Raygent

Microfluidics (MFLU.OB-$0.90) -a leader in advanced, nano-material, processing for a variety of industries
A turn-around play with value characteristics

This is a “heads-up” on a special report that we will issue post-earnings within two weeks on the nanotechnology small cap Microfluidics International Corp..
The Company sells high pressure microfluidic processors that are used to create materials on the micro-and nano-scale to achieve unique product characteristics and qualities.
The technology  achieves the following functionality:

Particle size reduction
Bottom-up nanoparticle creation
Cell disruption
Nanoencapsulation
Nanoemulsions and dispersions.

Rod Raynovich BIOgraph, Company Profiles Mflu.ob, Microfluidics, nanotechnology

In a volatile sell-off day involving tech stocks, the biotech world was relatively calm. Despite good news on corporate earnings and a GDP with an annual 5.7% annual growth, investors chose to take profits even on solid player like Microsoft down over 3% today. Market Strength is routinely being sold. Biotech stocks stayed out of the fray with some even up: AMGN,CBST,GENZ,GILD,and a handful of smaller caps.
Here is the 12 month performance of major Life Science ETF’s and selected funds taking into account that January tends to be strong for biotech.T.Rowe Price and BlackRock are more diversified funds with general health,pharmaceutical and biotech stocks.

Jan 29, 2010 Price % gain 12 mos.period

FBIOX (Fidelity) $66.50 10%
HQL 9.60 9
IBB 83.8 19.7
PBE 17 21.4
PRHSX (T.Rowe) 26.1 34
SHSAX (Blackrock) 26.4 27.8
XBI 55.7 3
XPH 38.5 28.3

Rayno Life Science Model Portfolio 16%

Rod Raynovich BIOgraph life science ETF's, Life Science stock performance

Large Cap biomedical stocks held firm on another volatile but down day in the market driven by a host of macro and fundamental factors: earnings, Davos, Greece,China, politics, Bernanke confirmation, strong dollar, jobs, etc.
In this convoluted market the technology leader Apple ( PE 26.6,EPS $7.49) with their iPad launch does not threaten Amazon’s (PE 74, EPS $1.70) Kindle according to investors. Amazon is selling six Kindle books for every 10 physical books. I still see people with books and newspapers so where are these Kindles?And most of us are on Blackberrys, computers and iPhones all day so do we relax with yet another screen for reading books and newspapers?
If you need relief from this correction S&P down 1.18%, NASDAQ down 1.91%, look at the these boring biomedical stocks which have gotten relief as healthcare reform (lite) is in limbo:

Abbott ABT 53.95 even
Amgen AMGN 58.05 up 0.6%
Becton Dickinson BDX 76.48 up 0.6%
Cardinal Health CAH 32.91 up 5.11%
Idexx IDXX 58 up 2.24%
Johnson and Johnson JNJ 63.8 up 0.57%
St. Jude STJ 38.53 up 1.61%
Varian VAR 49.77 up 1.63%

In biotech sector the IBB was off 0.93%.

Rod Raynovich BIOgraph biomedical, Kindle

Gilead (GILD) shares were up 6% to $47.75 after the close as the Company announced record sales and earnings.
Full Year total Revenues were $7.01B up 31% over 2008.
Full Year Non-GAAP EPS were $3.06 up 40% over 2008.
Fourth Quarter Non-GAAP EPS were $0.93 up 49% over 2008.

Average analysts revenue estimates for 2010 are in the $7.9B range. The Company balance sheet was strengthened now at $3.9B in cash and marketable securities.

The increases were driven primarily by sales of antiviral products for treatment of HIV: Atripla $697.8M and Truvada $2.49B. In 1996 treatment of HIV required 30 pills and now it requires one.

Viread sales also grew to $667.5M for treatment of hepatitis B (HBV).
Full Year Tamiflu royalties from Roche were $392.7M.
Gilead has a strong pipeline of 12 products in the clinic for treatment of HIV,Cystic Fibrosis,HCV and Pulmonary Arterial Hypertension.

GILD is a core holding in the Rayno Life Science Portfolio.

