September 14, 2009
The trading week was shortened due to the Labor Day celebration, as well as a somber sentiment in remembrance of the victims of 9/11. Despite this, the markets concluded the week higher overall, although falling short of six consecutive up days, which would have been the longest streak since late November.
Of recent, there appears to be less selling pressure within the marketplace, which has helped propel the indices higher. Since its 12-year low closing price on March 9, the S&P is now more than 54% higher.
One of the leading percentage gainers during the past week was Vivus Inc. (VVUS), a biopharmaceutical company developing innovative, next-generation therapies to address unmet needs in obesity, diabetes and sexual health. The company’s stock surged more than 70% last week in response to Vivus’ final two late-stage trials evaluating Qnexa, which met all primary endpoints and exceeded the FDA efficacy benchmark.
Qnexa, the company’ investigational drug for the treatment of obesity, could potentially offer patients struggling to lose weight a much needed weight loss aid. The drug combines low doses of the stimulant Phentermine and the epilepsy drug Topiramate.
Phentermine was part of the infamous fen-phen diet drug controversy where the drug was tied to cardiovascular problems in those that were taking the weight loss drug. Current side effects of Qnexa include tingling sensations, dry mouth, insomnia, altered taste and constipation.
In 1,267 morbidly obese test subjects, the average person lost 37 pounds or nearly 15% of their body mass over the course of a year. In a similar, two-year study, 2,487 patients taking Qnexa witnessed an average weight loss of 30 pounds, or 13.2% of their total body weight.
Leland Wilson, CEO at Vivus commented on the company’s recent success, "I think this is a game-changer. This will change the way people look at obesity, the way payers pay for it, and we think it will have a major impact on health."
Wilson later added, "We've had high interest from pharmaceutical companies, but we were all waiting for these results. Now serious negotiations can begin." The company is now formulating plans to begin partnerships with larger pharmaceutical companies in order to market their product.
Following the company’s announcement on the results of the test trial, shares of VVUS surged during the September 9 trading session, reaching a high of $12.49 before retreating to close at $11.80 that day. Over the next two trading days, the stock would establish a new 52-week high of $12.88 before ending the week at $11.06, up over 73% for the week.
At the start of the new trading week, shares of Vivus resumed their upward trend, adding $0.17, or 1.5%, to close the September 14 session at $11.23 per share.
Operating as the world's largest confectionery business with a primary position in twenty of the world's fifty largest confectionery markets, Cadbury PLC (CBY) made headlines last week as the company was the target of a takeover bid by Kraft Foods Inc. (KFT), the largest branded food and beverage company in the U.S. and the second largest in the world. Upon news of the proposed bid, shares of CBY added more than $14 per share heading into the September 8 session.
The deal, in which Kraft proposed 10.2 billion pounds (US$16B) for Cadbury, was quickly rejected by company official, stating that the offer grossly undervalued Cadbury and its future prospects. The offer price represented a 31% premium over Cadbury’s closing price of $37.46 on Friday, September 4. Kraft announced their takeover intentions on September 7.
Cadbury’s Chairman, Roger Carr, responded to the takeover bid by stating, "I would emphasize that the delivery of value to our shareholders remains at the top of our agenda. Your proposal is for Cadbury shareholders to exchange shares in a pure-play confectionery business for cash and shares in Kraft, a company with a considerably less focused business mix and historically lower growth."
Kraft Foods' Chairman and CEO Irene Rosenfeld remarked on the proposed deal, "This proposed combination is about growth. We are eager to build upon Cadbury's iconic brands and strong British heritage through increased investment and innovation. As we have done, Cadbury has built wonderful brands by focusing on quality, innovation and marketing, but we believe the next stage in Cadbury's development will be challenging, given the increased importance of scale in the industry."
Rosenfeld later added, "Our current plans contemplate that the UK would be a net beneficiary in terms of jobs. For example, we believe we would be in a position to continue to operate the Somerdale facility, which is currently planned to be closed, and to invest in Bournville, thereby preserving UK manufacturing jobs. We believe that Cadbury's share price already reflects its prospects as a standalone entity and the benefits of VIA (Vision Into Action program). We hope to engage with the Board of Cadbury on a constructive basis with the goal of consummating a recommended transaction."
If talks do not resume in a more constructive manner, Kraft may seek to make a hostile takeover bid for Cadbury. Kraft is already in discussions with Citigroup Inc. (C) and Deutsche Bank AG (DB) in order to set up debt financing for nearly half of the 10 billion pound, or $16B offer price.
By the end of the trading week, shares of CBY jumped more than 38% on buyout talks. Heading into the September 14 session, shares of Cadbury continued with their uptick, gaining $0.34, or 0.7%, to close the day at $52.16 per share.
Over the course of a year, shares of CBY have traded as low as $27.58 and as high as $53.05, which was established the day the company rejected Kraft’s offer.
Rounding out the list of top performing stock for the week ending September 11 was Hi Tech Pharmacal Co. Inc. (HITK), which benefited from a positive quarterly earnings report that sent the company’s shares higher by nearly 30% for the week.
Hi Tech, is a specialty pharmaceutical company that develops, manufactures and markets branded and generic products that include liquid and semi-solid dosage forms of pharmaceutical products, as well as producing a wide range of sterile ophthalmic, otic and inhalation products.
In a report released on September 9, HITK revealed that the company’s profits during the 1Q increased year-over-year, in large part due to increased sales of generic drugs. For the period, Hi Tech recorded net income of $8.7M, or $0.73 per share, compared to the prior year’s earnings of $1.5M, or $0.13 per share.
Quarterly revenues more than doubled during the period, advancing from $15.8M to $43.5M. The company witnessed a $3.25M contribution to overall sales from the company’s recently acquired ECR pharmaceuticals, which Hi Tech purchased in February.
Looking further into the company’s sales totals, Hi Tech saw generic drug sales nearly triple during the quarter, from $12.5M to $36.7M. Revenues form their health care products increased almost 11%, from $1.9M to $2.1M.
With a new trading week commencing, shares of HITK resumed their trek higher, gaining more than 2%, or $0.42, to end the September 14 session at $20.73 per share.
Over the past year, the company’s stock has traded as low as $3.46 per share, and as high as $22.65 per share on the day following the company’s earnings announcement.
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