Senior Analyst Dr. Jason Kantor of Credit Suisse Group recently upgraded The Medicines Company (MDCO) due to its solid portfolio in what is a very specialized pharmaceutical area.
“Medicines Company is a hospital-focused specialty pharmaceutical company. All of this company’s products are designed to be sold into hospitals. This is a very specialized area, and there are only a handful of companies that do this well,” Kantor said.
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Kantor says that recent M&A deals have shown the attractiveness of this space. While Medicines Company is in three primary areas within the hospital —cardiovascular, antibiotics and pain management — Kantor says the antibiotic segment is the one to watch.
“These are the three big pillars of drug use in hospitals. I think in particular the anti-infective franchise is going to get a lot more focus,” Kantor said. “We believe that Medicines Company’s portfolio, not just its lead program but its pipeline in antibiotics, is very solid, and we expect the FDA to continue to be very permissive in terms of bringing new antibiotics to market.”
Senior Analyst Dr. Jason Kantor of Credit Suisse Group says PTC Therapeutics, Inc. (PTCT) is one of his top biotech picks, as it has significant amount of clinical and regulatory news in 2015 that could drive outperformance.
“PTC, specifically, has as their primary focus rare genetic diseases. Their lead drug, Ataluren, is for Duchenne’s muscular dystrophy. It’s an oral drug, and it’s the first drug of its kind. It’s been conditionally approved in Europe — in fact they are launching it there as we speak — which is a major de-risking event for the company,” Kantor said.
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Kantor says PTC is in Phase III for the same indication in the U.S., and he expects that trial to be completed in the fourth quarter of 2015. Ataluren is also in Phase III for other genetic diseases, Kantor adds.
“Ataluren, in addition to being useful in muscular dystrophy, is also in a Phase III trial for cystic fibrosis, which represents another very large unmet need in the area of rare genetic diseases,” Kantor said. “We like PTC because it’s been substantially derisked, and there are several additional key derisking events in 2015, which we think could drive outperformance.”
Analyst Stefan Quenneville of Morningstar says Vertex Pharmaceuticals Incorporated (VRTX) is an attractive larger-cap name within his coverage universe, as the company has a large opportunity in the cystic fibrosis market.
“It’s actually still an unprofitable company,” Quenneville said. “People are well aware of the opportunity in cystic fibrosis for the company. We think this is a really big attractive market, and Vertex is going to do quite well in the space.”
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Quenneville says Vertex is combining two of its drugs, which is up for approval in the middle of 2015. He believes Vertex will get a strong price for the combination, and that it will be a very successful launch.
“It’s a very attractive name, and it’s a company that’s developing a very strong franchise in cystic fibrosis. I don’t think there are going to be a lot of people that will be able to compete with them once Vertex really gets established and takes hold in the market,” Quenneville said.
Analyst Stefan Quenneville of Morningstar says Amgen, Inc. (AMGN) is a large-cap biotech name that investors are viewing as lagging in terms of innovation. However, he views Amgen as an operational turnaround story.
“There were quite a few pipeline failures over the years, and a lot of their main products are starting to be vulnerable to biosimilar competition. So people are looking at it negatively, but recently they have announced some cost-cutting measures and have also made some big investments in their manufacturing processes that are really going to bring down some of their costs and improve their overall margins,” Quenneville said.
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Quenneville also says the market may not be appreciating Amgen’s emerging pipeline.
“We think it’s an operational turnaround story — there is lot of operating leverage in their model — and we also think that their pipeline is going to start producing some hits over the next few years, so it’s a bit of an operational turnaround, emerging pipeline story that is underappreciated. That’s another name that we think has some value in this market,” Quenneville said.
Analyst Stefan Quenneville of Morningstar says Sanofi SA (ADR) (SNY) is a good value stock, and details the reasons why this Big Pharma name is down on the year.
“What it really all came down to, last quarter they reported disappointing guidance for their diabetes franchise, and probably even more importantly what affected the stock was that the CEO was fired due to conflicts with the board of directors of the company. So there was a big cloud of uncertainty over the company that’s a real short-term concern,” Quenneville said.
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Quenneville, however, believes that overall Sanofi is a company with a wide moat and very attractive business.
“It’s well diversified; it has a strong vaccine business and longer-term the diabetes franchise, which is the big driver for the company and does have challenges, is still an attractive place to be. So overall we think that given its valuation, which is quite cheap compared to most of its Big Pharma peers, this is a good opportunity to get into a wide moat company at a really attractive discount to its fair value,” Quenneville said.
CEO Jonas Prising of ManpowerGroup Inc. (MAN) says that when the economic recovery began in 2011, his company laid out a roadmap to help them navigate the slow-growth environment while still delivering profitable growth.
“When we began to see the global economic recovery take hold in 2011, we could sense that this recovery was going to be atypical of the recoveries that ordinarily follow a downturn. It was more drawn out, and growth was much slower than in the past,” Prising said.
