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Exelixis, Inc. Message Board

  • erniewerner erniewerner Nov 30, 2012 8:28 AM Flag

    Blue light special

    One of the outcomes of the secondary, the converible offering, and the attention surrounding the PDUFA is that it put a substantial chunk of the equity in EXEL in the hands of weak and uninformed holders. The successful secondary bidders got stock at $4.25 pps and the convert price of $5.31 has become a cap until the that position gets digested by the market.

    The PDUFA binary event attracted speculators wanting to bet on a thumbs up or down event and scalp a quick gain. Cramer has even been pushing the stock. Expectations were unrealistic. The decision came in and everyone scrambled to track the aftermarket reaction and watch the hated shorts get creamed, right?

    The counterintuitive drop in price caught everyone (including me) by surprise. I bought more last night and I have a buy in at $4.90 right now. The afterhours trading is thin and I'm still looking for a 4pm close today much closer to that $5.31 convert price. When the new owners found out how small the market for MTC actually is and saw the black box warning and side effect profile for 140mg Cabo, instead of buying more, many ran for the afterhours exit.

    The PDUFA outcome was as good or better than the mainstream informed expectation, but obviously disappointing to the casino crowd. One of the features of the afterhours market is that there are occasional dislocations during which rational behavior is suspended. In the aftermath of the approval, sanity will eventually reassert itself. A new crop of informed investors and existing investors will take those swing shares off the market when it is realized that 60mg Cabo will deliver equivalent efficacy and much lower toxicity than 140mg Cabo. It was poorly understood that MTC was not an end unto itself, but a stepping stone to loftier goals.

    I;'m going to sign off and go back to reading about the war with the despised shorts, the double digit price rise next week, and the great investment opportunities available at Threshold and Synta.

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    • erniewerner, aren't u one of the Medarex veterans? your id sounds familar too me.

      the biggest questionmark behind the drug for me is the lack of (overall) survival benefit! What's your take on this?

      • 1 Reply to ville_9
      • An analyst asked about the OS issue on the call last night. My recollection is that Gisela said that OS analysis was ongoing and that the FDA reference was with respect to data up to that point. I think the suggestion was that with positive responses, there should eventually show a benefit. If someone could confirm or deny (or check the transcript) that would be helpful.

        Sentiment: Strong Buy

    • Excellent summary----especially for those who only know the stock symbol and daily price!

    • erniewerner, weren't you long in Medarex a few years ago until it was took over by BMS? your id sounds familar too me.

      one question: what's your take on the missing overall survival benefit of cabozantinib in MTC? Is it just because only 44% of the patients were available for interim analysis and we can expect a better result in the final analysis? Or is it because the drug works, but cancer comes back faster as it was gone and there won't be an survival benefit with this drug? this one scares me most....

    • I am with you on your take. Let the short term stuff play out, the focus by investors like me is on the fact that we have approval with the real markets about to open up. Huge cash position, which is so often the concern with these situations, but not here. I am looking to acquire more, so will watch the action, but it only represents opportunity to me.

      Sentiment: Strong Buy

    • if you are buying now--around 5--what's your outlook for the next few weeks--i also see the 5.30s as a cap but for how long?

      • 1 Reply to hiatview
      • "if you are buying now--around 5--what's your outlook for the next few weeks--i also see the 5.30s as a cap but for how long?"

        I'll guess for you, but that's all it is, a guess. Anyone elses opinion is as good as mine. Average volume is about 3 million per day. To work through all the convert shares would take about 15 trading days if they represented 100% of the trades and the stock stayed above $5.31 for all the trading volume. It also depends on the demand side. As a wag, I'll say 3-4 months, I think every time the pps runs above $5.30 there will be arbitrage selling pulling it back down like a stretched rubber band. But who knows, maybe a week, maybe 6 months.

        What's more important to me is that sooner or later, this thing will get marked to market and the full value will be understood. We were there briefly 18 months ago and I think it is inevitable that we will head back that direction.

        The market is spooked about the toxicity issue. We've seen companies get raped in the market over black box warnings in indications like diabetes and beta blockers. The true risk/reward profile for Cabo needs to be evaluated in the context that these patients are for the most part terminal. Low dose Cabo is no worse than Avastin or Nexavar. The toxicity of those drugs has been baked into their multibillion revenue rates and is not an issue. It is a knee jerk reaction for the market to look for the fly in the ointment and sell on the news.

    • Thanks for your thoughts Erie........LL

      Sentiment: Buy

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