if you think it will be able to successfully fend off Lilly, and add it to your watchlist to be notified of all the latest developments.
Disconnecting from growth
The problems settling in on the rest of the solar industry are also casting a pall over GT Advanced Technologies, a maker of solar manufacturing equipment. With a number of solar shops like JA Solar (NAS: JASO) and Yingli Green Energy forecasting slack sales and profits, it's not surprising that GT, which makes equipment to produce polysilicon, is feeling the burn of the cutbacks. Although it has some $2 billion in order backlog, at least some portion of it is getting pushed out to 2013.
Analysts have argued that with a second foot planted in the LED lighting sector -- it also makes the furnaces to grow the synthetic sapphires critical to the industry -- it won't be as affected as if it was solely dependent on solar. Yet the LED markets are growing dim, Chinese subsidies have crushed margins, and major players like Veeco Instruments (NAS: VECO) and Aixtron have been flattened.
With the vast majority of GT's revenues coming from either photovoltaics or polysilicon, though, it will be the solar industry that drives its fortunes.
CAPS All-Star fthfool thinks the combined business though is worth latching onto:
Sales are rocketing and somehow it is being dump because of the neg. impact on the solar sector. Although they are in the solar business, they also are diversified into the technology of making the machines that make LED. The world is moving away from inefficient light bulbs and this company will benefit big time from that move. With these prices we are in low single digit P/E ratio. Soon you might not be able to buy at these prices.
Let us know in the comments section below if you see GT Advanced Technologies rising above the tumult, then add it to your watchlist to see which way it goes.
At the time this article was published Fool contributorRich Dupreyowns shares of Aixtron SE, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of GlaxoSmithKline. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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