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Incyte Corporation Message Board

jacosa 289 posts  |  Last Activity: 14 hours ago Member since: Jan 24, 2000
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  • Reply to

    prolaris reimbursement.

    by newtwo99 Apr 19, 2014 12:58 AM

    If the timing works out that way, it's especially favorable. I've always found that medical-related stocks are bouncier around the solstices than around the equinoxes.

  • Reply to

    BI Study

    by investmentorr Apr 19, 2014 7:31 AM

    Yeah, good for ITMN because BI is unlikely to file an NDA while a p3 is ongoing (they COULD, but they aren't likely to). The big thing in the short run is going to be detailed comparison of side effects

  • Reply to

    Near Term Catalyst

    by pulasahvas Apr 18, 2014 6:14 PM

    Near-term (I interpret that as 2 months or less) for INCY the candidates are revelation of the magic subgroup, readout of a third-party p2, pricing in a third major EU market or good sales. For ITMN, candidates are press coverage of ATS presentation, pricing in Spain or EU sales acceleration. Of course all of these are subject to takeover, but we won't plan on that. My impression is that ICPT got SO far ahead of itself on surprising good news that nothing near-term can make it pop.

  • Reply to

    Jacosa - Any Concerns About the Market Selloff?

    by nhanduyvo Apr 11, 2014 7:51 PM
    jacosa jacosa Apr 12, 2014 11:36 PM Flag

    I think ICPT is too far away from making money for there to be much shelter there. I've never much liked AAPL, and it's clear that I have often been wrong. I know nothing about the other two. We seem to be rotating to a market where "Strength of America" stocks should do well. One of my investing principles is "Don't try to beat the pros at their own game--there are too many of them.," and this is a market segment they're good at. I like to use closed end funds selling at a discount to net asset value to cover such things (Barron's has a useful table; Nuveen has a cefconnect page that gives more information) You might want to try selling a few uncovered puts against ITMN--it looks like you could get $7 for Jan '16 puts at a $25 strike. Ok, one industrial that not everyone is looking at: Diodes Inc. (DIOD) makes a whole lot of humble electronic parts that position it well if there's an economic pick-up.

  • Reply to

    Jacosa - Any Concerns About the Market Selloff?

    by nhanduyvo Apr 11, 2014 7:51 PM
    jacosa jacosa Apr 12, 2014 2:01 PM Flag

    The tone of my remarks has been bothering me. I'm sick (pityriasis rosea, still in the itchy phase), and I kinda went into "If you can't stand the heat..." mode. I really don't expect a quick recovery for either stock because the market has a tendency to get into "I did it, so there must have been a reason" fugues. ITMN is now massively underpriced on the popular basis of probability-weighted DCF, and insanely underpriced on an optionality model, but that says nothing at all about what the market will do short-term. INCY is much harder to value, but it's certainly worth its present price on any valuation model **even assuming failure of all long-term opportunities** I'm not interested in selling ITMN below $65 or INCY below $110. But that isn't the question.

  • Reply to

    Jacosa - Any Concerns About the Market Selloff?

    by nhanduyvo Apr 11, 2014 7:51 PM
    jacosa jacosa Apr 12, 2014 12:29 AM Flag

    Why did Yahoo censor the number 5 from the second paragraph of the first posting?

  • Reply to

    Jacosa - Any Concerns About the Market Selloff?

    by nhanduyvo Apr 11, 2014 7:51 PM
    jacosa jacosa Apr 11, 2014 10:02 PM Flag

    I want to point out a useful alternative to bottom fishing. You can sell puts short. This strategy is profitable in a wide range of scenarios, but it can be catastrophic if done without full attention to the worst-case scenario. Taking a specific example that I mentioned on the INCY board (and which people who don't understand it are attacking me for): when INCY was about $60 and it looked like resistance on drug prices was the main thing driving down the stock, I sold 5 puts, January 2016 expiration, $40 strike price. This obliges me to buy 500 shares of INCY for $20,000 (or some number of fifths of that transaction) any time until the expiration date, should the other party desire. I got $3500 in premium ($7 a share). The FIRST thing is that yes, even in a bad market I am sure of having the $20K available (the REALLY cautious way to do this is to have the appropriate amount of treasury securities in the same account). The second thing of note is that the expiration date is favorable--January (a good month for drug stocks) after a period in which any of several likely upward drivers may happen. And of course the strike price is far out of the money. In fact, it's low enough that the breakeven price is roughly my floor price.