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Prising says ManpowerGroup recalibrated its business in 2013. At the time, its EBITA margin was 2.4%; now it is at 3.6% on a trailing 12-month basis. Prising says ManpowerGroup is currently on a journey to 4% operating margin.
“We have improved our leverage by 120 basis points, and almost 100 basis points are from simplification and cost recalibration, and 20 basis points came through our improved GP mix. Our goal is to reach 4% operating margin, and the remaining 40 basis points will come from improved productivity and efficiency on incremental revenue growth. It is a path we laid out in February 2013, and we are making very good progress on that plan,” Prising said.
Chip Paucek, Co-Founder and Chief Executive Officer of 2U Inc (TWOU), said the company has signed its fifth program commitment for 2015, adding an MBA program at the Kogod School of Business at American University. He was speaking at the 17th annual Needham Growth Conference, held at the Palace Hotel in New York City.
2U partners with colleges and universities to create degree programs that combine online learning with live programming and on-campus privileges. Existing partners include the University of California at Berkeley, the University of Southern California, Georgetown and other top institutions. The company has a total of 18 programs covering 13 verticals with 12 universities.
The American deal marks the first time a third program has been added to a vertical, Paucek said. 2U signs 10-to-15-year deals with the universities, provides the back end for the online learning and shares tuition revenue. Admission, staffing and other details that traditionally fall to the universities are strictly handled by those institutions, Paucek said.
Paucek said the 2U programs have an 83% to 84% retention rate for students. Revenue share to 2U averages 65%, he added.
2U had an IPO last March. “Year-over-year losses are decelerating,” Paucek said, with adjusted net loss improved by 46% and adjusted EBTDA loss improved by 60%, year over year. Initial 2015 outlook suggests revenue growth remaining high and adjusted EBITDA loss margins continuing to improve, Paucek said.
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SS and C Technologies Holdings Inc (SSNC) expects adjusted revenue for 2014 of $761 million to $766.1 million, according to Chief Executive Officer William Stone. He was speaking at the 17th annual Needham Growth Conference, held at the Palace Hotel in New York City, New York.
SS&C Technologies is an on-demand provider of cloud-based software for financial services firms. It has 4,650 employees and 56 offices worldwide to service 7,000 clients, including Morgan Stanley, Pacific Life, GM Asset Management, J.P. Morgan and Citi, among others.
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The company has grown largely through acquisitions, Stone said. “Three times in our history we bought companies that had 70% of our revenue.” SS&C claims that it has 91% contractually recurring revenue, Stone said. The company revenue comes from software licenses, professional services, maintenance and software-enabled services.
The company’s adjusted net income was between $204.4 million and $205.8 million, with $225 million to $235 million cash for operating activities. Net income was up about 19.8% in adjusted after-tax net income.
“More and more people want to have outside experts do the work anyway,” Stone said. “We run our own data centers, which gives us flexibility and allows us to move quickly.” The company handles portfolio management, reconciliation, valuation, performance and attribution, reporting, risk management, regulatory solutions, investor services and training and other financial record-keeping.
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Comverse Inc (CNSI) President and Chief Executive Officer Philippe Tartavull said the company is committed to becoming free-cash-flow positive in 2015. He was speaking at the 17th annual Needham Growth Conference, held at the Palace Hotel in New York City.
The company, which provides such technology services as billing systems and communications management, is “moving our platform to the cloud,” said Tartavull, and has done extensive restructuring resulting in savings of $30 million, he said. Comverse is moving to software-only delivery models and software platforms to the cloud, Tartavull said, while managed services “should generate higher operating margins.”
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Tartavull said the company expects revenue of $480 million for 2014, with $220 million in cash reserves and no debt as of October 31. Additional restructuring and outsourcing is expected in 2015, Tartavull said, with the company using its debt-free balance sheet assets to help accelerate growth.
Comverse is targeting markets growing on average 15% for the next three to five years, Tartavull said. It is focusing on “faster-growing” technology markets as voicemail and video mail decline, Tartavull said, working with such customers as Verizon, AT&T, Bell and Foxtel, among others. It has 450 customers worldwide.
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HubSpot Inc (HUBS) is on track to be cash-flow positive in 2016, according to Chief Financial Officer John Kinzer. He was speaking at the 17th annual Needham Growth Conference, held at the Palace Hotel in New York City.
The inbound marketing company, which went public on the New York Stock Exchange last October, has over 12,000 customers, Kinzer said. It is targeting the estimated 2.9 million mid-market companies in the U.S. and Europe.
“About 3% of companies have a solution like ours,” said Kinzer. “It’s pretty wide open. There’s lots of opportunity to grow the business in that market.” Retention rates for current HubSpot customers are “in the low 90s,” Kinzer said.
HubSpot will announce its fourth-quarter and full-year 2014 financial results after the U.S. financial markets close on Wednesday, February 11. The company’s third quarter showed $30.4 million in revenue, up 51% year-over-year.
“There’s been a lot of work done about really educating the market about what inbound marketing is,” Kinzer said. “What you’re seeing now is people realizing they need to have this.”
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