(See additional posts from JPM Conference January 13)

Rod Raynovich BIOgraph antiviral, HBV, HIV

AMGN-Top line revenue slowing
One of the largest biotech companies reported earnings within estimates with full year 2009 EPS of $4.91 up 8% on Revenue of $14.6B down 2%.2010 Total Revenue is expected to be in the $15.1B to $15.5B range with adjusted EPS at $5.05 to $5.25.U.S. Product Sales were $11.13B a decrease of 3% vs the prior year and International Product Sales were relatively unchanged at $3.2B with a slight negative currency impact of $213M.
With regard to the product pipeline going forward the major opportunity appears to be Denosumab a key bone drug for cancer patients with data expected in Q1 and a BLA submission later this year.
The stock was flat after hours to $55.80.

Biotech sector run from November has topped out
The biotech “January Effect” has ebbed with a top around Tuesday January 19 coinciding with the “Scott Brown” effect due to the election of a Republican Senator in MA which sparked a one day rally in healthcare stocks.
The IBB topped out at around $85.50 last Tuesday a gain of 10% from early November. The XPH Pharmaceutical ETF (weighted toward large caps) slightly outperformed the IBB with a 12% return from November through last week.

Rod Raynovich BIOgraph BIO ETF's, January Effect

It is hard to believe but the Obama administration wants to open up a new political front at the last minute to
squeeze the biotechnology industry after everyone thought the 12 year protection from generic biologicals was a “done deal”.

http://www.genengnews.com/articles/chitem.aspx?aid=2717

Last-ditch lobbying battle over biotech drugs
By ALAN FRAM
The Associated Press
Thursday, January 14, 2010; 7:21 PM
WASHINGTON — Makers of generic biotech drugs, backed by President Barack Obama and a well-placed congressional ally, are waging an eleventh-hour battle to reduce the competitive protection that the emerging health overhaul bill would give to brand-name producers of the expensive pharmaceuticals.

Biotech drugs, made from living matter and used to treat diseases from cancer to diabetes, have been a growing portion of the pharmaceutical market and are seen as key to the industry’s future. The House- and Senate-passed bills reshaping the nation’s health care system would both grant biotech producers 12 years of protection against lower-cost generic competitors.

see complete article below

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/14/AR2010011403612.html

Rod Raynovich BIOgraph biogenerics, biosimilars

Here are some of the broader themes and market trends gleaned from Company presentations:

1.) There is a shift from small molecule drug development to biologicals and vaccines. e.g. Pfizer (PFE)

2.) “Bolt-on” acquisitions of smaller companies are being done to bolster product portfolios and emerging market positions. e.g. GSK

3.) There is increasing synergy of diagnostics and pharmaceuticals (Companion Diagnostics). e.g. Roche

4.) A migration of diagnostics out of the Lab to the “point of care” and from the Professional to the Home will attack chronic diseases such as obesity and diabetes and develop a more “holistic” approach to the way medicine is practiced.It will also be integrated by health IT.
e.g. Inverness (IMA)

5.) Pure-play personalized medicine companies are targeting cancer treatment though genomics. e.g. Genomic Health (GHDX).

6.) There continues to be an Increasing number of partnerships between pharma and biotech.

7.) Pharmacogenomics -getting the right drug to the right patient-continues to get traction even at the retail level. e.g. CVS/Caremark (CVS)

8.) On the healthcare refrom scene a luncheon presenter, Thomas Scully, an ex-CMS administrator, said the “reform” impact will be an expansion of insurance benefits to 30M or more people that will be positive for the industry in the short term due to increased demand but create federal budget problems in the long term (2013 time frame).

Here are some brief notes from important companies presenting at JPM:

Genzyme (GENZ)
Genzyme had a difficult year with serious manufacturing problems in its Allston MA facility caused by FDA (483) issues related to GMP’s and viral contamination in its Cerazyme manufacturing process.
An overloaded operations was one of the causes. To correct the situation GENZ has hired a new GM for Allston and strengthened Regulatory and Compliance staff. Cerazyme manufacturing was restarted in November 2009 and Fabrazyme is expected this week. Also new capacity will be brought on from 20kL in 2009 to 32kL in 2011.
Chairman and CEO Henri Termeer said he is confident that “Genzyme will emerge as a stronger Company”. Revenues are in the $4.5B range with a CAGR of 19%. The Company is a leader in genetic diseases (Lysozyme Storage Disease) with a diversified product line. Guidance for financials in 2010 will be given on February 17. In the meantime Carl Icahn owns 1.5M shares and is looking for a Proxy fight. Q4 Revenues slipped to $1.04B due to the plant shutdown helped by the osteoarthritis knee pain drug Synvise-One and the oncology drug Mozobil which were launched in 2009.

