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And the arbitrage premium is getting smaller and smaller as people become more convinced the acquisition by OPK will happen.
Barrons had a piece today on the Cubist/Trius tieup, saying it was a good deal for Cubist (no surprise to this lurker) and that it was not assured that the contingent $2 payment would be made.
BTW, I am a long and have been since $5.45.
If you have a subscription, you can access Barrons, but here is what I could capture:
"Investors' Soapbox PM
| WEDNESDAY, JULY 31, 2013
Cubist Pharma's Buys Look Like Square Deals
Needham & Co.
Cubist Pharmaceuticals announced, after Tuesday's market close, plans to acquire two antibiotic companies, Optimer Pharmaceuticals and Trius Therapeutics.
We view both transactions as favorable to Cubist (ticker: CBST), particularly given the contingent payment structure. The Optimer (OPTR) deal calls for $10.75 cash per share up front ($535 million) and up to $5 cash upon achievement of Dificid [Clostridium difficile-associated diarrhea] sales milestones through 2015.
The Trius (TSRX) deal calls for $13.50 cash per share up front ($707 million) and up to $2 cash upon achievement of a tedizolid [gram-positive infections] sales milestone in 2016.
We note some overlap between the Cubist and Optimer/Trius pipelines. However, we believe the strategy as described by management last night properly leverages each asset's strengths under the circumstances.
We maintain our Hold rating on Cubist, but believe the company is in a stronger position overall if both deals close. We believe the $5 Dificid sales milestone is likely to be achieved, but have less confidence that the $1 or $2 tedizolid sales milestone will be reached. Dificid is a well-differentiated drug in the Clostridium difficile space and our most recent estimates would trigger the $5 payment.
Trius recently completed Phase III trials of tedizolid in skin infections. Although oral formulation is a key positive, we are concerned the drug may not be sufficiently differentiated from its relative linezolid (Zyvox from Pfizer (PFE)) in a generic linezolid environment. This may occur between 2015 and 2021, subject to a settlement agreement between Pfizer and Teva Pharmaceutical Industries (TEVA).
We agree with management assessment of combined $600 million-$1 billion peak sales for the two drugs. We believe potential is split evenly.
Trius has a Gram-negative drug discovery program targeting DNA gyrase and topoisomerase IV (GyrB/ParE), with potential entry into the clinic in 2014. Possible areas of focus include Klebsiella and Acinetobacter. Trius has been successful in drawing nondilutive financial support from biodefense agencies. There are no other drugs in development at Optimer.
-- Alan Carr
-- Mark Vignola "
The prior press release links directly with the video link I posted earlier.
New press release: http://finance.yahoo.com/news/beesfree-executive-team-meets-top-174100097.html
"WEST PALM BEACH, Fla., July 26, 2013 /PRNewswire/ -- BeesFree, Inc. (OTC QB: BEES), the worldwide distributor of BeesVita Plus™, an innovative composite food supplement for honeybees that strengthens the bee's immune system and prevents the effects of Colony Collapse Disorder (CCD), announced today that Dr. Andrea Festuccia, Chairman of BeesFree, Inc. and other members of BeesFree's executive team met with the Iowa Economic Development Authority, Iowa State University and private accredited investors in the state of Iowa. The Iowa Economic Development Authority's mission is to strengthen economic and community vitality within Iowa to make Iowa the choice for people and businesses. As a result of the enthusiasm from local officials in Iowa coupled with the response from accredited investors in Iowa, BeesFree is considering relocating the company's U.S. headquarters to Ames Iowa. BeesFree currently maintains offices in West Palm Beach, Buenos Aires and Rome.
Dr. Festuccia commented, "I couldn't be happier with the reception that we received from accredited investors and other important officials within the state of Iowa. With the help of Ben Washburn CEO MMI Consulting, and on follow-up conversations that we have had after our initial meetings, there is great interest from both the state level as well as from investors who understand the great opportunity that BeesFree has. There is no evidence that CCD is going away and the world needs a solution."
Dr. Festuccia concluded, "We expect to see similar interest from other areas in the United States and throughout the world that depend on agriculture as the main contributor to the local economy."
