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Tessera Technologies Inc. Message Board

jacosa 126 posts  |  Last Activity: Dec 24, 2014 1:05 AM Member since: Jan 24, 2000
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  • Reply to

    Excuses

    by jacosa Dec 23, 2014 11:58 AM
    jacosa jacosa Dec 24, 2014 1:05 AM Flag

    Part of the discipline is when and how to repair a position that is getting away from you. Depending on the time value, I usually roll them up and to a longer duration when the underlying is either $5 or $10 above the strike price. The called yield of the repair transaction should be looked at to be sure it is attractive.

    Conditions are now reasonable for considering short puts rather than buy/write. But those of us overcommitted to Incyte should be careful not to get into a situation where an outsized drop would be catastrophic (I'd want to be sure that my position wouldn't suffer forced liquidation from $38 INCY and poor performance of other issues).

    It might be worthwhile to form some opinions on likely courses of interest rates. Much of the value of Incyte is effectively an option on businesses that don't exist yet; such values are sensitive to rates, especially the treasury of matching duration (work a few examples of Black-Scholes to get a feel). I presently think that it will benefit the US to keep interest rates low as long as The Fed can resist the political pressure, so the good recent GDP growth doesn't move the first increases sooner than they used to be (say October--that might as well be forever).

  • jacosa by jacosa Dec 23, 2014 11:58 AM Flag

    That's all they are, but I offer them.
    1) Rebalancing of portfolios away from issues that have run extraordinarily well in the last year (My broker feels obliged to suggest that I should do this, even though I've turned him into a major Incyte bull). At least some of this is going on around now, and it comes close to being forced selling in accounts managed under tight discipline.

    2) Money parked during tax sale waiting periods being returned to the desired investment vehicles. (Now *I* would park the money generated from a sale made to establish a tax loss in something like Berkshire Hathaway for the requisite month, but I'm not everybody.) Parked money would also explain the puzzling strength of INCY in the recent past.

  • jacosa jacosa Dec 20, 2014 1:00 AM Flag

    I believe good faith is a defense against an anti-trust action. It would be difficult to collect from Myriad, who acted as if they believed that they had valid patents. (Especially since in Europe, where Myriad doesn't have a monopoly, it is the low-cost provider of BRCA mutation testing) But the NEXT legal step is probably going to be an appeal by Myriad on the basis that the latest decision went beyond the scope of the matter brought before the court. This can go on for an extremely long time.

  • Reply to

    What do you guys think about GERN?

    by vpd22_dwayne Dec 17, 2014 8:38 PM
    jacosa jacosa Dec 19, 2014 1:22 PM Flag

    Dead money, at best. Basically, they have one product. If it gets approved, J&J gets the goodies. If it fails, Geron is on the hook for a lot of J&J's costs. The one product has "issues."

    The company got into hopeless financial shape, so they weren't able to negotiate a better deal.

  • jacosa jacosa Dec 17, 2014 6:20 PM Flag

    I don't think a Russian default would be an event. They used to be bigger, and people trusted them more. Back when ('98?) they busted costing $2-4 trillion and is was a nasty 6 months. The 2008 housing event was 10 times that, and Russia is maybe half what it was. Why, the CEO of IMAX said in a CC that China of all places was a better place to do business--nor because of numbers, but because of rule of law, contract compliance and accountability. So I just don't think a default would amount to much.

    Other than that, I think the MYGN upturn is going to depend on actual earnings, not guidance. That may not matter in practice, because if management runs to form they may not raise guidance before the results are in. But if they DO raise guidance first, I just don't see them being believed.

  • jacosa jacosa Dec 17, 2014 5:27 PM Flag

    Really sad end for the company. Once upon a time they were small and chased hard after a good idea. And it worked. And they did it again. And some time around then they got a bunch of ideas and decided that they must all be good and that they could chase after them all at the same time. Coulda been SO much better. Phillips has said that it'll take about 2 years to straighten out the mess, and they have the money and people to do it.

  • Well, not all. If suddenly there was no way to sell drugs for over $5 a pill (and things used to be like that) there would be a BIG crater. But let's be realistic.

    In a tough market, the Jakafi company (Ruxolitinib sold for label indications) is worth something like $25-30 a share. The Bari prospect, with 1 off-the-main-subject p3 passed is worth another $10-15. The 3 "co-checkpoint" cancer drugs arethe least guessable-at because of the possibility of sales without a p3, but group them at $8 and nobody will complain. The JAK-1 drugs, even '110, are under a cloud because of the eye signal seen with one of them and not yet explained publicly--call it $5 for the bunch. I get a 'squoze' price of $48-58. That's a little above the chart "floor," so let's knock it down to $45 as a lowest plausible price. Helluva downside, but remember that it's a maximum-skepticism price.

