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Biotech Forum Daily Digest: Celgene Gets A Shout Out, Starboard Value Targets Depomed, Spotlight On Novavax

The biotech sector after a huge move on Wednesday that had the feel of some significant short covering, gave back some of those gains on Thursday and Friday.

However, the sector easily outperformed the overall market for the second week in a row. The area is one of the strongest performing so far in the second quarter.

In this edition of the Biotech Forum Daily Digest we discuss an analyst's bullishness on Celgene, a hedge fund's push on Depomed and spotlight a small vaccine play named Novavax.

Not surprisingly following Wednesday's almost six percent one day surge that had the markings of a short covering rally; the biotech sector pulled back some on Thursday & Friday. However, it still was a very solid week for the area and it easily outperformed the overall market for the second week in a row.

It does seem the bottom is in for biotech after enduring the deepest and longest bear market since the end of the financial crisis. I would like to see some pick up in M&A activity, secondaries and IPOs before concluding sentiment has gone back into "risk on" mode and put my rally cap back on, but it does seem fairly obvious that outside a major event; the worse does seem to be over this beaten down and oversold sector. The space is one of the best performing sectors in the market so far early in the second quarter. Let's see if we can get three weeks in a row of strong performance this week.

Activist fund Starboard Value targeted a small drug maker which an approximate $1 billion market capitalization named Depomed (NASDAQ:DEPO) late last week. The company has been caught flat footed as many others in the space by the fallout and negative sentiment created on the industry by the now pariah Valeant Pharmaceuticals (NYSE:VRX). Last year the Depomed also successfully fought off a takeover attempt by Horizon Pharma (NASDAQ:HZNP), which has its own issues. The stock is selling at half of its 52 week highs.

Starboard has acquired 10% of the company and is demanding six board seats. The activist firm noted the reason for its push is because the company "has a troubling record of egregiously manipulating the corporate machinery to entrench management and the Board." Starboard has had success effecting change at larger companies such as Darden (NYSE:DRI) and Yahoo (NASDAQ:YHOO). This will be interesting drama to watch unfold.

Speaking of boards, privately held and much in the news of late medical testing firm Theranos is beefing up theirs. The company has splashed across the headlines and more and more questions has come to the forefront on the actual accuracy of its medical tests. The company has at one time received a $9 billion valuation in the private markets as one of the so called "unicorns".

Theranos board has always been full of political figures such as Henry Kissinger and former Senator Sam Nunn. Now the company has added actual scientists and researchers to its board to review its systems, data and procedures.

While this is a long overdue step, I think it will do little to resolve the controversy around this firm. A recently released report from the Centers for Medicare and Medicaid Services gave new details around a 2015 inspection of one of its main labs, the conclusions were hardly comforting. In fact they led the agency to issue a letter warning the violations posed "immediate jeopardy to patient health and safety." I am just glad this is...


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