Dr. Festuccia was interviewed by the Des Moines Register. Interested parties can read or view the interview by clicking the following links:
http://www.desmoinesregister.com/article/20130717/BUSINESS/307170060/?odyssey=nav|head
http://whotv.com/2013/07/21/the-insiders-sodders-and-stineman-part-1/
Fergo, I think it is a long term winner. I generally buy and hold, so long term is my game. Steve
Actually, not really interview. Some video of the CEO. More of a discussion between Iowa Senators on the pros and cons on incentives to locate facilities in Iowa.
Interview in Iowa with Beesfree CEO, setting up a new facility in the "agricultural capital of America":
http://whotv.com/2013/07/21/the-insiders-sodders-and-stineman-part-1/
So, treat IPF with viagra? Go out with a bang!
DS,
Good move. The spread between PBTH and OPK assumes the deal will not go through. PBTH has, IMHO, a great future ahead of it if it remains independent. If acquired by OPKO, this is a cheap way to buy OPK.
Steve
Let's hope!
Fergo,
If you go here:
http://www.secform4.com/insider-trading/1087432.htm
You'll see most transactions are described as "tax withholding".
Steve
Day traders closing out their positions.
GHMM,
It was interesting to see how bad the results were. Also interesting was the list of drug firms which paid some of the doctor's expenses. Have you seen any information as to why ITMN paid his travel expenses as it was a Gilead drug?
Steve
dshade, The only prices that matter ultimately are what you bought at vs where you sell. I'm well overweight in PBTH in my portfolio already and my average cost is under $5, so I'm content to sit tight. IMHO, this will be a big winner long term. Although it seems to offer lots of opportunities for traders to get in and out, that's not my temperament.
IMHO, I personally think an addition now would be fine. You would be, in essence, buying OPK shares cheaply if the acquisition by OPK goes through. If PBTH remains independent, there are exciting events on the horizon as they further prove their technology and monetize one or more of the applications.
Good. I've been in OPK since the mid $4 range and in PBTH since just under $5.
ABC, Have you bought in yet?
http://finance.yahoo.com/news/secfilings-com-insider-buy-breaking-131500625.html
New insider purchases:
"REDONDO BEACH, CA--(Marketwired - May 21, 2013) - ChromaDex Corporation (OTCQB: CDXC) Director Michael Brauser purchased 25,000 shares of common stock on the open market on May 13th, according to a Form 4 filing made with the SEC. These purchases took place at $0.662 per share, bringing the insider's total ownership stake to 4,519,926 shares owned directly by Mr. Brauser.
View the Form 4 filing from SECFilings.com here:
http://www.secfilingsnews.com/cdxc_insiderbuy.php
Michael Brauser, 57, has served as Co-Chairman of the Board since October 2011 and served on the Compensation Committee from May 2010 to March 2011. Mr. Brauser has been the manager of, and investor with, Marlin Capital Partners LLC, a private investment company, since 2003. From 1999 to 2002, he served as President and Chief Executive Officer of Naviant Inc. (eDirect Inc.), an Internet marketing company. He was also the founder of Seisant Inc. (eData.com Inc.). Mr. Brauser also served as Co-Chairman of the Board of Directors of InterCLICK Inc. -- now a part of Yahoo Inc., from August 2007 to December 2011. With his past experience as Co-Chairman of the Board of Directors at InterCLICK and as manager of an investment company, he brings extensive business and management expertise to the board."
PBTH price seems to have decoupled from the offer by OPK.
OPK offered 0.9951 shares for each share of PBTH. Yet PBTH closed at 6.49 today while OPK closed at $7.16.
The price for PBTH should be $7.12, implying either: (1) some arbitrage opportunity to buy PBTH and short the same number of shares of OPK; or (2) that the market assumes that the deal will not go through and that PBTH will not receive a higher offer. As speculated in the article you posted, PBTH shareholders might find the offer attractive at this point.
Disclosure: I am long both OPK and PBTH. No short holdings.
PBTH price seems to have decoupled from the offer by OPK.
