Bets on OSI-Astellas Stand-Off (OSIP)
OSI Pharmaceuticals Inc. (NASDAQ: OSIP) looks innocent enough today. Shares are barely up in positive territory at $60.00 today and share trading volume is light. Yet there may be a bet brewing that OSI might not be able to milk much more either out of Astellas nor from a rival offer. And if you look further behind the curtains, there is an options trade that stands out here signaling that thought.
Joe Kunkle of OptionsHawk.com noted, “OSI had a buyer of 2,000 May $55 puts at $0.90 that sold 2,000 May 60/65 call spreads at $1.45… looking for OSI Pharma not to receive a better takeover offer and for the current offer to potentially fall apart, sending shares lower. The trade was done for a net credit so that bet is more that no other offer comes in and shares remain below $60, but it has added profit potential if things fall apart.”
If you look at the current Astellas hostile offer, this was initially rejected at $3.5 billion or $52.00 per share as inadequate. That tender offer was initially set to expire last week but was extended to a date of April 23, 2010.
Astellas has been trying to buy OSI Pharma for about a year, but it seems that the predator may have gotten into a one-man bidding show. OSI was a $70+ stock in 2004 and was a $80+ stock back in 2000.
This is a profitable company targeting with cancer and diabetes/obesity, so with a $3.5 billion market cap and expectations for sales of almost $500 million in 2010 and $536 million in 2011 there may still be some value for someone. Still, shares have petered out here at $60.00 for almost two weeks. If another buyer is going to surface, OSI holders better hope that comes fast.
The bet right now is that even a higher bid might not mean a premium to today’s above-offer share prices…. Stay tuned.
JON C. OGG
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