Gilead (GILD)
Gilead is the leader in the treatment of HIV and AIDS with $4.7B in 2009 revenues up 26% from previous years. HIV testing will be mandated or encouraged resulting in 5 million more tests in the U.S. providing increased drug demand because HIV is now a manageable disease with daily drug therapy.
The Company also has the leading antiviral, Tamiflu for treatment and prevention of FluA and B sold through their partner Roche with sales of $2.7B and royalties to GILD at $195M.
Viread another major drug, a reverse transcriptase and polymerase inhibitor was approved in Europe in 2008 for chronic HBV infection.
A broad pipeline of products include: Quad (GS9350) regimen of the integrase inhibitor which recently met goals in a Phase II trial; GS9450 Caspase inhibitor for HCV in Phase II; Aztreonam inhalation for cystic fibrosis with pending market applications; and other Ph. II products for HCV, CF and Pulmonary Arterial Hypertension as well as several others in preclinical and Phase i stages.

Dendreon (DNDN)
Dendreon is gearing up to launch Provenge (sipleucel-T) an active cellular immunotherapy for treatment of asymptomatic, metastatic and androgen-independent treatment of prostate cancer.
Commercialization is expected by year-end with full capacity by mid-2011 supporting sales in excess of $500M. In the pipeline are products for bladder cancer and renal cell carcinoma as well as other cancer
types. This new class of therapy uses the power of the patient’s own live cells, by isolating and activating antigen presenting cells(APC’s) in an autologous therapy 3X a month.
Three cell processing centers will be set up but the existing service infrastructure will be used. A partner for Europe may be sought.
125 domestic sales reps will be hired to call directly on 3000 urologists and 5000 oncologists.
The Company has a cash position of about $600M.

Illumina (ILMN)
Illumina appears to have weathered the brief slowdown in purchases of genetic analysis systems with a preliminary financial report that states Q4 Revenues above Street estimates at $176M.2010 guidance is revenues of $800 and earnings close to $1.00/sh. The stock took a big hit last quarter down to the 26 range after it issued a warning on October 28 about weak Q3 sales. Shares are now $39-40.The Company recently received an order for 128 HiSeq 200 sequencing systems from the Beijing Genomics Institute(BGI) some of which will be installed in their state of their art genome center in Hong Kong beginning in Q1. This new system will have a price tag near $700k and can sequence an entire human genome for about $10,000.The HiSeq 2000 can generate 200Gb of data per run with a new standard for ease of use and cost effectiveness.

LifeTech(LIFE)
The merger of Invitrogen with API has created one of the largest biotech “tools” companies with revenues of over $3B focused in molecular, genetic and cellular markets. Over $1B of sales revenue comes from eCommerce
and 50% of their revenues come from NIH and other government life science research funding. The Company has a patent estate valued at $100M and efforts are underway to leverage that technology through licensing and partnerships. Longer term the Company will pursue synthetic biology, animal health, food testing and molecular diagnostics. The vision is to apply single molecule sequencing and other technologies as a basis for medical treatment. The Company announced it signed a definitive agreement to acquire AcroMetrix, a provider of molecular and serological QC products, a strong fit with the current high growth $300M molecular diagnostics product line.

Edited version published in Genetic Engineering News (GEN) Thursday January 14,2010

Rod Raynovich BIOgraph companion diagnostics, personalized medicine

Over 5000 people piled into the Westin St. Francis Hotel in San Francisco for the 28th Annual Conference. Investors, Company presenters and entrepreneurs
were emboldened by good biotech sector returns in 2009 of 18-28% with many stocks reaching new highs. Seasonality has been a factor
with the so-called “January effect” where small cap stocks tend to spike up due to a number of factors but this Conference is paramount. For example the IBB ETF is up about 6% from November levels
Although financing opportunities are still limited due to a closed IPO window there is renewed optimism due to explosive scientific developments in molecular biology
immunology and genomics and how this will result in more targeted drugs and diagnostics.

