What to Watch at Merck, CytRx, and Mylan This Morning

Merck, CytRx, and Mylan are 3 health care stocks worth watching this morning. Here’s why.

Feb 3, 2014 at 9:15AM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Good morning, fellow Foolish investors! Let's take a closer look at three companies -- Merck (NYSE:MRK), CytRx (NASDAQ:CYTR), and Mylan (NASDAQ:MYL)-- which could loom large in health care headlines this morning.

Merck makes a $2.3 billion investment in Ablynx's oncology pipeline
First and foremost, Belgian biotech company Ablynx (NASDAQOTH:ABLYF) just signed a deal worth up to €1.7 billion ($2.29 billion) with Merck to develop new treatments for cancer.

This is the second major agreement between Ablynx and Merck, following a prior neurology partnership which started in October 2012. According to a statement from Ablynx, the company will be in charge of discovering antibody-derived proteins known as nanobodies, which are intended to target "immune checkpoint modulators". The theory is that Ablynx's nanobodies can help activate a patient's immune system to recognize and attack cancer cells.

Under the deal, Ablynx will be paid €20 million ($26.96 million) and €10.7 million ($14.42 million) in research funding during the initial three-year research term. Ablynx will be eligible to receive milestone payments up to €1.7 billion plus royalties, while Merck gets the rights to develop, manufacture, and commercialize any of Ablynx's approved products.

This is a positive development for Merck's oncology pipeline, which the company has been trying to grow under its new R&D chief Roger Perlmutter, who replaced Peter Kim last March.

Growing its small oncology portfolio into a new pillar of growth is critical for Merck, since it currently faces a simultaneous slowdown in sales of its top-selling asthma drug, Singulair, and its diabetes drug Januvia. Singulair lost patent protection in August 2012, while Januvia may be weighed down by safety concerns and rising competition in the field of alternative diabetes treatments. Last quarter, sales of Singulair plunged 53% year-over-year to $280 million, andsales of Januvia fell 5% to $927 million.

Merck's most promising oncology candidates are the skin cancer treatment MK-3475 and the ovarian cancer drug MK-1775, which it is co-developing with AstraZeneca.

CytRx's prices its new offering of 11.5 million shares
Meanwhile, CytRx could open lower this morning, after the company priced its previously announced public offering of 11.5 million shares at $6.50 per share. The sale will generate approximately $75 million in cash, prior to the deduction of underwriting discounts, commissions, and expenses.

The new offering price represents a 22% discount from the 52-week high of $8.35 the stock hit on January 30, and the 11.5 million shares will considerably dilute the 42 million outstanding shares of the stock.

Much of CytRx's previous rally of more than 200% over the past 12 months has been fueled by several positive developments regarding aldoxorubicin, the company's lead drug candidate. The drug is being tested as a second-line treatment for soft tissue sarcomas, and could eventually also be approved for first-line soft tissue sarcomas, brain cancer, and other indications. If approved for multiple indications, aldoxorubicin could generate peak sales of $1.1 billion -- a huge boost for a company with a market cap of $290 million with no stable sources of revenue.

CytRx's offering is necessary, since the company finished last quarter with only $23 million in cash and equivalents. Last October, the company added $24.1 million (after fees) from another equity offering, but the company's current cash position will be unclear until it reports its fourth quarter and full year earnings.

Mylan launches the world's first biosimilar version of Roche's Herceptin
Last but not least, generics maker Mylan announced that it had launched the world's first biosimilar version of Roche's (NASDAQOTH:RHHBY) blockbuster breast cancer drug Herceptin (trastuzumab) in India, known as Hertraz.

Hertraz is indicated for the treatment of HER2-positive metastatic breast cancer, which accounts for 15% to 20% of all breast cancer cases, and will be available in two strengths -- 440 mg and 150 mg.

Herceptin is one of the best-selling breast cancer drugs in the world, generating 6.08 billion Swiss francs ($6.67 billion) in 2013 sales. However, Roche abandoned its Herceptin patent in India in August 2013, due to the intellectual property rights "environment" in the country.

Over the past several years, the Indian government has invalidated patents for drugs that it considers essential for the poor -- such as cancer medications -- and handed over the production rights to local generic manufacturers instead.

Where Roche retreated Mylan sees opportunity. In fiscal 2012, Roche reported $21 million in Herceptin sales in India. It's unclear how much Mylan will lower the price, but Roche has already lowered the price of Herceptin to $1,366 per month (compared to $4,500 per month in the U.S.).

This is the second recent positive development for Mylan in India. On January 31, the company was named Gilead Sciences' exclusive branded medicines business partner in India, which will allow Mylan to market and distribute Gilead's HIV drugs Viread (also for hepatitis B), Truvada, Stribild, and the systemic fungal infection treatment AmBisome.

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Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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