Wednesday, August 26, 2009

Affymax (NASDAQ:AFFY): Cowen's Non-Consensus Idea

Cowen is highlighting Affymax (NASDAQ:AFFY) as one of their non-consensus ideas:

Consensus View: The typical investor ignores Affymax. Some do so simply because they view the company as too early in its lifecycle, while others are concerned that lead candidate Hematide's Phase III trials may not succeed. Nearly all think that Hematide's commercial prospects are uncertain as it will compete against the entrenched epoetin franchises of Amgen and Johnson & Johnson, and therefore will struggle to gain share.
Our View: We think Affymax is likely to be one of the best-performing small cap biotech stocks over the next 6-12 months. Biotech investors are keenly focused on events occurring within a couple of quarters, and all four of Hematide's Phase III trials will report results in Q1:10. As Hematide will challenge the Epogen/Aranesp/Procrit franchise, one of biopharma's most successful, in the $4B renal anemia market, all investors will need to form an opinion of its prospects. Therefore Affymax will become very topical, and we expect just the increase in visibility will drive outperformance. Moreover, we believe that as investors do real work on Hematide, they will be pleasantly surprised by what they find. We recently checked in with 6 anemia physician consultants who have been involved in Hematide's development. They are unanimous in their opinion that Hematide's 4 Phase III trials will succeed, and support FDA approval. They believe its once-monthly administration is a significant advantage in the $1B predialysis market and therefore expect it to capture share. While its competitive advantage in the $3B dialysis market is less clear, the nearly-certain introduction of bundled reimbursement in 2011 will create the opportunity for Hematide to take share by competing on price. Our DCF analysis suggests Affymax is pricing in 2016 (peak) U.S. sales of just $280MM - $360MM, representing approximately 7-9% of the market. Should investors come to believe that Hematide could take more substantial but still minority 20-30% share of the kidney disease ESA market, Affymax's stock would appreciate by 100-200%.

Action: Looking at the chart I wouldn't say AFFY is that ingored. After all, the stock is trading near the 52-week highs and is almost certain to make a new high today with the help from additional spotlight from Cowen. They make a good case for the stock and highlighting a stock as potential double or triple tends to attract some new money.

It is very thin name, too thin to be involved with meaningful size.. but if you're able to get some shares early on, you should be able to unload these at least 1 point higher when the rest of the crowd comes chasing the shares.

Or maybe I'm just too bored. It has been really slow this week and I don't see anything even mildly interesting today.

No comments:

Post a Comment