Healthcare Review: DaVita, WellCare, Seattle Genetics, Chelsea Therapeutics, OXiGENE Print E-mail
By Staff and Wire Reports   
Wednesday, 12 February 2014 15:05
The S&P 500 rose slightly on Wednesday as a slide in Procter & Gamble's shares kept gains in check after a four-day rally took the benchmark index within striking distance of a record high. The Standard & Poor's 500 has risen 3.9 percent over the past four sessions, its longest winning streak of the year and best four-day performance in 13 months. The S&P 500 now stands 1.4 percent below its record closing high of 1,848.38 set on Jan. 15. The advance came after Wall Street's sharpest drop in more than a year, with a selloff triggered by turmoil in emerging markets. Investors were subsequently reassured after Congress agreed to advance legislation extending U.S. borrowing authority and Federal Reserve Chair Janet Yellen held off from making any changes to its schedule for trimming stimulus.

DaVita ($DVA +5.5%) hits a new all-time high after cruising past earnings estimates last night and upping 2014 operating income guidance to $1.725B-$1.86B from $1.675B-$1.85B. Consolidated operating cash flow is expected at $1.45B-$1.55B. “[This year's] operating income guidance was increased on an improved dialysis outlook, and we suspect that will not be the last time,” says Feltl's Matt Weight, though warning upcoming Medicare Advantage rate projections from the Centers for Medicare and Medicaid - due next week - could dampen share growth.

WellCare ($WCG -10.5%) shares tumble after Q4 earnings came in short of expectations, as higher medical benefits expenses overshadowed revenue growth. WCG sees an impact of $1.17-$1.26 a share to adjusted net income during 2014 due to $125M-$135M in health insurer fees stemming from the Affordable Care Act - that’s on top of as much as $1.19/share in additional expenses expected during the year, such as corporate infrastructure investments, growth initiatives and interest expense increases; WCG sees its capital expenditures jumping as much as 50% Y/Y. For FY 2014, WCG predicts adjusted EPS of $3.75-$4.05 vs. $5.03 analyst consensus estimate, and premium revenue of $11.6B-$11.75B.

Seattle Genetics ($SGEN +12.2%) is upgraded to Buy from Hold with a $60 price target at Needham, which says SGEN could be the next large cap drug company. The firm believes SGEN's leadership in developing antibody drug conjugates to fight cancer make it one of a small number of mid-cap biotechs with the ability to generate long-term growth sufficient to become a sustainable large cap drug company. Needham notes sales of SGEN's flagship Adcetris lymphoma drug have been modest so far, but forecasts $2B-plus in worldwide sales by 2020.

Chelsea Therapeutics ($CHTP +2.6%) is 70% likely to win FDA approval Friday for its Northera treatment of neurogenic orthostatic hypotension, Adam Feuerstein predicts, adding that there's a small chance of a delay given the short time period between Friday's approval decision date and last month's positive advisory panel. A Northera approval would be good news as long as the FDA doesn't saddle the drug with significant use restrictions; an FDA-approved label which says Northera should not be used longer than a week or two would be a disappointment.

OXiGENE ($OXGN) has agreed to sell $12M worth of units to investors for $2.05 a piece. Each unit consists of one share and 0.5 of a five-year warrant to purchase another share. The warrants have an exercise price of $2.75 a share and will be exercisable immediately.




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