Monday’s Top Health Care Stories: AstraZeneca, Pfizer, Intermune, and Compugen

Let's check in on four stocks -- AstraZeneca (NYSE: AZN  ) , Pfizer  (NYSE: PFE  ) , Intermune (NASDAQ: ITMN  ) , and Compugen (NASDAQ: CGEN  ) -- which could make waves in the health care sector this Monday morning.

AstraZeneca rejects Pfizer's sweetened $117 billion takeover bid
Pfizer just raised its bid for rival drugmaker AstraZeneca to £69 billion ($117 billion), marking the third time that it has raised its cash and stock offer. Pfizer's prior offer of $106 billion was officially rejected last week. However, AstraZeneca immediately rejected the sweetened bid, stating that Pfizer's offer still undervalues the company's portfolio and pipeline.

Pfizer's current offer values AstraZeneca at £55 per share. AstraZeneca stated that Pfizer's offer must exceed £58.85 per share before the board would recommend its offer to shareholders. AstraZeneca's investors clearly weren't pleased with the company's decision, and shares plunged more than 12% in pre-market trading this morning. Shares of Pfizer rose more than 1%.

Pfizer stated that its $117 billion offer was final, and that it had no plans to take the vote to shareholders with a hostile bid. To comply with U.K. takeover law, Pfizer must make another bid before the May 26 deadline, which now seems unlikely due to AstraZeneca's stance and the constant scrutiny of U.K. lawmakers, who have voiced concerns that British jobs could be lost due to a takeover.

Pfizer would benefit from acquiring AstraZeneca in two notable ways -- it would reduce its corporate tax bill by moving its headquarters from the U.S. to the U.K., and it would greatly expand its portfolio of potential cancer treatments.

InterMune's phase 3 trial of pirfenidone meets its primary endpoint
InterMune is up more than 5% in pre-market trading this morning, after announcing that a late-stage trial for pirfenidone, its experimental treatment for idiopathic pulmonary fibrosis (IPF) had achieved its primary endpoint of significantly reducing the decline in lung function.

The primary endpoint was to decrease a 10% decline in forced vital capacity (FVC) -- which is predictive of a higher risk of mortality -- or death. At the 52nd week, 16.5% of the pirfenidone group experienced a 10% or more decline in FVC or death, compared to 31.8% for the placebo group.

Intermune also announced statistically significant results in two secondary endpoints -- improvement in the six-minute walk distance and progression-free survival. Another secondary endpoint, addressing shortness of breath, was not met.

Pirfenidone has already been approved in the EU and Canada, where it is marketed as Esbriet. The drug was launched across Europe in 2011 and 2012, then in additional European countries and Canada in 2013. Intermune reported Esbriet sales of $70.2 million in fiscal 2013, a 168% year-over-year increase from 2012. Peak sales estimates for Esbriet hover around $1 billion -- indicating that Intermune could still have room to run after rallying more than 240% over the past 12 months.

Stifel Nicolaus also notably upgraded Intermune this morning, maintaining its Buy rating on the stock while raising its price target from $45 to $51.

Compugen tops analyst estimates on both the top and bottom lines
Compugen is up more than 3% this morning after topping analyst expectations on both its top and bottom lines. Compugen develops therapeutic and diagnostic biomarkers.

For the first quarter, Compugen reported a net loss of $1.9 million, or $0.04 per share, topping analyst expectations, and better than a net loss of $3.4 million, or $0.09 per share, in the prior year quarter. However, cost of revenue rose from $150,000 to $750,000, while research and development expenses climbed 18.5% to $3.2 million.

Compugen reported revenue of $2.1 million, compared to revenue of $162,000 a year earlier. That also topped analyst expectations by $0.26 million. The bulk of Compugen's revenue during the quarter came from collaboration and license revenues from Bayer (NASDAQOTH: BAYRY  ) for the development of two antibody-based cancer immunotherapies. That deal, which was signed last August, caused shares to rally more than 50% in a single day. The deal entitles Compugen to potential milestone payments up to $500 million, while Bayer retains commercialization rights to the drugs.

Compugen finished the quarter with $118.6 million in cash and equivalents -- up from $46.8 million in the fourth quarter of 2013. That increase of $71.8 million primarily came from a secondary offering of shares completed in March. The stock gave some of its post-Bayer gains after that offering, but it is still up more than 42% over the past 12 months.

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