    The stock has dropped about $15 since then (closed $46.25). If I had waited, I could now sell the same puts for about $2 a share more ($1000 unrealized loss). The position is still out of the money, though, so I'm in no danger of being put the stock. If the price drops to $30 and stays there until next January (emphatically NOT a prediction) I would almost certainly be able to buy back the puts (which would have a year of life left) and sell Jan 2017 puts with a $35 strike price at no debit, guaranteeing a token profit on the whole frustrating mess.

    The point of the exercise is that here is a way to make money on a stock one is confident about, in a fear-dominated market, without losing sleep.

  • Reply to

    Jacosa - Any Concerns About the Market Selloff?

    by nhanduyvo Apr 11, 2014 7:51 PM
    jacosa jacosa Apr 11, 2014 9:18 PM Flag

    For both of these questions, there's a huge question of time scales. The shorter your time scale, the less rational markets can be.

    We're seeing a combination of negatives and some have potential to last a while: The market in general is burdened by the failure of good times to return (2.628% yield on 10-year treasury bonds does not speak of anticipated prosperity). There have also been some bad earnings reports. I always plan on a rotation away from health care sometime during Spring, and that is happening. Drug companies in particular got a stomp from concern about prices. And of course the momentum guys are no longer our friends. So how long? Could be an unfavorable environment for as long #$%$ more months. Urrgh.

    Better news on how far down: I can't imagine that the downdraft will take either ITMN or INCY below the tops of the prior trading ranges. Yeah, that's a factor of 2, but at least it's a floor. This is not a prediction that they'll drop so far any more than my estimates of buyout prices for various scenarios were predictions. We're talking boundaries.

    I don't like this situation, but it doesn't concern me. I remembered the tech wreck when I was buying--back then I stuck to solid companies, things like EMC, HP and Intel and got demolished anyway because their customers weren't so solid. I do not see the customers of Intermune or Incyte products becoming less inclined to buy. When I've remarked that I was overextended, it was by a much stricter measure of financial rectitude than I once would have used.

    We may see a sales halo from the ASCEND results, if not next month then in 4 months. That is the earliest good money news I can think of. Good news from Spain or Holland at least wouldn't hurt. And there's just no way that FDA approval (say, Feb) with predictions of $1.5bln+ peak Esbriet sales leaves ITMN near its present $2.5bln market cap.

  • jacosa jacosa Apr 10, 2014 3:49 PM Flag

    Somehow I feel attacked. Suppose that I had bought INCY around 60 and sold slightly in-the-money calls against it for $7. I'd be happily pocketing the call premium (well, maybe not so happily, because a sudden up move remains possible), but I'd be annoyed about the stock being $14 below what I paid for it. Contrast: I sold $40 puts for $7. I have my money. The contracts are still out of the money--the stock would have to drop another $7 for me to be nominally on-the-hook for anything, and for me to be nominally $7 behind the stock would have to drop to $26.

    Suppose INCY was to drop to $26 and stay there. How do I repair my position? It's difficult with the covered write (unless I choose to use puts--then I close the covered write entirely and sell puts). The short put is a natural: I can be confident that come January I will be able to roll the puts a year farther out at a credit (or probably to be able to roll $5 down and a year out roughly even).

    Selling calls against existing holdings is a completely different exercise. It salvages some money if INCY drops and stays down, but it severely caps gains in the case I consider more likely, of INCY going way up by EoY.

    Meanwhile: PV WILL go on the Jakafi label, a money positive. The magic subset will be announced: a non-money positive. The p3 against PaCa will start. a non-money positive. References to survival may be allowed on the Jakafi label, a _surprising_ non-money positive. The PaCa p3 may be stopped midway by "slaughter rule" (this is almost a certainty if the logic of the magic subgroup holds up), a _surprising_ money positive. These are only the near-term schedulable possibilities. My puts expire Jan 2006. I am at risk of early assignment only if the time value part of the premium becomes small (generally at least $8 in-the-money in the last 6 months, or $15 in-the-money earlier than that).

  • jacosa jacosa Apr 10, 2014 1:30 AM Flag

    In principle, you could start early gathering field staff and even mid-level sales staff, and use them productively in Canada. I think you want the top-level organizations separate. And I think the detailed selling plans really are going to take that long.