    My "practically heaven" price is $220, more than 3x the current price, easily justifying the 40%-ish risk. It has been pointed out that AACR in mid-April is a target event for the checkpoint trials, so a little more clarity re checkpoint partners might come early Spring. Incyte clearly wanted the "good journal" publication of the PV study to come out in January, so keep an eye out. Clarification on the eye issue could come absolutely any time.

  • Reply to

    Why the damage?

    by jacosa Dec 12, 2014 12:42 PM
    jacosa jacosa Dec 15, 2014 12:43 PM Flag

    Let me try this out: Are you saying that they're over-hedged regarding light hydrocarbon feedstock for polyolefins? I remember that once upon a time Eastman owned wells, but I thought that they were out of that. I'd be real concerned if the company was speculating with financial hedges for more than its raw materials need; if it's just well ownership that's unfortunate, but has a limited downside.

  • Reply to

    Today's action is very confusing

    by bonkenx Dec 11, 2014 12:38 PM
    jacosa jacosa Dec 13, 2014 3:43 PM Flag

    With oil prices STILL falling, I see no reason to cut DAL short.

  • Only negative I've heard is that Eastman's feedstock hedges will moderate the benefit of falling prices. Still ought to be a benefit, though. Is mothballed competitive capacity going to be restarted?

  • jacosa jacosa Dec 12, 2014 12:33 PM Flag

    New products?

  • Reply to

    Analyst Day Today

    by jvolpi334 Dec 11, 2014 4:21 PM
    jacosa jacosa Dec 12, 2014 12:27 PM Flag

    I listened to maybe 1.5 hours of it. A lot was \lost to technical difficulties and I had other things to do. Points from what I heard: they really DO love their buzzwords, but there seems to be substance behind them. They showed an understanding that the business starts with good pawn brokers, and are going to train them up. They seem to be learning from mistakes. High volume / low margin is necessary and valuable, but perhaps it was said too often. I need to listen to more of the presentation, and of course we'll have to see some results.

  • Reply to

    Exit Strategy (What does the future hold)

    by backontopic Dec 10, 2014 5:49 PM
    jacosa jacosa Dec 11, 2014 2:46 PM Flag

    I did too, and not in bubble companies either. Real companies (Like EMC) doing too much of their business with bubbles, otherwise-solid companies (Like Comdisco) investing too much in their customers. Companies with neither problem (Like Intel) just going from high to low multiples. It was, in an important way, foreseeable (maybe not in extent, but you could ask "What happens if most of these guys using the Internet apparently just to use it go bust?)

    [the 2008 event was even more predictable, although the extra mess caused by banks indemnifying each other with non-standardized contracts WAS unforeseen]

    The equivalent question right now is probably "What happens to valuations if interest rates double?". And the comeback to that is "explain how it could happen quickly enough so we could be trapped?" Potential lenders have plenty of cash; they are rationing credit by policies rather than by interest charges.

  • Reply to

    Today's action is very confusing

    by bonkenx Dec 11, 2014 12:38 PM
    jacosa jacosa Dec 11, 2014 2:03 PM Flag

    Best pure guess is that Zack's damned with faint praise over the Lilly p3. Another possibility is that some rumor we never heard has collapsed. There's a possibility that we're seeing recognition that Momelotinib will arrive someday, and that it still looks pretty comparable to Ruxo. At ASH, Tefferi tried to throw up some dust about desirability of a companion diagnostic for Mo (and by extension Jakafi) but it wasn't real convincing.

    There's presently plenty of air in the stock price. For all the possibilities in the future, what we have is a half-billion-dollar sales drug barely supporting a very large R&D program.. Hard to argue with any valuation.

  • Reply to

    Exit Strategy (What does the future hold)

    by backontopic Dec 10, 2014 5:49 PM
    jacosa jacosa Dec 11, 2014 3:23 AM Flag

    A buy-and-hold-er should probably just buy and hold. A more active player might work with the likelihood that Incyte won't do spectacularly from Feb through May of '15 (I'm anticipating that the actual sell-in of Jakafi for PV will be satisfactory, so Jun-Aug may be pretty good) After that Incyte's business has a chance to generate some big positives, but the US economy may have some problems (although a premature attempt to raise interest rates could work out well for Incyte investors should it become clear that rates don't want to go up)

    I honestly expect INCY to get over $220 Some Day, independent or acquired. Maybe in 2 years, maybe in 5. Diversify by all means, but do you have anything so attractive that you want to greatly reduce your position and buy it instead?

