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DepoMed Inc. Message Board

  • drive_gt3 drive_gt3 May 5, 2011 10:26 PM Flag

    CC thoughts

    The call was basically as I expected. The strategy appears to be much along the lines of what CP had talked about.

    JS isn't a marketing guy like CP, so he's not as charismatic. But I wouldn't interpret that to mean that he's any less capable (the Board thinks he's a better man for the job, I'll defer on that judgment for awhile).

    CP was always teasing us about partnerships that sounded like they were right around the corner, and they almost never were (a bunch of them we're still waiting on). JS is setting much more realistic expectations, as we all know these things take time and they happen when they happen. From the time line JS spoke about with respect to launch for Gralise, DEPO should have a new partner in Q3 (which was my expectation going into the call). Who that partner is likely determines what happens with RoW, which likely gets resolved simultaneously or shortly thereafter.

    JS did do a good job describing how he's getting everything prepared for the Gralise launch in Q4--planning, marketing, manufacturing, sales (CSO), etc. And also how they can leverage that work in the future with "external opportunities". Again, no surprise there and nothing to worry about now.

    I would've liked to have heard more thoughts re Pristiq, but he likely doesn't know much more about it than we do and I'm sure he can address that better in the future after more facts have surfaced. When the Serada trial data is in, they'll be more vocal about comparing and contrasting the two for sure.

    I don't know if there's not much interest in Parkinson's (or GERD, for that matter). Holding onto that may be the best way to monetize the opportunity. Or maybe it's just a negotiating ploy. Time will tell.

    To summarize, some of the uncertainty has lifted. No lofty promises have been made. The next major news is probably a Gralise partnership deal in Q3, then Serada trial results and the launch of Gralise. Maybe there are some minor deals/events also between now and year end (my guess).

    I wouldn't characterize the stock as dead money. In an industry where it takes years to make any progress,
    waiting a few months is no big deal for me (your timeframe may vary).

    I also didn't hear anything on the call that would lead me to think they are for sale or negotiating a transaction. In fact, what I heard made me think even more so that the exact opposite is true and that the speculation about a transaction is just more of the perpetual wishful thinking.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • JS might also be a very smart ceo to self-market gralise just in case serada doesn't pass trial muster. And, if serada does pass trial muster, maybe he'll self-market that one also.

    • "E-mail me at jasrich at yahoo dot com"

      Done.

    • Even when Nicky is completely wrong, he's right.

      Troll logic at its best!

    • Chipper, I have a couple of follow-up questions that I want to spare the board from having to read. E-mail me at jasrich at yahoo dot com, if you don't mind. Tx.

    • Nicky before the call:
      "Who cares what the stock does after the cc, people should only be interested if it drops dramatically so they can add. The cc will most likely be anon event. I never saw so many people bickering and acting like know it alls about the short term movement of the stock price into a meaningless conference call."
      http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_%28A_to_Z%29/Stocks_D/threadview?bn=5320&tid=61393&mid=61445

      It's a good thing that most people have Nicky on ignore. Almost as bad as his advice regarding SVNT!

    • Nick, can you still sign up to teach summer school again?

      You obviously could use the money.

    • Nicky's not happy when the stocks he touts take a beating. He can't congratulate himself using several different aliases and blow smoke about his "verified track record" of all winners.

      And when he's completely wrong about the direction of DEPO, he becomes this incredibly talented day trader who does nothing but mint money.

      Nicky is the internet sensation and not just your average Troll.

    • "Given what we know now post CC, do you stand by the example you gave that other poster about how to lock in gains but keep some skin in the game with deep in the money calls? To an amateur like me that seems an expensive way to get back in the stock when there are all of these cheaper options. I see a lot of open interest and volume in the September 10s. I guess that that is a bet that a partnership is announced for Gralise or they launch early because everything that mgt has said points towards October or later. I don't like those much - this stock could be a lot lower than 10 in September."

      1) Before you open an option position for any stock you need to do the following:

      Determine what your PREMISE is for the stock over the time period in question. Are you looking to have options cover the next month only, the next 2 months, or the next 6 months, etc?

      When you have the time frame in mind, then what do you expect the stock to do during that time frame? Go up, down, or sideways?

      Given both the duration of the options, and the expectation for stock price movement (these are the 2 components of a PREMISE), you can then set up the option trade which best takes advantage of the PREMISE.

      Now, in regard to your question about substituting calls for DEPO shares (in order to take advantage of DEPO's presumed rise come September), do I still stand by that strategy? Yes, assuming the shares are held in a cash account (e.g., IRA).

      What is the PREMISE for DEPO shares come Sept? Let's say we expect the stock to move to $12 because of Serada and Gralise partnership.

      For each DEPO share now held, sell it at $8.70 in the cash account. From the $8.70, take $4.70 and buy a Sept 4 Call. The call will appreciate, $1 rise for each $1 rise in the stock. It will also depreciate $1 for each $1 loss in DEPO shares down to about $4-$5, where some time premium will be evident in the call value.

      This transaction will free up $4.00 from each share of DEPO to be used as you see fit.

      2) As for the Sept 10's, people are buying more out of speculation, hoping that the 65 cent calls will double or triple (or more) in value come Sept expiration. The Dec 10's are $1.35-$1.40, which are more expensive due to the time premium for the extra 3 months.
      If your PREMISE is that DEPO will be at $12 or higher by Sept (or Dec), you could sell each DEPO share for $8.70 now, and pay $0.65 (or $1.40) for the Sept 10 (Dec 10) Calls and expect them to appreciate by at least $1.35 (for Sept) or by $0.60 (for Dec). What you do with the rest of the money is your call, but if you sold all your shares to invest ALL of the money in Sept 10 Calls, you would end up holding about 13 times as many calls as the number of shares you sold. The payoff would be HUGE, compared to just letting the shares appreciate, or even substituting the Call 4's for shares.

      Example: you sell your 1000 shares of DEPO for $8,700 and invest the proceeds in Sept 10 Calls, buying 133 of them for $65 each, which represents 13300 shares at your control. If DEPO is $12 at Sept expiration, your shares would have appreciated by $3.30 each, yielding you $3300 in profits. On the other hand, your Sept 10 Calls would be valued at $2 each, yielding a profit of $135 for each call, or $17,955 total profits on 133 calls. So, if your PREMISE is correct, and you sell all your DEPO shares to buy Sept 10 calls, you'll make $14,655 more in profits for each 1000 shares sold. That's why it's so important to be sure of your PREMISE.

      You seem somewhat risk averse to me, so I would execute a more conservative position (deep in the money calls in a cash account) and not try to guess if DEPO will be above $12 by Sept or Dec. You're right...it could be lower than $9 by then if something goes wrong. One never knows, which is why options always allow investors to take either side of the PREMISE.

      Cheers and good luck.

    • Given what we know now post CC, do you stand by the example you gave that other poster about how to lock in gains but keep some skin in the game with deep in the money calls? To an amateur like me that seems an expensive way to get back in the stock when there are all of these cheaper options. I see a lot of open interest and volume in the September 10s. I guess that that is a bet that a partnership is announced for Gralise or they launch early because everything that mgt has said points towards October or later. I don't like those much - this stock could be a lot lower than 10 in September.

      I'm going to take a look at YMI, btw.

    • Thanks a lot for explaining. I really do consider it to be more of a hypothetical situation in DEPO's case, but I was curious.

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