  • jacosa jacosa Apr 10, 2014 12:00 AM Flag

    Timing that's good for one party tends to be bad for the other party. You've noticed that small drug companies are generally taken over at generous prices and with management agreement? Everybody wants to avoid an auction. Sometimes management has an unrealistic idea of the value of a company, and then the deal may not get done. On the one hand, development of "son of pirfenidone" and trials against "other fibrotic diseases" might just be ploys to get the price up, but on the other hand, any actual benefit in those other diseases would likely open bigger markets than IPF. And even if SoP should only succeed to the degree of requiring 1 small pill tid rather than several large ones, that would still be a marketable advantage. I don't see an acquirer pitching the desired shutout either soon or late with much under a 90 mph fastball (errr, $90/shr offer--I'll be tired of baseball soon enough)

  • jacosa jacosa Apr 9, 2014 11:44 AM Flag

    You touch on an interesting point. I don't believe for an instant that "FDA submission isn't near ready yet." ASCEND results were so close to best case that I'm pretty sure the submission was in the can before the first patient started treatment. There are strategic reasons for the delay. and maybe they're interesting to speculate on.

    If you do some sort of formal logistic study, there are 4 large interacting tasks between now and making money in the US market. Largest, and making 2 of the others redundant, is sale of the company. Basically, as long as we remember that it's going on, and that achieving it before the task of preparing to sell product is finished has some extra benefits, we may as well ignore it. Getting FDA approval is necessary, but unless financing needs some extra help, it can be completed any time up to final preparations for selling product.

    The other two large tasks are being prepared to sell product and having finances in place to take the sell-in through to self-sustaining operation. My impression is that IF there is a substantial pick-up in European sales post-ASCEND and if ALSO the initial sell-in in Canada goes moderately well, the financing task can be regarded as solved. Management will know about that in about another 3 months.. Preparing for US sell-in seems like the slowest task. Identifying and hiring senior US sales staff, laying down plans, getting second-line staff in place and assuring availability of potential field staff will surely take until Thanksgiving, and maybe longer. So FDA approval before December is unlikely to be useful.

    Then you can consider timing of the full ASCEND publication. Year-end seems likely, and a fresh paper in a top journal would help in selling product. So an NDA filing late May to early July looks commercially best, and I think that's what we'll see.

  • jacosa jacosa Apr 8, 2014 11:42 PM Flag

    The child probably shouldn't pretend to know what big words like 'put' mean. I don't LOSE money unless the stock drops substantially below 30. (Most of that is arithmetic that you won't learn until you're in first grade, but part of it has to do with really grown-up things)

    Safest is for you to keep your words to MA and NO.

  • Reply to

    A little [left leaning] market economics

    by jacosa Apr 8, 2014 12:18 AM
    jacosa jacosa Apr 8, 2014 12:59 AM Flag

    Besides being prompted by illness, this also comes from my trying to learn option pricing methodology as it applies to anticipated new businesses (So far, it seems gratuitously complex, and the advantage over probability-adjusted DCF rarely matters) Anyway, both your interest rate and the company's interest rate enter in.

  • Reply to

    A little [left leaning] market economics

    by jacosa Apr 8, 2014 12:18 AM
    jacosa jacosa Apr 8, 2014 12:50 AM Flag

    So QE isn't money printing and it isn't stimulus in the sense that hiring a bunch of pothole fillers would be. It's stimulus in the sense of taking some of the fear if ruin (it wouldn't make as much sense if that fear was fully justified) out of longer-term loans bringing longer-term interest rates into line with the opportunities in a generally punk economy.

    Well, QE 1 worked, and that was in large part because the banks were genuinely terrified that agency paper they were holding would default and leave them short of reserves. QE 2 was still needed because while the bakns felt better about themselves, they were still very suspicious of borrowers. We're now in QE [many], and it isn't clear that it's doing much anymore. Yeah, banks will have to reacquaint themselves with pre-QE ways of doing business, but I have faith. There'll be upward pressure on longer-term interest rates but note: if you expect the punk economy to continue, with LIBOR under 1%, and you are a government agency or a well-established business that is accustomed to paying LIBOR +1% or so for 90 day money, and LIBOR + 3% for long-term money, you will still have shopping power. Furthermore, note the "invisible" side of the QE transaction: as Treaury borrows less very-short terms, the corresponding rates will tend to drop. So basically, in 2008+6, I don't think tapering of QE is more than a symbolic threat.

    In other words, when blood is running in the streets, BUY!

