Whenever a stock I own has unexpected good news or bad news, I sell half. The JNJ acquisition of Aragon, however you may read it, is an unexpected event which, if nothing else, will cost us a lot of money in litigation costs. Aragon, which was no threat until now because they didn't have the money to pursue clinical trials, is now in a much stronger position. On the upside, you can conclude that because JNJ was willing to pay almost $1 billion for a legally dubious version of Xtandi, they know that Xtandi is replacing Zytiga. You could be even more optimistic and read this as a gambit to set up an acquisition of MDVN. At the minimum, to demonstrate superiority to Xtandi in trials, JNJ is going to have to buy many millions of dollars worth of Xtandi.
But what was the exogenous event that would cause you to sell ONXX? As I pointed out on the ONXX board a couple of weeks ago, the earnings estimates had been going steadily up for the past 60 days, while the stock price had actually gone nowhere. My basic thesis on ONXX was that Kyprolis would eventually replace Velcade and become a billion dollar drug. If that thesis had seemed in question, I would have sold. In the case of Aragon, I never expected it to be acquired by a major pharma. I expected that there would be some legal manuevering and that UCLA, not thrilled with the prospect of, in effect, suing itself, would force a settlement. So I sold virtually all of my shares and waited until I could guage the market's reaction. This decision was made easier by the fact that I had a lot of shares in an IRA, where there were no immediate tax consequences. I did not sell mt ONXX shares upon the AMGN offer announcement, since the documents said that the terms were negotiable, which I interpreted as meaning that the 120 offer was a starting point.
It's so convenient to be able to reply to all of melonhead's pseudonyms at once. Thank you all for being here. As I posted at the time, I sold all but 500 of my MDVN shares immediately upon the JNJ/Aragon announcement - these were shares in my wife's account with a basis of $19. I had earlier taken profits in my own account and there is no reason not to take profits opportunely in my IRA, so I sold all the shares in these accounts at an average price in the mid-47's. And I did wait. Until later that week, when I bought back all my shares in the mid-45's. Yesterday, I added some more shares and now have more than I had pre-Aragon. As for who missed out on an opportunity here, melonhead/nostockgeniusss, who obviously had some cheap puts at stake, missed out on the best opportunity he/they'll probably have to sell them by sitting there, as usual, and hoping. In spite of the dire predictions he/they made, the stock is now about three dollars higher than it was pre JNJ/Aragon. Of course a lot of this is due to the excitement surrounding the AMGN offer for ONXX, another one of my foolish speculations. Incidentally, there was no way to know what the market's reaction to the JNJ deal would be, but after a week an intelligent investor would have been able to see that it was not taken that seriously.