Bets on OSI-Astellas Stand-Off (OSIP)

April 7, 2010 · Filed Under Cancer, Financial, M&A · Comment 

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

OSI Can’t Stay Indpendent Forever (OSIP)

March 15, 2010 · Filed Under Cancer, Financial, M&A · Comment 

OSI Pharmaceuticals Inc. (NASDAQ: OSIP) is holding up yet again, despite the notion that Astellas Pharma, Inc. of Japan wants to acquire the company.  OSI decided to formally reject the $52.00 per share tender offer and is recommending that its shareholders reject the offer while it contacts other parties.  Today we have a counter-response from Astellas.  The profitable maker of Tarceva either wants to remain independent regardless of its notion that it will contact outside parties, or it wants to fetch a much higher price.  Based upon a $52.00 deal offer and a current price of about $58.00 after the fact, take a guess what the market is thinking.

Astellas has said that it is pleased that OSI’s board of directors has finally instructed its management to explore a transaction for the Company.  But it also noted that the Astellas offer gives OSI Pharma shareholders the opportunity to get a full and fair value immediately in cash.  The market is paying $58.00, not $52.00, at least as of this afternoon.

But what Astellas did note was that its offer is not subject to any financing conditions nor to due diligence.  The deal only contains customary conditions to close, as per its own words.

Astellas decided that its best route is to take its offer directly to shareholders of OSI Pharma. Astellas said that it will also nominate a full slate of directors for OSI’s upcoming shareholder meeting, although it is not likely to get a warm reception.  The company further noted that the $52.00 per share cash offer was a 40% premium from the last trading day before Astellas made its offer public.  It further said the deal is a 53% premium to the 3-month average and a 31% premium to the 52-week high.

The problem is wider than today’s share price.  OSI has been public long enough that it is one of the oldest in its class.  For a brief period in 2000 to 2001 its shares hit $80 a share.  Then it even more briefly went up to almost $100.00 per share in 2006 and spent several months north of $60.00 on its own.

Talking Biotech ETFs: iShares Nasdaq Biochnology to $100 (IBB, OSIP, MDVN)

March 3, 2010 · Filed Under alzheimer's, daily, Financial · Comment 

Today’s price moves in the biotech sector are quite different from what we saw earlier this week.  A hostile merger via tender from Astellas for OSI Pharmaceuticals Inc. (NASDAQ: OSIP) got everyone up in arms this week.  So much that other investors were going back over buyout candidate notes.  We also gave a list of those recently noted biotech buyout candidates this week.

But today’s news out of Medivation, Inc. (NASDAQ: MDVN) severely missing its endpoints in the Phase III targets for Dimebon as a new potential blockbuster to treat Alzheimer’s Disease has everyone reminded of the risks in betting on speculative biotech stocks with no products on the market.  That has a sentiment reversal taking place, and unfortunately Dimebon has become Dime-Bag.

But before this morning’s blow-up there was an interesting call that may have more merit than just the bet against the sector.  A chart analysis from OptionsZone.com on the iShares Nasdaq Biotechnology (NASDAQ: IBB) showing a potential break-out pattern on its chart.  If these levels hold, the call is for the “IBB” to head to $95 to $100….

JON C. OGG

More Biotech Buyout or M&A Targets (OSIP, VRTX, AUXL, ITMN, HGSI, CELG, DNDN, ENZN, FACT, PBE, XBI)

March 1, 2010 · Filed Under Cancer, Financial, M&A · 1 Comment 

After today’s hostile Astellas offer for OSI Pharmaceuticals (NASDAQ: OSIP), we have investors and traders alike looking for ‘the next takeover target’ in biotech.  Buy now you know that there are many pitfalls in simply looking for biotech stocks to buy because they will be taken over.  We have taken a look through our own recent stocks noted as takeover candidates and even gone through some sites of our partners looking through potential takeover candidates in the space.

Morningstar just last week had a short video with some key potential buyout targets in the biotech space.  It noted Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX), Auxilium Pharmaceuticals Inc. (NASDAQ: AUXL), and InterMune Inc. (NASDAQ: ITMN).  Those are all names that have come up as takeout targets before.

