The Zacks Analyst Blog Highlights:Isis Pharmaceuticals, Onconova Therapeutics, Vertex Pharma, Biogen and FTI Consulting

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Feb 27, 2014, 09:30 ET

CHICAGO, Feb. 27, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Isis Pharmaceuticals (Nasdaq:ISIS-Free Report), Onconova Therapeutics (Nasdaq:ONTX-Free Report), Vertex Pharma (Nasdaq:VRTX-Free Report), Biogen (Nasdaq:BIIB-Free Report) and FTI Consulting, Inc. (NYSE:FCN-Free Report).

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Here are highlights from Wednesday's Analyst Blog:

Biotech Stock Roundup

Key events in the biotech sector last week included encouraging data from Isis Pharmaceuticals (Nasdaq:ISIS-Free Report) and disappointing late-stage data from Onconova Therapeutics (Nasdaq:ONTX-Free Report). The week, however, ended on a positive note with Vertex Pharma (Nasdaq:VRTX-Free Report) gaining FDA approval for another indication for its cystic fibrosis (CF) drug, Kalydeco.

Isis Soars on Mid-Stage Data: Isis' record of delivering encouraging data on pipeline candidates continues with the company presenting positive top-line results on its spinal muscular atrophy (SMA) candidate, ISIS-SMNRx. The study, conducted in children with SMA, showed that the 9 mg dosage led to an average increase of 3.7 points in muscle function score. An increase in SMN protein was also observed.

That's not all – the company also presented interim data from a study in infants. All four infants in the 6 mg cohort remained in the study for more than six months and are now about nine and a half to 16 months old. All four are alive with none requiring permanent respiratory assistance.

Even though the data is on only four infants, the results are encouraging and support the advancement of ISIS-SMNRx into phase III studies for infants. With not too many treatments being available for SMA, the successful development of ISIS-SMNRx would translate into big money for Isis.

Shares were up 15.5% and Isis remains on track to move the experimental drug into phase III studies this year. The main question is will partner Biogen (Nasdaq:BIIB-Free Report) opt in and in-license the candidate.

Raptor Scores in Huntington's Disease Study: Raptor's shares jumped 14.9% with the company reporting encouraging top-line results on its Huntington's disease experimental drug, RP103, from an ongoing phase II/III study. At 18 months, total motor score (TMS) progression, the primary endpoint, was 32% slower in patients treated with RP103 compared to placebo. The significant slowdown of loss of muscle control in Huntington's disease patients is a good sign.

Huntington's disease, a chronic and debilitating condition, is an area of high unmet medical need. If approved, the market for RP103 would be huge with more than 60,000 patients suffering from the disease across the world.

OnconovaFallson Late-Stage Data: A big loser last week was Onconova which saw its shares plunging 36.7% on disappointing phase III data. The company's experimental cancer treatment, rigosertib, failed to achieve the primary endpoint in a study being conducted in treatment-experienced patients with higher risk myelodysplastic (MDS) syndromes. The saving grace could be that a treatment benefit was seen in a subset of patients who had progressed on or failed hypomethylating agents (HMAs).

However, given the data, chances of rigosertib gaining approval for the higher risk MDS market are slim. The company has plans to conduct a phase III study in transfusion-dependent lower risk MDS patients.

Kalydeco Label Expanded: Vertex's Kalydeco, which was earlier approved for CF patients with at least one copy of the G551D mutation, can now be used for eight more mutations. This expands the patient population for the drug. The company estimates that about 150 people in the U.S. have one of these additional eight mutations.

This approval is important as Vertex is already treating almost all G551D patients in the U.S. and EU. Kalydeco is under review in the EU for the additional eight mutations – approval would add an additional 200 patients to the patient population. Kalydeco is a key growth driver for Vertex and is expected to contribute $470 - $500 million to total revenues ($570 million - $600 million) in 2014.

Pricing Issues for Tecfidera in the EU? EU approval of Biogen's oral multiple sclerosis treatment, Tecfidera, may be a major milestone for the company but the launch process in the EU depends on pricing and reimbursement in individual countries. The company may have hit the first roadblock in the U.K. with The National Institute for Health and Care Excellence (NICE) asking Biogen to submit additional information on Tecfidera.

According to the Appraisal Committee, there are still questions that need to be answered about the clinical and cost effectiveness of the drug for adults with relapsing-remitting multiple sclerosis. Biogen has time until Mar 12 to respond to NICE. The company may well have to come up with higher discounts to smoothen the pricing and reimbursement process.

FTI Consulting Slips to Strong Sell

On Feb 26, Zacks Investment Research downgraded management services provider FTI Consulting, Inc. (NYSE:FCN-Free Report) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell) primarily due to downward estimate revisions and a fall in the share price following its fourth quarter earnings release.

FTI Consulting's share prices have gone downhill since Feb 18. Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 15.0x and has a long-term earnings growth expectation of 13.5%.

Why the Downgrade?

Over the last 7 days, most of the earnings estimates for FTI Consulting have been revised downward for first quarter 2014 as well as for the full year. This seems to be an aftereffect of a slightly bearish outlook for the ongoing quarter. Moreover, adjusted segment EBITDA margin for 2014 and beyond is expected to decline by 400 basis points to 500 basis points year over year.

Share prices have dropped following the fourth quarter earnings release, as adjusted earnings decreased year over year. Non-GAAP net income was $19.8 million or 49 cents per share in the fourth quarter of 2013 versus $27.4 million or 67 cents a share in the prior-year quarter. Adjusted EBITDA decreased to $53.0 million from $68.1 million in the year-ago quarter.

FTI Consulting anticipates flat to slightly increasing revenue in its Forensic and Litigation Consulting segment in the first quarter of 2014 compared with the sequentially preceding quarter. Revenues in the Strategic Communications segment are expected to be down in the mid-single-digit percentages on a sequential basis due to the continued challenging capital markets and pricing pressure.

For first quarter 2014, FTI expects adjusted earnings in the range of 20 cents to 28 cents per share. The current Zacks Consensus Estimate for the ongoing quarter is pegged at 27 cents, which represent a year-over-year decrease of 54.9%. These factors have cumulatively lowered expectations from the company, thereby leading to the least possible Zacks Rank.

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