Zacks Analyst Blog Highlights: Moody's Investor Service, Alcoa, Incyte, Eli Lilly and Novartis - Press Releases
For Immediate Release
Chicago, IL – December 23, 2009 – 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: Moody’s Investor Service (MCO), Alcoa (AA), Incyte (INCY), Eli Lilly (LLY) and Novartis (NVS).
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Here are highlights from Tuesday’s Analyst Blog:
Moody’s May Downgrade Alcoa
Reportedly, credit rating agency, Moody’s Investor Service (MCO) has placed Alcoa’s (AA) senior unsecured debt under review for a possible downgrade, after the U.S. aluminum giant announced it would be spending $900 million in a joint venture with Saudi Arabian Mining Co. to create a new aluminum manufacturing operation in the country.
However, Alcoa’s share price soared 8% after market close as positive investor sentiment boosted the stock following the announcement of the joint venture, negating the Moody’s possible downgrade impact.
Alcoa has signed an agreement with the state-run Saudi Arabian Mining Co., Maaden, to build a $10.8 billion aluminum complex. Under the agreement, the two firms will build a 1.8 million ton per year aluminum refinery and a 740,000 million ton per year smelter, set up a bauxite mine with an annual capacity of 4 million tons and a rolling mill with a capacity of up to 460,000 tons.
The refinery is planned for commissioning in Ras Azzour on the kingdom's Gulf Coast close to Maaden's phosphate fertilizer plants. The smelter is scheduled to start production in 2013 while the aluminum refinery is slated to come online in 2014. The firms have yet to raise funds, but they plan to do so in 2010. Alcoa stated that the total project cost of $10.8 billion would be split, with Alcoa and its partners paying 40% and Maaden paying 60%.
Moody’s may put Alcoa’s debt, which is rated Baa3 currently, into junk territory. Moody’s judges Baa-rated debt to be of moderate credit risk. Such debt is considered medium-grade as protective elements may be lacking or may be characteristically unreliable. The rating agency stated that Alcoa’s extremely high debt service ratio, about 17.3 times the amount of debt relative to EBIDTA generated in the last 12 months, has prompted the review. A downgrade into junk territory could significantly increase the company's cost of debt.
Moody’s believes that the aluminum industry still has lots of excess capacity and that a correction in aluminum prices is likely.
Another Deal for Incyte
It’s raining good news for Incyte (INCY), which entered into a deal with Eli Lilly (LLY) regarding one of its pipeline candidates. The two companies have entered into a worldwide license and collaboration agreement related to the development and commercialization of Incyte's oral JAK1/JAK2 inhibitor, INCB28050, and certain other follow on drugs for inflammatory and autoimmune diseases. INCB28050 is currently being studied in a phase II trial for the treatment of rheumatoid arthritis (RA).
As per the agreement, while Lilly will receive worldwide rights to the compound, Incyte has retained its co-development and co-promotion rights. Under the deal, Incyte will receive an initial payment of $90 million as well as another $665 million in the form of milestone payments. In addition, the company is also eligible to receive tiered, double-digit royalty payments on global sales of the drug on successful commercialization. Following the transaction, Lilly’s fourth quarter earnings will be impacted by 5 cents.
This is the second deal for Incyte within a span of one month. Back in November, Incyte entered into a collaboration and license agreement with Novartis (NVS) regarding two of its pipeline candidates -- INCB18424, an oral JAK1/JAK2 inhibitor and INCB28060, an oral cMET inhibitor. While the former is currently being studied in a phase III clinical trial for myelofibrosis (MF), the latter has yet to enter its phase I trial as a potential treatment for multiple cancers. Along with MF, INCB18424 is in phase II trial for patients with advanced polycythemia vera (PV) and essential thrombocythemia (ET).
We believe the recent deals with big pharma players prove the huge underlying potential of Incyte’s compounds. RA is an autoimmune disease affecting about 1% of the world's population. None of the current available treatment is curative and there is a significant unmet clinical need in this area.
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