But two that are on Morningstar’s list for buyouts are Human Genome Sciences Inc. (NASDAQ: HGSI) and Celgene Corporation (NASDAQ: CELG) for its REVLIMID franchise.  The problem with Human Genome is that it is in the same boat we have addressed on multiple occasions: its size got away from the potential realm of buyers.  And Celgene has just become too big at a $28 billion market cap for most potential buyers to consider it and the sales growth from $2.689 billion in 2009 is expected to go to $3.26 billion in 2010 and $3.75 billion in 2011 per Thomson Reuters estimates.

After looking around elsewhere, we went back to some Dendreon Corp. (NASDAQ: DNDN) rumors from last month we covered.  This was based somewhat on options trading, and we think this company may have to wait for a suitor.  Taking the risk of buying the company out before the FDA approves PROVENGE for advanced prostate cancer is something companies are seeming to shy away from.

Enzon Pharmaceuticals, Inc. (NASDAQ: ENZN) is another name that comes up routinely in the rumor mill.  We noted this one hitting 52-week highs in January on fresh rumors.

Facet Biotech Corporation (NASDAQ: FACT) has also fought off attempts from Biogen Idec (NASDAQ: BIIB) as a new add-on for its MS franchise.  Biogen has been rebuffed and it supposedly will not have an interest anymore.

ETF investors are chasing up names in the sector as well.  PowerShares Dynamic Biotech & Genome (NYSE: PBE) is up 4% at $18.48 and the SPDR S&P Biotech (NYSE: XBI) is up 4.7% at $58.98.

Jon C. Ogg

Hostile Mergers Back in Biotech (OSIP)

March 1, 2010 · Filed Under Cancer, Diabetes, Financial, M&A · 2 Comments 

Mergers are back in biotech…. Astellas Pharma Inc., a global pharmaceutical company in Japan, announced that it will commence a tender offer to acquire all outstanding shares of common stock of OSI Pharmaceuticals (NASDAQ: OSIP).  The direct tender is nothing short of a hostile merger after Astellas said that OSI has refused to discuss terms.

The offer is for $52.00 per share in cash valued at approximately $3.5 billion on a fully diluted basis.  Astellas notes that this offer is premium of over 40% to the recent closing stock price and it is a 53% premium over the three-month average share price.  The deal is also said to not be suject to any financing terms or conditions.

In the deal, Astellas hopes to build a world-class oncology platform and expects to invest in OSI’s business and employees.  Here is how Astellas describes the deal:
The acquisition of OSI – a biotechnology company primarily focused on the discovery, development and commercialization of molecular targeted therapies addressing medical needs in oncology, diabetes and obesity – would support Astellas’ growth strategy of becoming a Global Category Leader in oncology.  OSI manufactures and sells Tarceva as a leading cancer medication and has several prospective new oncology medications in its R&D pipeline.

This is a hostile takeover rather than an approved and friendly merger.  Astellas noted that it has made numerous attempts to engage in substantive discussions to acquire OSI.  The company first raised its interest in acquiring OSI during a meeting with OSI’s CEO in January 2009.  It noted that it then made its first written proposal in February 2009.  It then sent letters reiterating its interest in March and June 2009 and several face-to-face meetings, including a meeting between the two CEOs on February 12, 2010.  The company has maintained that OSI has refused to engage in a meaningful discussion, so Astellas is going directly to OSI stockholders.

This may not be the only or last deal either, because Astellas said it will consider all means necessary to secure a completed transaction.  Astellas also intends to nominate directors at OSI’s upcoming annual meeting to give stockholders a voice in the outcome.

Stay tuned.

JON C. OGG

Top 2010 Established Biotech Stock Picks for Upside (MNKD, THRX, DNDN, INCY, ILMN, ALNY, GILD, SVNT, AMGN, ONXX, PDLI, OSIP, CELG)

BioHealthInvestor.com wanted to put together a list of key biotech and BioHealth-related stocks that had the most upside for 2010 according to consensus analyst price targets.  This is of course no exact science for many reasons, but getting a lot of consensus price targets together is often a sign of at least where to start when looking for upward price targets in stocks.  And we all know that BioHealth and biotech stocks often offer the upside of the century as these companies all hold a bit of your own personal lottery ticket in all of their share prices.

