TheChek News Flow

Gapping down
In reaction to disappointing earnings/guidance: TFM -13.5%, ROST -9.3%, CRMT -6.4%, NDSN -5.8%, INTU -4.3%, DE -4%, MOLG -1.8%, HPQ -0.7%

Select Fan Favorites showing weakness with the broader mkt: FIT -4.6%, NFLX -3.1%, GPRO -2.4%, FB -1.6%, TSLA -1.6%, BA -1.5%, SBUX -1.3%, AAPL -1.1%, MA -1%

Select China related names showing early weakness with Shanghai -4%+ overnight: BITA -4%, CMCM -3.4%, JD -2.8%, CTRP -2.6%, BIDU -1.4%, JKS -1.4%

Other news: GIG -12.1% (announces a public offering of common stock), XON -5.5% (announces a public offering of common stock), BTE -4.3% (sees 25% reduction in Capex; suspends dividend), SUNE -2.7% (cont weakness), MU -2% (cont weakness), BTU -1.8% (following 20%+ move higher yesterday), GILD -1.3% (European Medicines Agency validates co's marketing application for single tablet regimen containing rilpivirine, emtricitabine and tenofovir alafenamide for HIV treatment), WIN -1.2% (afternoon strength on potential data unit sale), NE -0.9% (provided its monthly fleet contract status update), WFM -0.8% (following TFM results), AEO -0.7% (Chief Marketing Officer, Michael Leedy, announced that he will step down from his position, effective September 15, 2015), CSTM -0.7% (announced West Virginia Economic Development Authority approval for a partial financing of its $35 million investment in its Ravenswood plant), TUR -0.6% (Turkey will hold snap election on November 1)

Analyst comments: SSI -0.9% (downgraded to Neutral from Buy a B. Riley & Co), DIS -0.9% ( target lowered to $89 from $98 at Cowen), LUX -0.7% (downgraded to Sell from Neutral at Goldman)

{http://reut.rs/1J9TZXU}

Junior creditors of Caesars Entertainment’s bankrupt operating unit argue a proposed restructuring deal between the casino giant and fewer than half of its creditors represents an “improper” conflict of interest.

That’s because most of creditors who signed on to the deal also own equity in Caesars parent company, which has not filed for bankruptcy, lawyers for the junior creditors said Thursday.

The proposed deal would allegedly allow Caesars parent company — and its shareholders — to keep the best assets while depriving creditors of the bankrupt operating unit.

Paulson is one of the biggest shareholders in the parent company, with a 10 percent stake.

He also owns an undisclosed amount of debt at the operating unit, according to sources, which would make him one of the “conflicted” creditors. Paulson declined comment

To push through the restructuring proposal, Apollo-backed Caesars said it needs more than 50 percent of junior creditors to agree to it. The junior creditors are lobbying against it.

Paulson was caught up in a controversial Goldman Sachs deal, known as Abacus, in 2006. Goldman paid $550 million to settle accusations that it let Paulson cherry pick mortgage-backed securities that were packaged and sold to investors, knowing that the loans were doomed to fail.

- Cut 2015 from -1.9% to -2.3%

- Cut 2016 from +0.1% to -0.5%

Find Both note attached :

>>> Shire Pharmaceuticals Baxalta's risk from ACE910: under-estimated (say our patients) or over-estimated (says Shire)?

--> ACE910 is a clear risk, but Baxalta could be ~EPS neutral even in a 'worst case'

For the last year, we've highlighted the potential for Roche's ACE910 to be a gamechanger in haemophilia. This drug could have a major impact on Baxalta – which should derive 59% of Op Profit from competing haemophilia therapies at the time of ACE910 launch in 2018. Our Evidence Lab haemophilia survey, discussed in our Roche notes today, indeed confirms major patient interest in ACE910. If the responses in our survey are representative - and if ACE910 reaches market with the strong profile seen so far - it implies 60%+ of patients would consider switching to ACE910 in 2 years. Our downside scenario would take 40% off Baxalta stand-alone consensus from 2021, reducing EPS accretion for Shire/Baxalta by 12% & 23% in 2020 & '23. However, surprisingly, the original proposal (inc buyback) would still be almost EPS neutral for Shire from 2018-23, even in this downside scenario with no cost synergies. Cost synergies will be modest, but could add another 8% accretion

The billion-dollar question in haemophilia is: how 'sticky' are patients in reality – would patients really switch to ACE910 as quickly as they claim? Despite enthusiasm for long-acting Factor VIII (37% of pts said they'd switch in ~1 year), Biogen's Eloctate has in fact taken 1 year to gain just 5% market share, supporting Shire's argument. Shire has also seen first-hand the loyalty of rare disease patients (Genzyme's 2009 manufacturing woes). However, in total contrast, new long-acting Alprolix has taken a full 33% of the Factor IX market in 1 year (see p9). Shire's strategy of capitalising on uncertainty in Baxalta's valuation looks plausible, but by no means risk-free. Shire is

openly willing to take on this risk – and the low absolute downside to earnings accretion, in our view, makes this deal just about logical.

Buying a broad pharma pipeline (inc new Hyqvia IVIG) that is likely under-valued within a MedTech company makes sense to us. The logic for long-duration revenues, and diversifying away Shire's patent cliff is also clear: this deal could be 22% accretive to Shire by 2023 (post-Vyvanse). More intriguing: could this be a precursor to Shire divesting some of the 'old, spec-pharma' Shire, like GI or ADHD? Certainly that would fit the strategy. Shire still faces huge difficulty in getting the deal done, we think.

Our valuation is based on 22.2x 2016E EPS.