If you recall, OPK offered 0.9951 shares for each share of PBTH. Yet PBTH closed at 6.49 today while OPK closed at $7.16. The price for PBTH should be $7.12, implying either: (1) some arbitrage opportunity to buy PBTH and short the same number of shares of OPK; or (2) that the market assumes that the deal will not go through and that PBTH will not receive a higher offer.
Disclosure: I am long both OPK and PBTH. No short holdings.
And going back a bit further, to
http://biz.yahoo.com/e/130418/mnov8-k.html
"Form 8-K for MEDICINOVA INC
18-Apr-2013
Entry into a Material Definitive Agreement, Financial Statements and Exhibits
Item 1.01 Entry into a Material Definitive Agreement.
On April 17, 2013, we entered into an equity distribution agreement, or sales agreement, with Macquarie Capital (USA) Inc., or MCUS, pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $6.0 million from time to time through MCUS as our sales agent. The issuance and sale of these shares by us under the sales agreement, if any, is subject to the effectiveness of our shelf registration statement on Form S-3 (File No. 333-185022), initially filed with the Securities and Exchange Commission on November 16, 2012. We make no assurance as to the continued effectiveness of our shelf registration statement.
Sales of our common stock through MCUS, if any, will be made on The Nasdaq Global Market by means of ordinary brokers' transactions at market prices, to or through a market maker other than on an exchange, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, in block transactions or as otherwise agreed by us and MCUS as to any other method permitted by law. Subject to the terms and conditions of the sales agreement, MCUS will use commercially reasonable efforts to sell our common stock from time to time, based upon our instructions (including any price, time or size limits we may impose pursuant to the terms of the sales agreement). We are not obligated to make any sales of common stock under the sales agreement and may terminate the sales agreement at any time upon written notice. We will pay MCUS an aggregate commission rate of 8.0% of the gross proceeds of the sales price per share of any common stock sold through MCUS under the sales agreement. We have paid $55,000 to MCUS as an advance on the commissions payable to MCUS, which offsets the initial $55,000 of commissions earned. We have also provided MCUS with customary indemnification rights. "
From http://finance.yahoo.com/news/medicinova-reports-first-quarter-2013-213000092.html
"MediciNova Reports First Quarter 2013 Results
GlobeNewswirePress Release: MediciNova, Inc. – Wed, May 8, 2013 5:30 PM EDT
SAN DIEGO, May 8, 2013 (GLOBE NEWSWIRE) -- MediciNova, Inc. a biopharmaceutical company traded on the NASDAQ Global Market (MNOV) and the Jasdaq Market of the Osaka Securities Exchange (Code Number: 4875), today announced financial results for the first quarter ended March 31, 2013 through the filing of its quarterly report on Form 10-Q.
A detailed discussion of financial results and product development programs can be found in MediciNova's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, which was filed with the Securities and Exchange Commission on May 8, 2013 and is available through investors.medicinova.com/sec.cfm.
Financial Results
For the quarter ended March 31, 2013, MediciNova reported a net loss of $2.4 million, or $0.14 per share, compared to a net loss of $3.9 million, or $0.24 per share, for the same period last year. For the quarter ended March 31, 2013 and 2012, service revenue relating to the Kissei services agreement was approximately $3,000 and $191,000, respectively. Research and development expenses were $0.7 million for the quarter ended March 31, 2013, as compared to $1.9 million for the quarter ended March 31, 2012. The decrease in research and development expenses was due primarily to a decrease in spending on MN-221-CL-007 and MN221-CL-012 resulting from the completion of both trials in 2012 and a decrease in stock-based employee compensation expense, partially offset by an increase in spending on MN-166 clinical development. General and administrative expenses were $1.7 million for the quarter ended March 31, 2013, as compared to $2.2 million for the quarter ended March 31, 2012. The decrease in general and administrative expenses was due primarily to a decrease in stock-based employee compensation expense.