After taking a look at our normal universe of biotech and biohealth related stocks. it was obvious that MannKind Corp. (NASDAQ: MNKD) still has the most upside from the consensus price targets IF it is hit.  Then in order of expected share price appreciation comes Theravance Inc. (NASDAQ: THRX), Dendreon Corp. (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and then came Illumina Inc. (NASDAQ: ILMN), Alnylam Pharmaceuticals, Inc. (NASDAQ: ALNY), and Gilead Sciences Inc. (NASDAQ: GILD).

The stocks above all had upside of over 25%.  The other stocks here are the ‘lower rung’ of upside expectations but are all still offering over 20% upside to the consensus analyst price targets (again IF they are hit).  Of the 13 stocks with markets caps of $750 million (or almost $750 million) which we cover, these still had upside of over 20% except a few: Savient Pharmaceuticals, Inc. (NASDAQ: SVNT), Amgen Inc. (NASDAQ: AMGN), Onyx Pharmaceuticals Inc. (NASDAQ: ONXX), PDL BioPharma, Inc. (NASDAQ: PDLI), OSI Pharmaceuticals Inc. (NASDAQ: OSIP), and Celgene Corporation (NASDAQ: CELG).
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OSI Still Worth A Look After FDA Rejection (OSIP, RHHBY)

December 16, 2009 · Filed Under Cancer, fda, Financial · Comments Off 

OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) and Genentech, Inc., a wholly owned member of the Roche Group (RHHBY), had a disappointment from the FDA.  The FDA’s Oncologic Drugs Advisory Committee voted 12 to 1 recommending against the approval of the daily pill Tarceva® as a first-line maintenance use in people with advanced or metastatic non-small cell lung cancer whose cancer has not grown or spread following first-line treatment with platinum-based chemotherapy.

While it is true that the FDA itself is not bound by the recommendations of its advisory committees, a vote this dominant against approval leaves a fairly certain outcome.  The agency is expected to make a decision whether to approve Tarceva for this use by January 18, 2010.

It goes without saying that company expressed disappointment.  The results were a 41% increase in the number of people showing improvement in the likelihood of living without the disease getting worse.  People whose tumors over-expressed the epidermal growth factor receptor (EGFR) as assessed by Immunohistochemistry (IHC) who received Tarceva had a 45 percent improvement in PFS compared to placebo.  Overall survival also improved by 23 percent with Tarceva compared to placebo.

The side effects noted as most common were rash at 49% and diarrhea at 20%.

What is interesting here is that this was given a very low pre-event binary trading alert status as this was an expanded use for Tarceva.  OSI Pharma’s shares closed down over 7% at $32.89 and the shares are down another 1% at $32.51 in the after-hours session.  We also saw 4.1 million shares trade hands versus an average volume of only about 800,000 shares before today.  The 52-week trading range is $27.01 to $43.00.

It will be interesting to see how analysts treat this on Thursday in reaction.  The 2009 estimates from Thomson Reuters are $1.25 EPS and $418.87 million in revenues.  The estimates for 2010 before any changes based upon this are $1.67 EPS on $484.2 million in revenues.

If those estimates are still attainable in 2010, again if, then this trades at 3.9-times revenues and just under 20-times earnings.  Some will say this is cheap, and others will say it is expensive.   We want to see how much is taken off of the revenue expectations before giving this one a thumbs-up or thumbs-down.

JON C. OGG

Developments in the War on Lung Cancer (OSIP, ONTY, LLY)

December 13, 2009 · Filed Under Cancer, fda · Comments Off 

We have seen some developments over the last week on the companies that aim to fight lung cancer.  OSI Pharmaceuticals Inc. (NASDAQ: OSIP) has an FDA review event coming up this week for Tarceva.  We also wanted to review what occurred this week in Oncothyreon Inc. (NASDAQ: ONTY) and Eli Lilly and Company (NYSE: LLY), as well as noting some crazy activity in a penny stock.

