Drug companies have never liked the FDA. Why should a government agency tell them whether their drugs are safe or effective? The FDA approval process can be a long one, and often new treatments are turned down.
According toThe Wall Street Journal, the head of Schering-Plough (NYSE:SGP) believes that an "intensifying focus on safety and a diminished tolerance for side effects at the Food and Drug Administration have dramatically lowered the odds that the drugs would make it to market -- at least not without a lot of extra time and money."
Perhaps if pharmaceutical companies had a better track record for safety, the process would not to be so long. It is not that long ago that the FDA discovered that anti-depressants could lead to suicidal thoughts. More recently the agency warned that anemia treatments including Aranesp, Epogen and Procrit increased the risk of strokes and heart attacks.
Drug company earnings may be hurt by a long FDA approval process, but, without the current system there would likely be an increase in deceased patients.
Douglas A. McIntyre is an editor at 247wallst.com.
Merck & Co (NYSE: MRK) shares are falling today after the company reported that FDA approval its new cholesterol drug will likely be delayed until 2013. The FDA first rejected regulatory approval of the drug in April, and requested more information from company studies. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MRK.
After hitting a one-year high of $61.62 in December, the stock hit a one-year low of $34.49 earlier last month. This morning, MRK opened at $35.40. So far today the stock has hit a low of $35.00 and a high of $35.83. As of 12:25, MRK is trading at $35.03, down 57 cents (-1.6%). The chart for MRK looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $42.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in four months as long as MRK is below $42.50 at October expiration. Merck would have to rise by more than 21% before we would start to lose money.
MRK hasn't been above $42.50 since March and has shown resistance around $39 recently. This trade could be risky if the company's earnings (due out in mid-July) are a positive surprise, but even if that happens, this position could be protected by resistance MRK might find at its 50 day moving average, which is currently around $38 and falling.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in MRK.
Chantix, an anti-smoking drug from Pfizer (NYSE: PFE), would seem to be good for people. Smoking causes heart and lung problems and who knows what else. The trouble with the drug is that it seems to cause heart problems, called cardiac arrhythmia, all on its own. That seems counter-productive.
The drug may also make some people crazy, at least to the level of causing suicide and depression in a portion of patients.
The Institute for Safe Medication Practices said, "Based on the data available now, the existing warnings are completely inadequate," according to The Wall Street Journal.
The news points to an ongoing problem in the drug industry. Big Pharma wants to get products to market fast and sell as much as it can. Many of the current drugs that get them revenue are going "off patent" and will be sold by generic drug companies. That kills most of the profits on the treatments.
But, in the race to get the drugs out, it seems that side effects are overlooked and overlooked often.
Profits versus people being sick or dead. Hard decision.
After hitting a one-year high of $56.60 in July, the stock hit a one-year low of $35.03 in March. AZN opened this morning at $41.50. So far today the stock has hit a low of $41.29 and a high of $41.76. As of 11:55, AZN is trading at $41.42, up $0.75 (1.8%). The chart for AZN looks bullish and deteriorating slightly, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 14.9% return in just five months as long as AZN is above $35 at October expiration. AZN would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
Day one of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Management Advisory Committees meeting: Purdue Pharma's NDA for Oxycontin.
Anadarko Petroleum (NYSE:APC) to report Q1 earnings; conference call Tuesday at 10:00am.
Tuesday, May 6
Day two of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Mgmt Advisory Committees meeting: Cephalon's (NASDAQ:CEPH) sNDA for Fentora.
Molson Coors (NYSE:TAP) to report Q1 earnings; conference call at 12:00pm.
GlaxoSmithKline (NYSE: GSK) shares are trading higher after the Food and Drug Administration approved GSK's Advair Diskus 250/50 for the reduction of exacerbations in patients with chronic obstructive pulmonary disease (COPD). Advair is now the only FDA-approved treatment for the reduction of COPD exacerbations. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GSK.
After hitting a one-year high of $58.33 last May, the stock hit a one-year low of $40.51 in March. GSK opened this morning at $44.51. So far today the stock has hit a low of $44.42 and a high of $44.85. As of 12:35, GSK is trading at $44.61, up 0.50 (1.1%). The chart for GSK looks bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $37.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just three and a half months as long as GSK is above $37.50 at August expiration. GSK would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
GSK hasn't been below $40 at all in the past year and has shown support around $42.50 recently. This trade could be risky if one of the company's drugs runs afoul of the FDA, but even if that happens, that position could be protected by support the stock might find just above $41, where it bottomed out in March.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in GSK.
Abbott Laboratories (NYSE: ABT) shares are trading higher after the Food and Drug Administration denied regulatory approval for Merck & Co.'s (NYSE: MRK) cholesterol drug Cordaptive. The Merck drug would have directly competed with ABT's own cholesterol drug. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABT.
After hitting a one-year low of $49.58 in July, the stock hit a one-year high of $61.09 in January. ABT opened this morning at $53.32. So far today the stock has hit a low of $52.97 and a high of $53.73. As of 12:10, ABT is trading at $53.24, up $1.63 (3.2%). The chart for ABT looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just seven weeks as long as ABT is above $50 at June expiration. Abbott would have to fall by more than 6% before we would start to lose money. Learn more about this type of trade here.
Merck (NYSE: MRK) was counting on its new cholesterol drug to help its revenue in the years ahead. It won't work out. The drug, Cordaptive, was turned down by the FDA.
According toThe Wall Street Journal, "Merck was counting on Cordaptive to bring in as much as $2 billion a year in sales." The news is likely to hurt the company's stock, which trades at $41.44, well below its 52-week high of $61.62.
Merck's revenue last year was just over $24 billion, so the rejection will hurt, and perhaps hurt a great deal.
