Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

OBI Pharmaceuticals (4174:TT) is a biotechnology company developing treatments for cancer. The company has been mired in controversy for the past several months with the failure of its lead compound in a late-stage clinical trial and accusations of insider trading. The stock has declined by 21% YTD, yet we think it continues have significant downside risk. The current valuation of US$2.5 billion (11x+ cash) values the company's technology at US$2 billion+: the highest among "pre-revenue" Taiwanese biopharma companies. We think that the commercial prospects for OBI’s product candidates are less promising than assumed given the failures of similar compounds in clinical trials. The company's Chairman faces potential legal liabilities in both the US and Taiwan. His loss would be a significant blow to the company.

OBI Pharmaceuticals (4174:TT) is a biotechnology company developing treatments for cancer. The company has been mired in controversy for the past several months with the failure of its lead compound in a late-stage clinical trial and accusations of insider trading. The stock has declined by 21% YTD, yet we think it continues have significant downside risk. The current valuation of US$2.5 billion (11x+ cash) values the company's technology at US$2 billion+: the highest among "pre-revenue" Taiwanese biopharma companies. We think that the commercial prospects for OBI’s product candidates are less promising than assumed given the failures of similar compounds in clinical trials. The company's Chairman faces potential legal liabilities in both the US and Taiwan. His loss would be a significant blow to the company.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

Democratic presidential candidates' potential drug policy reforms have pressured drug stocks, and ongoing political campaigns are likely to continue to create volatility despite the Republican-majority Congress and low probability of reforms passing into law.Among all the reforms, dual-eligible legislation—offering mandatory Medicaid-level drug rebates to some Medicare Part D beneficiaries— looks the most likely, and most impactful (5% earnings cut on average).Analysts: Karen Andersen, Damien Conover &amp; Kelsey Tsai

Democratic presidential candidates' potential drug policy reforms have pressured drug stocks, and ongoing political campaigns are likely to continue to create volatility despite the Republican-majority Congress and low probability of reforms passing into law.Among all the reforms, dual-eligible legislation—offering mandatory Medicaid-level drug rebates to some Medicare Part D beneficiaries— looks the most likely, and most impactful (5% earnings cut on average).Analysts: Karen Andersen, Damien Conover &amp; Kelsey Tsai

Low Odds of U.S. Drug Pricing Reforms Create Favorable Valuations

United States

Roche Holding AG develops and manufactures pharmaceutical and diagnostic products. The Company produces prescription drugs in the areas of cardiovascular, infectious, autoimmune, respiratory diseases, dermatology, metabolic disorders, oncology, transplantation, and the central nervous system. Roche Holding serves customers worldwide.

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Roche Holding (RO SE)

Fasten Your Belts: Air Pockets Ahead

OBI Pharmaceuticals (4174:TT) is a biotechnology company developing treatments for cancer. The company has been mired in controversy for the past...

Kemp Dolliver, CFA

Low Odds of U.S. Drug Pricing Reforms Create Favorable Valuations

Democratic presidential candidates' potential drug policy reforms have pressured drug stocks, and ongoing political campaigns are likely to...

Morningstar, Inc.

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