  • I'm sick and feel like blathering. What's mostly happening tho Incyte now is the usual Spring period in which cyclicals outperform medical-related companies. But clearly there's a broader market pullback going on. What it absolutely ISN'T is bursting of a bubble in financial assets- everybody, his broker an his shoeshine boy has been warning about that, totally ruling out the possibility. Almost as surely, it isn't The Cold War going back into the microwave. Cold war is GREAT for business, without all those nasty casualties. I really think it's fear that the Fed will taper quantitative easing, stop pouring free money into the banking system and let interest rates rise. That only makes sense if you don't understand quantitative easing. Back in crisis days, we had a credit paradox--the interest rate at which solvent lenders and creditworthy borrowers coul come together on loan terms was very cheap, but not so many lenders were as solvent as they'd like to be, and as for creditworthy--WE'RE ALL GOING BROKE!! NOW!! So you could get a great price on a loan. only you couldn't get a loan. So the Treasury borrowed just tons of money short-term, putting government paper into banks' treasuries, while The Federal Reserve announced that it would buy lots of longer-term bonds on an ongoing basis. Quantitative easing. The bank might still look at you funny, but they'd give you a loan at about the right price (those nasty agency bonds on their books were replaced by safe T-Bills) Lovely, except that the accounting invites misinterpretation. Bank cash got turned to cash equivalents (same line). Treasury sold lots of new bills (since they weren't from FRB inventory the proceeds vanished) while the FRB added lots of pretty good (but not as good as the banks needed) bonds to its inventory, cheap. But it LOOKS like the FRB is pouring money for nothing into the system.

  • Reply to

    halo news good for incy?

    by tjnelis Apr 4, 2014 10:00 AM
    jacosa jacosa Apr 4, 2014 11:57 AM Flag

    Doesn't generally work that way. Failure of one drug/device generally casts gloom on all analogous ones (and I can recall some EXTREME examples among pacemakers and related). Certainly the option value of Bari is suffering because of Tofa.

  • Reply to

    nvs and incyte

    by tjnelis Apr 4, 2014 10:21 AM
    jacosa jacosa Apr 4, 2014 11:53 AM Flag

    My one example is Esbriet, which received NICE approval 4 months after the initial rejection, and the timing was a surprise. So 1 year may be a most likely delay, but it doesn't seem to be inviolable. [the dispute with Esbriet was the conjugate of the one with Jakavi: there was no dispute that it extended life, but the QoL benefit was disputed] Meanwhile, I don't think we have any information bearing on when Italy might approve.

  • Reply to

    ACQUIRING CESCA COULD CATAPULT INCY

    by screaminbuys Apr 3, 2014 11:48 AM
    jacosa jacosa Apr 3, 2014 2:19 PM Flag

    I glanced at it. Something's there. The story is pretty complicated, though. FDA is easy-going with medical devices, compared to drugs, but the other side of that is that methods of treatment are hard to protect. And of course 'stem cells,' even adult-derived ones, are a bit of a red flag in some quarters. There's also some history that isn't encouraging.

    NOT by any means a fit with Incyte, but worth looking at more over the weekend.

  • Reply to

    1st Q

    by tjnelis Apr 3, 2014 8:47 AM
    jacosa jacosa Apr 3, 2014 11:59 AM Flag

    Historically, you tend to err on the bearish side.

    My global viewpoint is a version of "efficient markets." Basically, knowledge of neither price history nor business developments can make you money over closely-watched time frames. This puts me in the happy position of feeling justified in paying little attention to quarterly results (and none at all to daily, weekly or monthly charts).

    Incyte is a company moving from having been a drug developer, expected to make large losses, to being a drug company that expects to make money by selling products (while feeding its pipeline). Appropriate metrics for this stage are worse than tricky. Cash burn means something (Incyte hasn't been burning appreciably for a couple Qs, but probably will this one). R&D efficiency (how much of your research you can get others to pay for) means something (probably down a little). GAAP earnings mean absolutely nothing. When things are hitting properly (as they appear to be at Incyte) the hugely dominant item is option value of both actual and potential sales streams. For Jakafi in MPNs alone, that's about $8bln (low anticipated interest rates help). The pros are quite taken with option values of Ruxolitinib in solid tumors (probably in part because the delays are brief). The summary is that the "realistic" (as opposed to GAAP) earnings are dominated by increasing value of the Ruxolitinib franchise, an unreported number that we don't really know. (but which certainly exceeds cash burn).

INCY
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