  • Reply to

    Arthritis Drug

    by whc60805 Dec 9, 2014 9:01 AM
    jacosa jacosa Dec 9, 2014 6:56 PM Flag

    Thank you.

    Inhibiting IL-6 in RA treatment?!? I wouldn't have the nerve to propose that one.

  • Reply to

    Arthritis Drug

    by whc60805 Dec 9, 2014 9:01 AM
    jacosa jacosa Dec 9, 2014 10:22 AM Flag

    Model of a good result for this particular study. Shows the difference between how big and small drug companies do things. FDA wants to see preservation of joint structure, which wasn't even addressed (12 weeks is much too soon for convincing results there). But Lilly was willing to do a large and thorough test anyway, to be sure patients liked the drug and get an extra read on safety. Even today, with some bulk on it, Incyte couldn't afford such a thing.

    Interesting line in the release: the patient population was said to include many who had failed one or more non-anti-tnf biological. As an inteeerested outsider, the only non-anti-tnf biological I know of that is commonly used against RA is anti-lymphocyte serum, which sort of overlaps the immune suppressing action of Tofa. The old biological ACTH has made some sort of a comeback under a different name. But ACTH is a defined peptide, and not really what is called a biological today. Maybe when the full report on the trial comes out.

    Buyout? Still very iffy. Value of IDO inhibitor rides the coat tails of checkpoint inhibitors, which are doing a Harry Potter broomstick ride these days. At least one JANUS (maybe both) will pass fitility/slaughter before the next RA p3 reports. I think the price for a friendly deal has gone up significantly, and the motivation for an acquirer to want the team as well as the IP portfolio has gone up too.

  • Really really nasty thought occurred to me. Lots of that short interest is institutional, and lots of it is 15 and more points into Hell. Losing an employer's money in such chunks can lose a job. Perhaps there are portfolio runners talking fast and hoping for the best...to stay employed past year end bonus season before closing those positions. The short case is dead, buried, the coffin is starting to cave in and developers are talking about putting a mall over its grave. No sensible reason to keep short positions, so I'm guessing at a silly one.

  • Reply to

    It's Not Like They Are Curing Cancer!

    by dodilligence Dec 4, 2014 11:09 PM
    jacosa jacosa Dec 9, 2014 12:24 AM Flag

    Management's idea of a fair price comes into play most strongly when management is seen as being worth keeping around. At the moment, I don't think a potential acquirer would want them. But you DO clearly see the problem: the large (1.5 months of daily volume last time I looked) short interest forces a bidder to go higher than the present stock price and tangible assets would first suggest. And that makes a serious bid less likely. So long as there's even a rumor of a cockroach in Myriad's business (I do love my metaphors), an offer of 3 times market price is not worth thinking about.

    I'm kinda left-wing, but even I don't think it would be realistic for another diagnostics company to engineer a losing bid for Myriad just to tie up management attention, with no care in the world for who might eventually win.

  • Reply to

    It's Not Like They Are Curing Cancer!

    by dodilligence Dec 4, 2014 11:09 PM
    jacosa jacosa Dec 8, 2014 5:01 PM Flag

    Shutout: a bid good enough so nobody else wants to get into a bidding contest with you. I extended that myself: a no hitter would be a bid that didn't even allow a predictable massive market price rise (should shorts be given a firm deadline) to create conditions for a successful competing offer.

    There's a paradox at work here: a company may look like a better buy at a higher price because the offer premium over the market price may be a lower percentage.

    I've been making a corresponding argument about Incyte--the issue there was the unknown (but possibly very large) value of the pipeline. As the pipeline is validated the stock price goes up, but while the plausible take-out price goes up too, it becomes a smaller percentage premium over the market price.

    Let's rough in some numbers: absent the short situation, a shutout offer for MYGN might be around $55 a share. But knowing that there was say a month to get out, shorts would drive the price well above that A black/white/grey knight might well figure "Now that we see the price of MYGN with the relentless short pressure removed, perhaps an offer 20% above market price might be worth making." So the $55 offer and done turns into perhaps $80 and still an open contest. Not an attractive situation for the bidder. So they would have to offer a higher, and harder to justify, price to begin. Less likely to happen.

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