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.
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.
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.
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?
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.
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.
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.
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?
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.
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.
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.
It's tricky to negotiate purchase of a heavily-shorted company. Sellers know that if the first offer fails, a near-squeeze will follow. Buyer has to pitch not just a shutout, but a no hitter.
To the best of my knowledge, nothing about preservation of joint structure will be reported in the new Lilly results. That issue is pretty much the whole story, so we have longer to wait.
Only a big move if Tefferi catches the ear of a major outlet reporter; that would be down, but very low probability. This meeting is fill-in presentations around Incyte products. Most interesting to old hands will be the "local color" in the comparison of Momelotinib (formerly "the YMI candidate") to Jakafi.