OSI Pharmaceuticals Inc. (NASDAQ: OSIP) may have been forgotten about during the holiday rush.  The company already had its analyst meeting on December 3, but we have this one marked with a December 16 FDA advisory committee meeting for Tarceva as a first-line maintenance therapy treatment against non-small cell lung cancer.  The company said that Tarceva is the only oral, non-chemotherapy agent shown to provide a statistically significant improvement in both progression-free survival and overall survival in the NSCLC maintenance setting.  At $34.75, its 52-week trading range is $27.01 to $43.00.  If we use the 4 closest strike prices on put and calls combined, there is only just over 5,000 contracts in the open interest, so it seems that binary event traders in biotech are not giving this much of a grade one way or the other.

Oncothyreon Inc. (NASDAQ: ONTY) rose sharply on Thursday, yet gave back some gains on Friday.  The company last week said Merck KGaA has launched a Phase III trial of its Stimuvax vaccine in Asian patients with advanced non-small cell lung cancer and it is developing the cancer vaccine under a license with Oncothyreon.  The companies are already trying the drug in several other studies for other indications.  Stimuvax is designed to stimulate the body’s immune system to identify and target cancer cells that express MUC1, an antigen commonly expressed in NSCLC as well as in other common cancer types such as breast cancer, multiple myeloma, and colorectal, prostate and ovarian cancers.

Eli Lilly and Company (NYSE: LLY) gave analysts its pipeline update and financial guidance for 2010 this last week.  In its presentation, one of the many drugs under study was Necitumumab (IMC- 11F8).  The company noted that it has 2wo Phase III studies of necitumumab which have been initiated in non-small cell lung cancer.  The first of these commenced dosing in November 2009, while the second study is expected to commence before the end of 2009. A pivotal trial in colorectal cancer will follow.  Unfortunately for Lilly, if you did not count a whole $0.05 gain in the stock on December 9 this would have been a sever day losing streak.

I apologize for covering a pink sheet stock ahead of time.  A company called HARD TO TREAT DISEASES (Pink Sheets: HTDS) had to comment on recent trading activity: HTDS management would like the public to know that the only changes in the company’s fundamentals have been positive. As our shareholders will remember, we recently closed important new sales, added new marketing and technical advisors and had world-class research advances.  While it is only a fraction of a penny, it is hard to not notice 85 million shares… “We continue with our daily business activities, the research into MS, Lung cancer with our www.mindupbioresearch.com project to name a few.”…  We are offering you a link here to the company’s announcement, because it is obvious something is afoot here after noting many issues.

Jon C. Ogg
December 13, 2009

Key Biotech Short Selling Changes in November (AMGN, BIIB, CELG, GILD, GENZ, GERN, LIFE, DNDN, HGSI, AMLN, OSIP)

December 10, 2009 · Filed Under Financial · Comments Off 

We have now seen the changes in short selling in biotech stocks via the late-November short interest report from NASDAQ.  This marks the changes seen at the November 30, 2009 settlement date versus a November 13 settlement date.  We have given short interest data on Amgen Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB), Gilead Sciences Inc. (NASDAQ: GILD),  Celgene Corporation (NASDAQ: CELG), Genzyme Corp. (NASDAQ: GENZ), Geron Corporation (NASDAQ: GERN), Life Technologies Corporation (NASDAQ: LIFE), Dendreon Corp. (NASDAQ: DNDN), Human Genome Sciences Inc. (NASDAQ: HGSI), Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), and OSI Pharmaceuticals Inc. (NASDAQ: OSIP).

Again, the change reflects the November 30 date versus a prior date of November 13:

Amgen Inc. (AMGN) 18,247,560 shares versus 15,888,876, a gain of 14.8%.

Biogen Idec Inc. (NASDAQ: BIIB) 8,914,221 shares versus 8,201,010, a gain of 8.7%.

Gilead Sciences Inc. (NASDAQ: GILD) 19,334,491 shares versus 20,330,539, a drop of -4.9%.