Merck is one of a handful of Big Pharma companies that have a number of important drugs coming "off patent." That means that cheap generics will flood the market and margins on the original drugs will disappear. Creating a "blockbuster" drug can take years of R&D, so Merck is left with relatively high costs against falling revenue.
The best way to look at Merck, and the shares of companies like it, is to watch for approval of drugs that are likely to bring in billions of dollars. Without those Merck and its peers will have falling share prices for years to come.
Douglas A. McIntyre is an editor at 247wallst.com and the author of Ten Stocks Under $10.
Most Americans don't want to be poisoned by medications or components used to make medications which come from overseas. Imports from China come to mind.
Over the last month, the government has disclosed that over 80 people in the US have died from tainted Heparin, a blood thinner. So far, the most likely cause is problems with a basic ingredient for the drug which is made in China.
Now word comes that for just $70 million, inspections could be much better and more widespread. That is $70 million dollars which could save lives and protect consumers from bad drugs. Only $70 million.
According toThe Wall Street Journal the FDA "would need about $15 million to inspect about 700 facilities in China alone." That seems like a very modest investment.
Genentech announced that its profit during the first-quarter rose 12% to $790 million, or 74 cents per share, boosted by strong cancer drug sales. These numbers are up from $706 million, or 66 cents a share reported in the same period a year ago. Excluding special items, the company's earnings would have come at 84 cents a share, exceeding analysts' forecasts for a quarterly profit of 82 cents a share.
The company's quarterly revenue saw a growth of 8% to $3.06 billion, up from $2.84 billion a year ago. However, this was not enough to beat analysts' predictions for sales of $3.1 billion in the quarter, according to Thomson Financial.
It is interesting to see how one piece of news can have a different impact on two stocks. The news? The Food and Drug Administration found that anemia drugs are tied to increased risks of death and faster-spreading tumors at high doses.
Amgen Inc. (NASDAQ: AMGN) makes Aranesp and Epogen, while Johnson & Johnson (NYSE: JNJ) makes Procrit, all used to help cancer and kidney disease patients overcome anemia. But now the FDA says these drug show greater risks for patients with certain cancers on tumor progression and survival, as well as blood clots. While both companies believe the risks were seen when the drugs were given for unapproved uses, including higher-than-recommended doses, it is possible that following the study, the FDA may recommend to end the use of these drugs for patients whose anemia is caused by cancer chemotherapy, or who are at greater risk, but still allow it for kidney disease patients.
Still, as some analysts believe, with the recent updates both companies had on product prescribing and labeling, it is unlikely the drugs will be completely inadvisable for use in cancer patients as they allow the cycle of chemotherapy to continue more smoothly, helping to strengthen them after each treatment. It is more likely the companies will work with the FDA for better regulation on these drugs.
On the news, Amgen shares fell nearly 2%, while JNJ shares climbed over 1%. Surprising? Not really.
New studies show that widely used cancer drugs can increase death rates in some patients. According toThe New York Times, the FDA "is planning to convene an advisory committee on March 13 to discuss whether to impose further restrictions on the use of the drugs, Aranesp from Amgen (NASDAQ: AMGN) and Procrit from Johnson & Johnson (NYSE: JNJ), with cancer patients."
One of the things the FDA is considering is putting new warning labels on the drugs, but is that enough?
New studies show that the two drugs can increase the risk of clots and may actually cause some tumors to grow.
It is always a difficult question to ask, but how much of this did the drug companies know? Lehman Brothers estimates that a cutback in the use of the Amgen drug could cost the company $1 billion a year. News of bad clinical and research results often send pharma stocks down.
While the drugs may be effective for some treatments, they clearly cause risks in others. Amgen and Johnson & Johnson shareholders are just going to have to live with that.
Douglas A. McIntyre is an editor at 247wallst.com.
Genentech Inc. (NYSE: DNA) shares are trading higher this morning on news that the Food and Drug Administration granted conditional approval for its oncology drug Avastin for the treatment of breast cancer Friday after market close. The drug is already approved for the treatment of colorectal and lung cancers. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on DNA.
After hitting a one-year high of $86.04 last February, the stock hit a one-year low of $65.35 in December. DNA opened this morning at $78.12. So far today the stock has hit a low of $77.57 and a high of $79.40. As of 10:45, DNA is trading at $78.06, up $6.46 (9.0%). The chart for DNA looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $65 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make an 8.7% return in just four months as long as DNA is above $65 at June expiration. Genentech would have to fall by more than 16% before we would start to lose money.
DNA hasn't been below $65 at all in the past year and has shown support around $70 recently. This trade could be risky if there is new bad news about one of the company's drugs, but even if that happens, this position could be protected by the support the stock might find around $67, where DNA bottomed this past winter.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in DNA.
That the FDA has granted accelerated approval to Genentech (NYSE: DNA) for Avastin for the treatment of patients with breast cancer is not just big news for the company, but great news for women around the world in their fight against the dreaded cancer.
"There is no cure for metastatic breast cancer, so it is important to control the disease as early and for as long as possible," said Kathy Miller, M.D., Associate Professor of Medical Oncology, Indiana University School of Medicine and lead investigator on the E2100 trial. "Now with Avastin plus Paclitaxel, we can increase the time a woman's cancer is kept under control, and offer a biologic option to women who previously were limited to chemotherapies alone."
"As an oncologist who has treated women with metastatic breast cancer, I know how important the first course of therapy can be," said Susan Desmond-Hellmann, M.D., M.P.H., president, Product Development, Genentech. "New treatments are needed, and this approval provides women who have not yet received chemotherapy for their metastatic breast cancer a new option to consider with their physician and families."
Drug companies have never liked the FDA. Why should a government agency tell them whether their drugs are safe or effective? The FDA approval process can be a long one, and often new treatments are turned down.
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