At March 31, 2013, we had available cash and cash equivalents of $3.0 million and working capital of $2.8 million. The Company will require additional cash funding to continue to execute its strategic plan and fund operations. Between August 21, 2012, the date of the Common Stock Purchase Agreement with Aspire Capital Fund, LLC ("Aspire"), and today's date, we have generated proceeds of $4.3 million under this agreement including proceeds of $1.4 million subsequent to March 31, 2013. We have the right, subject to the terms of this agreement, to cause Aspire to acquire up to approximately 3.2 million shares for total gross proceeds not to exceed $20 million (including approximately 2.5 million shares issued or sold to Aspire to date). On April 17, 2013, MediciNova entered into an At-the-Market Equity Distribution Agreement with Macquarie Capital (USA) Inc. ("MCUSA") pursuant to which the Company may from time to time sell through MCUSA shares of our common stock up to an aggregate offering price of $6 million. Between April 17, 2013, and today's date, we have generated net proceeds of $2.8 million under this agreement on sales of 895,000 shares of our common stock. We expect to sell additional shares under the Aspire and MCUSA agreements and we are also pursuing other opportunities to raise capital.
Other Recent Highlights
On April 17, 2013, MediciNova entered into an At-the-Market Equity Distribution Agreement with Macquarie Capital (USA) Inc. ("MCUSA") pursuant to which the Company may from time to time sell through MCUSA shares of our common stock up to an aggregate offering price of $6 million.
On February 25, 2013 MediciNova announced that it had received Fast Track designation from the U.S. Food and Drug Administration (FDA) for ibudilast (MN-166) for the treatment of methamphetamine dependence. Fast Track is a process designed to facilitate the development and expedite the review of drugs that are intended to treat serious diseases and have the potential to fill an unmet medical need.
On January 3, 2013 MediciNova provided a development update on its lead program, MN-166, and on the MN-221 program. The company provided an update on its grant aided ibudilast (MN-166) neurological development program, which has trials ongoing in opioid dependence and methamphetamine dependence. The company also described the guidance it received from its MN-221 End-of-Phase 2 Meeting with the FDA including the next steps in manufacturing and clinical development, which will be partner-dependent."
From http://biz.yahoo.com/e/130510/mnov8-k.html
"Form 8-K for MEDICINOVA INC
10-May-2013
Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securities
Item 1.01 Entry into a Material Definitive Agreement.
On May 9, 2013, we entered into a Securities Purchase Agreement with the investors set forth on Schedule A thereto (the "Purchase Agreement"). Pursuant to the Purchase Agreement, we agreed to sell to the investors 1,158,730 shares of our common stock (the "Shares") at a price of $3.15 per share and warrants to purchase an aggregate of 869,047 shares of our common stock (the "Warrants") with an exercise price of $3.15 per share (the "Private Placement"). The Warrants will expire five years following the issuance date thereof and may be exercised for cash or, if the current market price of our common stock is greater than the per share exercise price, by surrender of a portion of the Warrant in a cashless exercise. The aggregate purchase price for the Shares and the Warrants to be sold in the Private Placement will be approximately $3.65 million. The closing of the Private Placement is expected to occur on May 13, 2013.
The Purchase Agreement includes representations, warranties, covenants and closing conditions customary for transactions of this type. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.
The offering described above is being made pursuant to the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.
The foregoing is a summary of the terms of the Purchase Agreement and the Warrant. The summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement and the form of Warrant, copies of which are attached hereto as Exhibits 10.1 and 4.1, respectively. "
If you look at the comments at the end of the article I referenced in the preceding post, there is extensive discussion of what the possible outcome of the offer by OPK to purchase PBTH might be. Comments were added even today.
