Aug 27, 2010 10:04 AM PDT
ZGEN: Cuts Q3 Loss by 50%+ and Gets Wedbush Upgrade
AIRM: Increases Q3 Net Income 51% - $1.01 EPS
TSPT: Regains Its Composure after $14-$5 Nose Dive
Gaining 13.84% this morning is ZymoGenetics Inc., (ZGEN) http://www.zymogenetics.com/ currently trading in the $5.76 range. ZGEN topped its 3-Month average daily trading volume early in today's session. There is approximately a dollar spread between ZGEN's current price and its 52-week high of $6.71 set on 09-11-09. The chart below says the stock is trying to make a $6 floor. With top-line sales of its drug Recothrom increasing and its bottom-line R&D costs decreasing, I believe ZGEN can make a new floor and with a little good news here and there in the near-term, can pick up the dollar and set a new high. This is a 'Buy' stock for me.
Research house Wedbush Morgan likes this stock too, giving ZGEN an upgrade this morning from 'Neutral' to 'Outperform'.
Yesterday after market, ZGEN released its Q3 2009 numbers. The BioTech company reported it lost $11.4 million, or 17 cents per share, compared with $28.8 million, or 42 cents per share, one year earlier. That's a marked improvement. Analysts were looking for a 20 cent loss: ZGEN beat street expectations.
In Q3 09, ZGEN revenues more than doubled to $27.5 million from $11.9 million. Sales of ZGEN's primary drug Recothrom, which is used to control bleeding during surgical procedures, climbed to $8.5 million from $1.8 million.
ZGEN license revenues increased to $18.5 million from $8.5 million and R&D spending fell to $21.3 million, down from $30.2 million a year ago.
ZGEN management is trying to get its books and operations together and post a plus Q4 earnings report. If it can keep sales of Recothrom at a steady or greater pace, they can do it as long as they prevail in court.
Court ?
ZGEN management said on Wednesday that a federal court in Tennessee had served it with three temporary restraining orders related to the marketing and promotion of Recothrom. Four rival companies are suing ZGEN in that court, accusing ZGEN of unfair competition, false advertising and trademark infringement. ZGEN management disputes the allegations and asked the court for an immediate hearing to lift the orders.
Think about it: Stopping bleeding during surgery is a big deal. There is a huge market to be had and ZGEN is already selling its wares. Lawsuits are typical in the Pharma industry and I believe that ZGEN will still make money even if they are contested into 2010.
Here's why... other drugs in the pipeline.
ZGEN has presented final Phase Ib clinical trial results for its PEG-Interferon lambda with positive results for tolerability and antiviral activity, and the Phase II clinical trial is underway. That will now trigger a $70 million milestone payment from its partner Bristol-Myers Squibb. ZGEN also has Interleukin-21 (IL-21) and in August, completed enrollment in the Phase II study in metastatic melanoma. The single-agent study is evaluating IL-21 in patients with no prior systemic therapy for metastatic melanoma. ZGEN continues to anticipate progression-free survival and overall survival results to be available in early 2010.
ZGEN also has drugs IL-11, IL-31, rFactor XIII, IL-17, IL-20 and IL-22 in various phases of trials. ZGEN also has collaboration agreements with Bayer Schering Pharma AG and Merck. Lawsuits or not, still a 'Buy' for me at this price.
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ZGEN
Gaining 5% this morning is S&P SmallCap 600 company Air Methods Corporation (AIRM) http://www.airmethods.com/ currently trading in the $33.90 range. AIRM handily surpassed its average daily trading volume early in the session. With $505 million in trailing twelve month revenues, AIRM has a 52-week high of $36.38 set on 08-21-09. AIRM also returned $2.07 in diluted EPS in the last calendar year.
The Chart below suggests AIRM has a $32 floor and is constantly looking for support at the $34 level. I believe AIRM can make that threshold permanent. This is a 'Buy' stock for me at this price and if I had to set a long-term (12 Mo) target, I would mark it at $40.
