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Exelixis, Inc. Message Board

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  • jcalvin1127 jcalvin1127 Oct 1, 2012 2:26 PM Flag

    Rangebound hedgefund stranglehold


    You continue to underestimate the damage done by MM in the recent share offering. All trust is gone. The participants of the last offering are simply using any positive news as an opportunity to sell into strength. They want to take their easy money and get away from MM as fast as they can. Just wait until Cabo is approved for MTC, you will see some serious selling then. Short of a buyout offer or Comet trial victories, this stock is going nowhere. And, unfortunately, any buyout, no matter how sweet it would be for the shareholders, must be accomplished over the objection of MM. He will not give up the salary and prestige of being CEO of an awesome drug without a fight.

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    • Mr. Calvin

      You are singing yesterday's tune.

      From Saturday's PR:
      "All 24 BRAFi-naïve patients evaluable for tumor responses had a decrease in tumor size from baseline, however, further follow-up is required to determine the confirmed objective response rate."
      "Exelixis is entitled to an initial equal share of U.S. profits and losses, which will decrease as sales increase, and will share equally in the U.S. marketing and commercialization costs. "
      "Roche has disclosed that it intends to evaluate the combination of vemurafenib with GDC-0973 versus vemurafenib in a multicenter, randomized, double-blind, placebo-controlled Phase III trial in previously untreated patients with BRAFV600 mutation positive, unresectable locally advanced or metastatic melanoma."
      Sudden need for $200 million more in cash (e.g. the offering of which you complain.)

      Notice also that the Roche combo study has been flying under the radar as it has been given almost no mention in the previous EXEL conference calls. Neither was it mentioned in the Adam Feurerstein short thesis article that came out before ASCO. Neither was it mentioned in the complaints about the offering on this board. Yet from how I look at things half the US rights for an effective drug against melanoma doubles the value of this company. The guy who seems to get it is Ernie on this board.

      Warrants and this Convert offering are not the same.

      If I buy a stock offering at say X with warrants to buy 1 share for every 2 of the offering at X + 70 cents, then I put out zero dollars for the warrants (the company just gives them to me to entice me to give them some cash they desperately need.) If then I short the shares at X + 2 bucks and the stock goes to X + 1 I cover and keep the warrants. If it goes to X+3 and I want out I buy the warrants and make 1.30 in profits. There was no way I could lose. This is a classic death spiral financing however it does not always lead to death. ARIA, for instance did almost exactly what I am describing above at 1.50ish (warrants at 2.10ish) and today is about $24. Viable drugs in big markets trump all else.

      Converts don't work the same way. First. if I was the buyer, I paid money for them up front and they pay interest so are worth income which offsets any play that requires me to sell them to someone (this creates some risk for me whatever I do.) Second, the converts can not be converted to stock until 2019 (which means if I have to sell, I have to make a market with someone at some undetermined price, creating risk.) Third, their value is capped because EXEL can buy them back without converting them to stock. Fourth, if the company goes belly up the converts are not worth much (which is what you may be betting on if you go short.) Fifth, if I sell them out while EXEL is going up rapidly in price I have probably cost myself some $ relative to NPV of the converts. Because of these considerations, there is a good chance of making a fool of yourself by mindlessly shorting EXEL (with now two likely viable molecules.)

      Sell to me my friends, for I am scaling in again after selling out at 5.35. This time I will be looking for a higher selling price than that and am "willing" to be an "investor" instead of trader (i.e. I may wait months instead of weeks to sell out, LOL)...


      • 6 Replies to gregorio_allegri
      • Extremely well written post from gregorio.allegri. If you haven't read it, you should. The idea that owners of the convertibles make out like bandits by shorting against their own shares is FUD strategically timed before a weekend of superb data.
        There is a massive short interest here that will say or do anything to drive the PPS lower. Beware the "long" who is worried. Way too much upside here to be pontificating about what can go wrong. Not one single bear argument holds water. So now they are grasping at straws like making up trading strategies that are fraught with risk. It's a travishamockery.

        Sentiment: Strong Buy

      • Allegri,

        My post was really just intended for Wilder as we have had an ongoing discussion over the merits of the last offering. My arguments regarding the failings of MM in securing the funds had nothing to do with the need for the money or the use of convertibles, so your post is entirely irrelevant to the ongoing discussion between Wilder and me. If you are truly interested in our discussion (which I can't imagine why you would be) I guess you can do a search to find the posts, but I'm not going to repeat the points made here. Obviously, there are a lot more cheerleaders on this board than there is objective analysis though there are a few that are very objective in their analysis of the science. However, the science is a secondary concern for me with respect to this company.

        My primary concern is with the management of this company. Of the opinions I have read about Morrisey, some think he is ok and others think he is a buffoon. I haven't read any opinions that believe he is outstanding as a CEO. This concerns me. While I understand it is natural to obsess about the science of a drug company, I also understand the quality of management can be of almost equal importance to the investor in the company. For the reasons stated in my prior posts, I believe the latest offering demonstrated some severe weaknesses in the quality of management that others have been warning were there all along.

        The question for me now is whether the remarkable science of Cabo can overcome the significant weaknesses of management to produce a healthy return for the investor. I have no doubt that under quality management, the stock price of this company would be easily double from where it is today. However, we must play the hand that has been dealt.

      • $$$$

        Bump. For those that missed this post, I simply wanted to ensure that Gregorio's take on our current trading scenario was not forgotten. This short-term rangebound scenario was discussed at great length before Nomad reappeared once again to attempt to rob all the credit, as if he'd invented the concept of the arbitraged convert.

        GA's got some interesting commentary, and I encourage the read.

      • "Yet from how I look at things half the US rights for an effective drug against melanoma doubles the value of this company."

        Gregorio, I only picked this quote but I wish I could bump your entire post by itself. Best post of the day.

        Sentiment: Strong Buy

      • bump

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    • very good post, unfortunately for MM if this POS keeps trading the way it is, he soon will have no company to be CEO for....and I will also like to know where the hell is the BOD in all of this, don't they see all the bad decisions that the useless CEO has taken so far? They are not hurt by the damage that has been done to the stock price since the guy has been in command....?

    • $$$$

      In as much as I may be underestimating MMM's megalomania, I don't think I am underestimating Cabo's potential. A couple years ago, I recognized the promise of MET inhibition in cancer therapy, and began investing accordingly.

      To date, Cabo has displayed such an unprecedented level of overall benefit over such a broad range of cancers that it has become one of my favorites. I don't see yet that it has an equal amongst comparable METi class TKI's...
      ...and it's effect on bone mets puts it in a class by itself.

      I'm not necessarily advising others to hold, I'm just suggesting that there are those that would bully you out of your shares by manipulating SP - which is precisely what I see taking place w/ EXEL.

      In two years time, I expect MMM will have little to do w/ Cabo. He'll be history. His path to self-destruction will be his own hand-written obituary. CEO's come & go...but Cabo's data is building a legacy in MET -class inhibition therapy.


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