Celgene Corporation (NASDAQ: CELG) 7,800,195 shares versus 8,122,937, a drop of -4.0%.

Genzyme Corp. (NASDAQ: GENZ) 3,835,576 shares versus 4,531,522, a drop of -15.4%

Geron Corporation (NASDAQ: GERN) 13,846,894 shares versus 13,653,745, a gain of 1.4%.

Life Technologies Corporation (NASDAQ: LIFE) 8,686,786 shares versus 8,950,719, a drop of -3.0%.

Dendreon Corp. (NASDAQ: DNDN) 9,881,341 shares versus 9,105,303, a gain of 8.5%.

Human Genome Sciences Inc. (NASDAQ: HGSI) 17,100,782 shares versus 17,571,094, a drop of -2.7%.

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) 8,353,185 shares versus 8,538,392, a drop of -2.2%.

OSI Pharmaceuticals Inc. (NASDAQ: OSIP) 5,471,010 versus 5,517,134, a drop of -0.8%.

JON C. OGG
December 10, 2009

Key Biotech Short Interest Changes (AMGN, GILD, BIIB, CELG, GENZ, GERN, LIFE, DNDN, HGSI, AMLN, OSIP)

November 11, 2009 · Filed Under Financial · Comments Off 

We have now been able to see the short interest changes that took place over the month of October-2009 in the world of biotech stocks.  There were some key gains seen in a couple names, but the overall trend in biotech short selling seems to be down.   We have given short interest data on Amgen Inc. (NASDAQ: AMGN), Gilead Sciences Inc. (NASDAQ: GILD), Biogen Idec Inc. (NASDAQ: BIIB), Celgene Corporation (NASDAQ: CELG), and Genzyme Corp. (NASDAQ: GENZ), Geron Corporation (NASDAQ: GERN), Life Technologies Corporation (NASDAQ: LIFE), Dendreon Corp. (NASDAQ: DNDN), Human Genome Sciences Inc. (NASDAQ: HGSI), Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), and OSI Pharmaceuticals Inc. (NASDAQ: OSIP).

Key data is below with the short interest and the percentage change from mid-October to the end of october:

Amgen Inc. (AMGN)
AS OF DATE Short Int. Change
10/30/2009. 14,737,921  -9.5%
10/15/2009. 16,286,597

Gilead Sciences Inc. (NASDAQ: GILD)
AS OF DATE Short Int. Change
10/30/2009. 16,198,837  +10.2%
10/15/2009. 14,703,407

Celgene Corporation (NASDAQ: CELG)
AS OF DATE Short Int. Change
10/30/2009. 7,370,581  -4.6%
10/15/2009. 7,725,108

Biogen Idec Inc. (NASDAQ: BIIB)
AS OF DATE Short Int. Change
10/30/2009. 8,574,239  -2.9%
10/15/2009. 8,827,991

Genzyme Corp. (NASDAQ: GENZ)
AS OF DATE Short Int. Change
10/30/2009. 5,118,715  -36%
10/15/2009. 8,085,099

Geron Corporation (NASDAQ: GERN)
AS OF DATE Short Int. Change
10/30/2009. 12,907,169   -1.9%
10/15/2009. 15,152,295

Life Technologies Corporation (NASDAQ: LIFE)
AS OF DATE Short Int. Change
10/30/2009. 7,746,689  +8.0%
10/15/2009. 7,173,192

Dendreon Corp. (NASDAQ: DNDN)
AS OF DATE Short Int. Change
10/30/2009. 8,427,630 +0.4%
10/15/2009. 8.398,235

Human Genome Sciences Inc. (NASDAQ: HGSI)
AS OF DATE Short Int. Change
10/30/2009. 17,160,491  -4.5%
10/15/2009. 17,967,328

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN)
AS OF DATE Short Int. Change
10/30/2009. 10,199,665  -17%
10/15/2009. 12,347,842

OSI Pharmaceuticals Inc. (NASDAQ: OSIP)
AS OF DATE Short Int. Change
10/30/2009. 5,415,588  +4%
10/15/2009. 5,212,729

JON C. OGG
NOVEMBER 11, 2009

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