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Sarepta Gets Second Wind, As FDA Delays Drug Decision — Again

Biotech Sarepta Therapeutics ( SRPT ) soared in early trading Wednesday after the Food and Drug Administration delayed making a decision on whether to approve its muscular dystrophy drug, giving new hope for a product that Wall Street had generally given low odds. The FDA’s self-imposed deadline had been Thursday, which itself was pushed back three months from the original decision date. Sarepta’s statement didn’t mention a new deadline, just saying that the reviewers “will not be able to complete their work” by the current deadline. Sarepta’s drug eteplirsen, for a subgroup of patients with Duchenne muscular dystrophy (DMD), had always had a tough case to make based on a clinical trial with only 12 subjects and no internal control group. The odds of success looked even lower when the majority of an FDA advisory committee last month voted not to recommend approval. However, families of patients with DMD, who generally don’t live past the age of 30, have been lobbying hard for some treatment to come on the market, since currently none are available. Analyst Simos Simeonidis of RBC Capital Markets suspects that this is the reason for the delay, but he still gives the drug only a 30% chance of approval. “Despite the fact that today’s news slightly increases the chances of an approval, we have a hard time imagining the agency setting the precedent of approving a drug with such a limited dataset,” Simeonidis wrote in a research note. “On the other hand, we cannot overlook the tremendous pressure being put on the FDA, and it is very difficult to gauge what may happen behind the scenes at the agency at the last minute.” Sarepta stock shot up 20% soon after the opening bell on the stock market today , near 22.

Tesla Price Target Cut; Monsanto’s Hiked; Best Buy Downgraded

RBC Capital lowered its price target on Tesla ( TSLA ), Jefferies upped its price target on Monsanto ( MON ) on views that Germany’s Bayer will sweeten its $62 billion takeover offer, and  Best Buy ( BBY ) was downgraded by Citigroup and Deutsche Bank. Tesla RBC Capital trimmed its price target on Tesla to 242 from 252. The electric automaker last week announced a $2 billion stock offering that will be used to fund a production ramp-up for the Model 3. RBC Capital forecast a fresh $1 billion equity raise in 2017 and lowered its estimate for Model 3 shipments. “We were always below Tesla’s vehicle delivery targets of 500,000 by 2018 and 1 million by 2020, but after speaking with industry contacts and reconsidering our model, we are tempering our delivery forecast to account for a slower Model 3 ramp,” said the RBC Capital report. Tesla shares were up 0.4% in premarket trading. Monsanto Jefferies upped its price target on Monsanto to 132. “We believe a higher-than-$130-per-share transaction is highly likely, with details emerging by August,” Jefferies said in the report. Monsanto on Tuesday rejected Bayer ’s ( BAYRY ) all-cash, $122-per-share offer. “To date, activist pressure has been limited. If a deal falters, we would expect (a) step-up in pressure for Monsanto to do more with its balance sheet,” said Jefferies. Shares rallied 2.3% early. Best Buy Best Buy, which on Tuesday forecast current-quarter profit below views and said its CFO was leaving, was downgraded to neutral by Citigroup and Deutsche Bank. Citigroup cited a lack of hot new consumer electronics products. Virtual reality will not take off until 2017, said Citigroup. “Categories with no secular threats — home improvement and auto parts — are performing better and are more predictable,” Citigroup said. Best Buy shares slumped 0.8%. Fleetmatics Pacific Crest Securities upgraded Fleetmatics ( FLTX ) to overweight with a price target of 54. Shares in the mobile fleet management software provider are down 20% in 2016 after surging 43% last year. “With plenty of solid runway for growth, rising (customer turnover) now better understood, a positively received management transition and a conservative earnings outlook for the year, we turn more positive on FLTX,” said the Pacific Crest report. In other analyst moves, Needham upgraded Workday ( WDAY ) to buy and raised its price target to 85 from 80.

How IBM, Xerox Get Impacted By HPE Services Spinoff, CSC Merger

The surprise move by Hewlett Packard Enterprise ( HPE ) to spin off and merge its enterprise-services division with Computer Sciences Corp. ( CSC ) could put pressure on IBM ( IBM ) to respond, analysts say. Shares in HPE jumped late Tuesday after the company announced the tax-free spinoff  of its services business. HPE also reported better-than-expected fiscal Q2 earnings, but EPS was still down 2% year over year. “We believe the HPE Services plus CSC transaction will cause Xerox ( XRX ) services to be looked at as an acquisition target, as well as put pressure on IBM to consider making acquisitions in its services business,” Citigroup analyst Jim Suva said in a report. The combination of HPE’s enterprise services business and CSC will have about $26 billion in annual sales. The deal is expected to close in March 2017. Jason Kupferberg, analyst at Jefferies, says the HPE-CSC deal has merit. “We believe the combined firm will trail only IBM Global Services and Accenture ( ACN ) in terms of global IT Services revenue,” Kupferberg said in a report. “While neither CSC or HPE enterprise services are industry growth leaders and have been in turnaround mode, we see strategic rationale for the merger, given the complementary vertical exposures (CSC strong in insurance, health care and banking, with HPE enterprise services known for pharmaceuticals, transportation, and telecom.)” Hewlett-Packard split into two publicly traded companies last November. Shareholders of HP Enterprise and CSC will each own half of the new company’s shares. Global Equities Research analyst Trip Chowdhry said the HPE services-CSC merger is the combination of two struggling companies and could result in 65,000 layoffs. “Two bad assets does not make one good asset,” he said.