Article on Seeking Alpha: http://seekingalpha.com/article/1391461-a-sweeter-deal-on-the-horizon-for-prolor-biotech?source=email_rt_article_title
".... As of 4/26/13, Prolor shares trade at $6.30, an 11.1% upside to $7.00 and a 12.5% premium to what shares traded at in the beginning of the week. The deal currently offers a total premium of about 25% on $5.60. Despite a 25% total gain and a current gain of about 11%, this current premium is not as delightful as the possible future profits Prolor could have in store for it. Some analysts have projected a share price of about $10 to $15 for Prolor. Deerpath Capital indicated that the Company is worth more than $10.00 per share. The overall point here is that the company has been deemed undervalued compared to the current buyout price. So there are a few things investors can do now to take advantage of the situation. Currently, there's about an 11% upside as I am writing this, and so an arbitrage play is defiantly a possibility; but 11% may not be all you get. Considering the current shareholder backlash and analyst valuation of the company, there could be further gains (assuming Opko raises its offer). If Prolor is offered $10 per share; (about 58.73% upside from $6.30) valuing the company at about $634 million and if at $15 per share (138% upside from $6.30), the company would be valued at about $951 million.
Worst Case Scenario For Now
Even if the deal didn't go through at $7.00 per share, and if an investor were to purchase shares now at $6.30, the probable scenario would be that the shares fall back to their $5.50 levels. This drop would propose a 12.7% downside from $6.30. This is not the end of the world either, because even if this acquisition doesn't work out, Prolor still has the possibility of being a profitable and very successful company in the future.
Conclusion
Although I can't tell the future, at the current valuation and possibilities, I believe it's safe to say that Prolor offers a nice arbitrage play with a speculative bonus. Based on the possible upside and limited downside as addressed above, I personally feel comfortable increasing my shares. In fact, I have already increased my position as of 4/26/13, and have the intention of increasing it further.
Please feel free to express your opinions below as I greatly appreciate opinions and criticism. I understand everyone is different in their views towards particular subjects of interests and whether or not you agree with my views, I still appreciate your feedback. I only hope my article provided some insight and help in your investing analysis. Please also keep in mind I address my opinions and views in this article and encourage readers to forge their own opinions when considering trades and investments."
I find the technology to dramatically extend the efficacy (to a week) of medicines which otherwise require daily injections fascinating. Has anyone estimated the market potential of all the different existing treatments to which this technology could be applied?
Does anyone see a likely prospect of the ambulance-chasing attorneys getting shareholders a higher price from OPK?
If you see the acquisition of PBTH by OPK as synergystic and that OPK can better bring the PBTH products to market, you might take the share swap and stay for the ride. After all, it would not be a taxable event.
OTOH, if you feel PBTH is fully valued or that OPK can't add value, then sell. You both appear to have adopted that stance.
While it is possible that one of the ambulance-chasing lawyers can extract more value for PBTH shareholders, I think it may be more likely that other entities might try to make a higher offer and snatch PBTH away. Frost only has around a 20% interest in PBTH and may be compelled to recuse himself anyway.
As I have OPK shares as well and find the Prolor technology exciting, I may just stick around for a while.
Well, Frost controls both companies and you had to see at least some likelihood of OPK acquiring PBTH. As I am long in both shares, it's not a big deal to me, but it has to make some of the shorts nervous. I wouldn't be surprised to see OPK acquire CDXC next, just IMHO as I am long there too, and Frost controls that as well.
I have to wonder if they are all being shaped up for acquisition by TEVA.
Prolor being acquired by OPKO for OPKO stock valuing PBTH at $7 per share. 0.9951 shares of OPKO for each share of PBTH.
I have been wondering when Dr. Frost would roll both of these into one company.
Surf, Keep holding! With the pipeline they have, I believe there are multiple ways forward.
GHMM, Thanks for the posts. Just trying to catch up.
Reimbursement rate in France for Esbriet.
From: http://biz.yahoo.com/e/121017/itmn8-k.html
"Form 8-K for INTERMUNE INC
17-Oct-2012
Other Events
Item 8.01 Other Events.
On October 16, 2012, the Journal Officiel de la R?publique Fran?aise (the official gazette of the French Republic, which serves as the primary source by which the national government of France disseminates legal information about its activities) published the price of Esbriet? (pirfenidone). The publication of price in the Journal Officiel is the final step in the reimbursement process for a new medicine in France. As announced by InterMune, Inc. ("InterMune") on September 11, 2012, the Comit? Economique des Produits de Sant? (France's Economic Committee on Health Care Products) authorized an ex-factory reimbursed price of 1.923,08? for a four-week treatment pack of Esbriet, corresponding to 25,000? per patient, per year (approximately $32,000 USD at the then current exchange rates). InterMune expects to commence the commercial launch of Esbriet in France for the treatment of idiopathic pulmonary fibrosis (IPF) in the second half of November 2012. "
But it does raise the profile of treatments in this sector and, to the extent the ITMN product has fewer side effects and is as or more effective, will attract attention to pirfenidone. Meanwhile, the news from France and Canada is all good.