Among the big movers Monday were :
AMAG up 7.9%, Array(ARRY) up 8.5%,Biocryst( BCRX )up 4%, Helicos (HLCS) up 4.6%,Ideninx(IDIX) up 9.2%,Quidel(QDEL) up 4.5%,MITI up 11%,
NovaVax(NVAX) up 14% and Seracare (SRLS) up 6.7%

At the Luncheon and Keynote Chairman and CEO Jamie Dimon of JPMorgan(JPM) gave an excellent synopsis of the current economic environment,
while detailing some of the causes of the financial meltdown . Dimon said ,”there is plenty of blame to go around and the risk management rules were not followed”.
Aggressive mortgages,securitization, derivatives and bad housing policy are among the culprits.
While the bailout of big banks is still a big issue (See Jan. 12 WSJ headlines) with the public Dimon felt that Secretary Hank Paulson did the right thing with little time to explore options and
averted a more disastrous scenario. He also has praise for Bernanke and Geithner. Dimon supports stronger consumer protection but doesn’t favor creation of a new Federal agency. The Feds could not avert the failure
of Lehman because it was an investment bank and the public outrage would have been considerable. However with more time, Lehman which had $20B in assets and $120B in debt
could have been saved from bankruptcy by restructuring debt with help from other private players. Dimon favors healthcare reform due to the number of uninsured and the stress on infrastructure such as emergency rooms but believes people need to take more responsibility for their health to combat smoking, obesity and management of Type 2 diabetes. The biggest issue in healthcare reform is how to reduce cost.

Also in response to Q and A Dimon made a number of key points:

-We need better enforcement of existing rules and laws but no doubt a major overhaul of the financial regulatory system may be needed.

-We do not need to re-instate Glass Steagall Act because that would not have prevented the meltdown of AIG and Lehman.

-There is $3.5T of commercial real estate debt outstanding of which 40% is held by banks. As equity is wiped out, debt should reach a stable level and new investors are coming in.

Rod Raynovich

Rod Raynovich RAG

We will be attending the 28th Annual JPMorgan Healthcare Conference in San Francisco and reporting on various companies and news on the Genetic Engineering News WEB site (www.genengnews.com).
Although we will be attending presentations of companies in all sectors we will try to focus on the following:

Diagnostics e.g, GenProbe, Idexx, Inverness
Genomics e.g. Celera, Illumina, LifeTech
Immunotherapy e.g. Dendreon, Emergent Biosolutions, Intercell
Small and Mid Cap biopharma e,g, Alnylam, Seattle Genetics, Viropharma

There are also some interesting panels on healthcare reform,personalized medicine and diagnostics.

Rod Raynovich BIOgraph

Robert W. Baird and Co. analyst Lawrence Neibor upgraded four medtech stocks and helped get the “January effect” in full swing. Cyberonics (CYBX), Edwards Lifescience (EW), Thoratec (THOR) and Volcano (VOLC) were all upgraded to Outperform from Neutral. Volcano was up 9% to 19 in late afternoon trading on 640k shares and is up about 30% from January 2008 levels. Volcano is a leading provider of intravascular ultrasound(IVUS) and functional measurement (FM) products that aid in the diagnosis and treatment of vascular and structural heart disease with annual revenues in the $225M range. Over 2500 consoles have been installed.
In his January 4, 2010 report, Mr. Neibor raised his price target to $23 saying that “it is one of the best- positioned stocks in devices, offering superior sales growth due to innovative IVUS and FFR technologies”.
Drivers for 2010 will be clinical studies (FAME) which will demonstrate cost savings and efficacy, increased market penetration, systems integrated marketing approach, and market launches of four products in IVUS and FFR pressure wires.VOLC revenues have been running in the $54M range for the last two quarters with a loss of $4M in Q3 2009. Mr Neibor is forecasting a profit of $0.09/share for 2010 compared to an estimated loss of 37 cents a share in 2009; revenues are forecasted at $290.7M. The price target of $23 would be 4X revenue and “should be awarded a higher multiple because we think investors will look toward companies with a significant technological advantage once the details of healthcare reform are more clear.”
The balance sheet looks strong with little long term debt and shareholder equity of $212M for 2009. The Company has $115M in cash.
The Medtech sector has outperformed the market over the past decade because of much smaller losses in 2008 and strong gains in good years.

Rod Raynovich BIOgraph intravascular ultrasound, medtech Baird cardiovascular