Junior Biotech Roche (OTCBB: RHHBY) to Start Human Trials in Quest for New Breast Cancer Treatments

Atlanata, GA 5/10/12 (StreetBeat) – The battle against breast cancer looks to be getting a few more weapons in its arsenal in the future. Swiss drug giant Roche took a shot in the arm in November of 2011 when the Food and Drug Administration revoked their Genentech unit’s Avastin as an indication for breast cancer, but Roche (OTCBB: RHHBY) is providing some promising research with their new pertuzumab drug in recent months. The experimental antibody is being used as an addition to Roche’s blockbuster breast cancer drug, Herceptin, and chemotherapy. The latest data shows that the new concoction can add six months to the lives of HER2-positive breast cancer patients. Herceptin, also known as tratuzumab, had 2010 global sales of $6.8 billion.

On the same front, other drug makers are providing optimistic results across the full range of research. Novartis's (NYSE:NVS) is developing Afinitor (everolimus) - which is already approved for other cancers - showed that treatment with it delays disease progression by four months among metastatic patients. Earlier on in development, Sunshine Biopharma(OTCBB:SBFM) is wrapping-up laboratories studies on Adva-27, a small molecule that targets and inhibits Top2, the second enzyme (HER-2 is the other) associated with aggressive forms of breast cancer. Also taking a step in the right direction helping to re-shape the treatments for breast cancer patients is Seattle, Washington-based TapImmune Inc. (OTCBB:TPIV).

A vaccine technology company, TapImmune received allowance from the FDA last year and recently got Institutional Review Board approval for a Phase I clinical trial to be hosted at the Mayo Clinic in Rochester, Minnesota. Today, TapImmune told investors that the company-sponsored trial is set to begin to test its novel set of HER2/neu Class II antigens in breast cancer patients who finished standard Herceptin-based therapy and are at a high risk of disease recurrence.

As a result of what the company called an “overwhelming response” from patients expressing interest to be in the trial, TapImmune expects the trial to be fully subscribed. The primary endpoints of the study will be safety and immunogenicity - the ability of a particular substance, such as an antigen or epitope, to provoke an immune response in the body of a human or animal. Representing a significant milestone, this is the first clinical trial to be run to test TapImmune’s HER-2/neu vaccine program.

There are four companies with four different root targets for the treatment of breast cancer with each striving to generate revenue while providing a solution to a disease that took the life of approximately 40,000 women in 2011, with about 300,000 new cases diagnosed. Proper due diligence on each is, as always, encouraged.

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Where is Buffett Looking

Investment Underground ran a screen to filter picks Warren Buffett would like: sustainable business advantages producing significant free cash flows, and healthy returns on equity in excess of 10%.

They also screened for market caps larger than $10 billion in order to “move the needle,” meaning, Warren could acquire enough shares to make the investment worthwhile given Berkshire's (BRK.A) size. Investment Underground provided 12 names that are consistent with Berkshire's investment philosophy. One is a current holding (BDX) and one is a former holding (WU).

Of the 12 picks, 8 are healthcare related. Considering Buffett's ever-increasing stake in Johnson and Johnson (JNJ), any of the names in this screen are fair game for an entry by the conglomerate.

Abbott Laboratories (ABT): This pharmaceutical powerhouse yields 3.61% and has a history of raising its dividend. The company's portfolio of patent protected drugs, along its excellent nutritional and diagnostic groups and its history of strategic acquisitions have dug ABT a wide economic moat, a criterion Buffett often looks for in his investments.

Becton, Dickinson & Company (BDX): Another healthcare giant, Becton has carved out significant market share in the medical tool market. As of 9/30/2010, Buffett owns .81% of shares outstanding. And like Abbott, Becton has a long history of raising its dividend, which is among the highest in the industry (1.9%). But unlike ABT, Becton doesn't have a sea of patent protected drugs to shield it from competition and many of its products have been commoditized, creating a narrow moat for the company.

Cisco Systems (CSCO): Buffett has brought tech executives to Berkshire's board, including Susan Decker. As well, Bill Gates, Walter Scott, Jr. and lawyer Ronald Olsen are not strangers to old and new technologies. Cisco is the dominant player in data networking produces tons of cash-flow and will continue to as this growth story keeps growing.

Covidien (COV): This producer of all things healthcare is raising its quarterly dividend 11% to $.20 a share. This is the second consecutive year COV has upped its yield.

Exelon (EXC): With the largest nuclear fleet of any U.S. utility, Exelon's 11 nuclear plants generate 17% of U.S. nuclear power and constitute 80% of Exelon's generation output. This is a low risk, wide moat operation with room to run. The company has traded upwards of $85 a piece. At the time of writing, EXC trades at $40 a share and yields 5.3%.

France Telecom (FTE): FT spits off about 8 billion Euros a year in free cash flow and should continue to for the next 5 years, allowing the company to pay off its debt load of around 34 billion errors net of cash and continue to increase its dividend which yields 5.7%. FTE as well has a solid history of increasing its dividend, though it did cut it in half during 2009 due to slowed wireless and broadband growth.

Medtronic (MDT): This Company dominates the medical equipment space, holding market leading positions in heart devices, insulin pumps, and spinal products. Medtronic trades on a TTM price to earnings ratio of 10.9. Compare that to an industry P/E of 16.5, throw in a 2.5% yield, a wide economic moat, and a recent increase in Goldman's price target to $36 a share, and you have a stock that fits Berkshire's investment philosophy.

Novartis (NVS): The Swiss-based pharmaceutical maker has a healthy balance sheet and a free cash flow yield of ~ 8%. The company's healthy intellectual property portfolio has created a wide moat for itself, which will likely remain as long as Novartis can continue to fuel its late stage pipeline and keep making targeted acquisitions.

Roche Holdings (RHHBY.PK): The other big boy of the Swiss pharma giants, Roche yields 3.2% and has a solid drug portfolio and pipeline, due to the company's acquisition of Genentech in 2009.

St. Jude Medical (STJ): One of Medtronic's biggest rivals, St. Jude's maintains an economic moat thanks to its diversified product offering and its key position in the $550 million dollar vascular closure market. What's more, 45% of STJ's sales come from abroad. The company could easily trade in the $45-$50 per share range as healthcare spending recovers along with the broader economy.

Western Union (WU): Buffett has owned WU in the past. And for good reason. The company is the largest money transfer company in the world. The size of the company has proved to be an advantage as many smaller rivals have been driven out of business because of regulatory requirements they couldn't keep pace with.

Zimmer Holdings (ZMH): Shares of ZMH appear cheap considering the company's market share and demographic trends on the horizon. The company leads the hip and knee implant industry, an industry which should see solid growth as the baby boomers keep getting older.