I have always thought that the people who are running Gilead are smart. But this fiasco is giving me pause. If they were really going to face down ESRX, they should have signaled this earlier, which would have given ABBV the leverage to extract a higher price. Not having done so, they had to know that this deal was already made. The fact that ABBV was spending millions on HepC advertising months ago was a clue to some of us.
So $20 billion or so of stockholders' equity evaporates and they are mute.
If you are headed into the playoffs and a good starting pitcher is available, you take him and pay the price -- whether you need him or not, just to keep your opponents from getting him. Not to make a deal with ESRX was a costly and stupid mistake.
Once again, thanks for your original post which really shed a lot of light on how this stuff works. I completely agree that this fiasco represents a failure on the part of GILD's management. If you go into this event with the most powerful and vocal PBM uncommitted to a superior therapy, that is plain stupid. They should never have given ABBV that opening. Also, I think that the analysts- or some of them - might have foreseen this. If they had read your post, they might have. Thanks again for sharing your knowledge. (But, as you are probably about to find, gratitude is the rarest of human emotions.)
I am not a fan of Cramer, who I think is always telling you what you should have done last week. And a week before yearend is a hard time to take profits. However, if you hold profitable positions in some of these stocks, it might be a good time to hedge with some short positions in the sector ...or if you trade options, which I don't, with some puts.
In one of your five posts under this name to date, bobcat, you say that you "appreciate good informative posts". But you have never complimented or approved of a single post. In fact, your only contribution to these boards is a little spurt of vitriol every couple of months. Aside of course from your deathless wisdom, "stocks go up and stocks go down". Profound.
Glad someone reposted this, the most valuable post on this board all year. In fact, it was the reason why I sold GILD out of my IRA Friday. Occasionally, amidst all the blather and posturing here, someone really knows what he/she is talking about.
The last time he told everyone to get out of biotechs was just as the February selloff was ending. But I do think this event has compromised a lot of the assumptions underlying the sector.
Yes, every misfortune is a profit opportunity for lawyers. But not necessarily for their clients. However, as bagholder 54 pointed out in his posts some time ago, this kind of arrangement is Standard Operating Procedure for the PBM's. They are the ones who determine the real price of these drugs. And if the drug companies are expecting the government to intervene on their behalf, I think they will be disappointed. I frankly thought that Gilead management might be too smart to be trapped like this.
Why take the risk? I'm keeping half of my longterm position, but that's purely for tax reasons. The bounce at the open was a signal that some big players got burned, too. Uncertainty is the enemy of profit.
Well, at this point you've lost around $170,000 on those 10,000 shares you bought at 110, plus another $6,000 or so which, given the timing of your post, you added at around 96. Fortunately, there is an easy way to avoid the pain of this reality: When you get your yearend brokerage statement, don't open it.
It seems to me that this is a watershed moment for the pharma industry and that the PRM's, insurance companies, and, to a lesser extent, the government have really said that the time of "whatever the traffic will bear" pricing is over. The alarmists always feared that the Feds would decree that the best treatment wasn't always available, regardless of price. Surprise: The PBM's are the ones wielding the big stick.
Nah, they have the FDA's blessing. It's not as if they were replacing Harvoni with Australian Dream.
Yes, as I posted at the time, I sold all my shares out of my IRA since the risk of predatory pricing on ABBV's part was real. I credit the excellent posts of "bagholder54" in mid November for alerting us to the fact that PBM's (e.g. Express Scripts) make a lot of money by writing exclusive contracts with drug companies well below the list price. Unfortunately, I was unwilling to pay the Feds and California all the taxes involved in selling my GILD positions in my taxable accounts, thinking I could wait until 2015 to sell half.
We should note that when large players get trapped in a bad position, they do the opposite of what we would do: They buy more to drive the price up and then walk it down. Which means that not only the small fry got fried here.
Yes, because they're unaccustomed to being told that they're wrong ... and apparently don't welcome any insinuation of their fallibility. I kept fairly large chunks of GILD in my taxable accounts because I wanted to postpone paying the capital gains tax until next year and hoped that the pricing situation would take longer to shake out. So I have relearned a basic lesson: Don't let tax considerations drive your decisions. Fortunately I had some lowball GTC buy orders in my IRA and got shares below 95, which I was able to sell at a profit. However, this is bad for the whole pharma sector, in which I am heavily invested, and there will be more pain.
Months ago, ABBV began running TV commercials about the risks of untreated HepC to your family. It was bad science - unless your family is made up of heroin addicts, there is very little risk of them contracting HepC from you. The puzzle was why they would spend millions of dollars to establish their credential in the HepC market if they didn't have an approved drug yet and would only seem to be driving business to GILD. Now we know why: Approval was certain and the Express Scripts business was in the bag.
I assume that when you're operating, doc, and the intern says, "But you're cutting the bile duct!" you have cotton packed firmly into both ears. You committed 90%of your liquid assets to this one stock @ 110, saying that if it fell, you would put in the rest of your cash. This in itself is idiotic - you contemplate the possibility of a stock dropping, and yet you have staked your financial future on it. But, your post indicates that you are as good as your word, Now, by my rough calculation, you have dropped $130,000. But it's okay because you have the brilliant response .."I CAN'T HEEEAR YOU!"
The concept of "diversifying", as understood on this board, apparently means going all in on another stock or two.... which, silly as it is, would seem to have been smart in this case.