Yesterday after the market, AIRM released its Q3 2009 earnings: Revenues increased 3% to $137.6 million from $133.8 million in the year-ago quarter. For the nine-month period, revenue increased 3% to $390.4 million, up from $379.9 million in the prior-year nine-month period.
For Q3, AIRM net income increased 51% to $12.6 million, or $1.01 per diluted share, as compared with prior-year quarter net income of $8.4 million, or $0.67 per diluted share. Net income for the nine-month period increased 69% to $26.2 million, or $2.12 per diluted share, compared to $15.5 million, or $1.23 per diluted share, for the prior-year period.
AIRM is in the business of emergency air medical transportation and medical services. The AIRM Hospital-Based Services Division is the largest provider of air medical transport services for hospitals. The Community-Based Services Division is the largest community-based provider of air medical services. The Products Division specializes in the design and manufacture of aeromedical and aerospace technology. AIRM has a fleet of over 300 helicopters and fixed wing aircraft.
WEATHER
AIRM's October 2009 total community-based transports during October 2009 were 3,065 compared with 3,495 during October 2008. Same-Base Transports decreased 489 transports or 15%, while weather cancellations for these same bases increased by 636 transports. Weather cancellations almost doubled as compared with the prior-year month, reflecting very severe weather conditions.
Aaron Todd, AIRM CEO said, "We are pleased with the continued strength in our financial performance through the third quarter of 2009. Despite more severe weather and the lack of hurricane response activities in the current-year quarter compared with the prior-year quarter, the Company has achieved strong earnings growth. Our cost reduction initiatives continue to improve our operating margins and our fleet rejuvenation and conversion activities will be ongoing throughout future periods. Our strong cash flows from operating activities of $52 million has allowed the Company to repay its line of credit in full, while also providing liquidity to finance aircraft purchases and safety technology upgrades. Although we experienced our most severe weather month of the entire year during October, our Same-Base Transports would have increased by over 4% absent the increase in weather cancellations." 'Buy'.
AIRM TSTP
Gaining over 7% this morning is Transcept Pharmaceuticals Inc., (TSPT) http://www.transcept.com/ currently trading in the $5.80 range. TSPT also sailed past its average trading volume this morning. You can see on the chart above that TSPT took a hard nose dive from the $14 range to its current price. On 10-19-09 it set a 52-week high of $15.40. What happened? The FDA.
TSPT management will address this in its entirety I'm sure when it releases its Q3 2009 results on November 12 after the market.
Is the story here 'Buy on the dips'?
That all depends on your risk exposure level. Buy now with good Q3 numbers to follow and there's a profit to be made, Buy now with bad Q3 numbers to follow and there's a loss to be had. This is a 'Watch Closely' stock for me. If TSPT does report good numbers, it could stage a rally and set a new level in the $6-9 range. Will it get back to $14? Not in the near-term I don't think unless the FDA does a 180.
What did the FDA say anyway?
It wanted more safety data about TSPT's sleep-disorder drug Intermezzo. That means more trials for TSPT. The TSPT CEO says the Company has enough cash to see it through. TSPT is trying to get the drug approved 'to treat insomnia in patients who find it difficult to return to sleep after waking up in the middle of the night'. The FDA wants to see if Intermezzo would present any risk in a person's driving ability the day after. The FDA also asked TSPT to address methods to avoid inadvertent dosing with less than four hours of bedtime remaining, and inadvertent re-dosing in a single night.
"A reasonable estimate is that this whole process will certainly not take less than six months. We would hope that the pending meeting with the FDA will not require more than a year, but we do not know yet," Chief Executive Glenn Oclassen said.
Good News for TSPT
Wednesday, TSPT received a Notice of Allowance from the United States Patent and Trademark Office for claims under U.S. patent application no. 11/833,323, which covers the use of Intermezzo (zolpidem tartrate sublingual tablet), the lead TSPT product candidate. Once issued, this patent will expire in February 2025.
If you'd like to know of any changes in our opinion of ZGEN, AIRM or TSPT
(or if SCN officially recommends them as trades)