Pterostilbene dosage -- how much?
Several of you have been delivering testimonials as to your personal success with the capsules in improving your personal numbers.
Given that the recently published study showed that 250 mg/day was effective at reducing blood pressure (with a slight increase in LDLs), and the HeartBlu, EternalBlu capsules contain 50 mg, does anyone have any insight as to proper dosage of the Bluscience dietary supplements? While the bottle calls for two a day, what do you use? What has your doctor said about it, if in fact you've asked your doctor?
Disclosure: Long CDXC.
Where are you seeing these large purchases of shares? The sites I look at for Form 4 transactions show nothing more recent than April and all of them appear to be exercise of previously granted options.
For example: http://www.secform4.com/insider-trading/725363.htm
It doesn't paste too well, but here goes:
CEL SCI Corp: Insider Trading and Stock Options
Goto page 0, 1, Next
Other transactions:
Transaction
& Date Reported
Date Company Symbol Insider
Relationship Shares
Traded Average
Price Total
Amount Shares
Ownership Filing
2012-03-30
Option Award 2012-04-03
12:47 pm CEL SCI CORP CVM ZIMMERMAN DANIEL H
(Senior Vice President) 6,589 $0.48 $3,163 374,209
(Direct) View
2012-03-30
Option Award 2012-04-03
12:45 pm CEL SCI CORP CVM TALOR EYAL
(Chief Scientific Officer) 5,000 $0.48 $2,400 479,937
(Direct) View
2012-03-30
Option Award 2012-04-03
12:43 pm CEL SCI CORP CVM PRICHEP PATRICIA B
(Senior Vice President) 6,945 $0.48 $3,334 868,686
(Direct) View
2012-03-30
Option Award 2012-04-03
12:40 pm CEL SCI CORP CVM KERSTEN GEERT R
(Chief Executive Officer
Director) 7,812 $0.48 $3,750 3,424,512
(Direct) View
And this one (also slightly OT):
http://seekingalpha.com/article/667531-4-signs-indicating-opko-is-undervalued?source=email_rt_article_title&ifp=1
"4 Signs Indicating Opko Is Undervalued
June 18, 2012 | 1 comment | about: OPK, includes: BMY, PBTH, PFE, TEVA
The world of emerging biotechnology may carry substantial risk when it comes to track records and approval, but there are two points that matter at the end of the day. First, risk can be good. One of the central principles of financial theory is that riskier assets generate higher returns as a result of fundamentals dissipating initial reservations.
This leads me to my second point, namely that there are ways emerging biotech investors can reduce risk. If a major experienced investor is endorsing the company, if the insiders are increasing ownership, if management or the board comes equipped with a track record of success, or if the pipeline has connections to leading companies, it's a good sign that the fundamentals are pointing in the right direction.
Opko Health (OPK), a billion-dollar-plus pharmaceutical and diagnostic company, has all four positive signs going for it. It is backed by healthcare legend Phillip Frost, who is worth $2.3B, according to Forbes. Frost is the Chairman & CEO of Opko and has delivered past innovation time and time again. He has proven to be a winner with the $826M sale of Key Pharmaceutical to Schering-Plough and the $7.6B sale of Ivax to Teva (TEVA). I also believe he is a winner, because he has done an impressive job of "interlinking" his holdings (ie. getting one holding to provide business to another and vice versa).
It is unfortunate then that an article published earlier today on Seeking Alpha attempted to discredit both Frost's investment record and his bullish position on Opko. Perhaps most upsetting of all, the piece made a point of looking at the flaws in the painting and just missing the overall painting.
It ran us through a series of disappointing Frost investments and went so far as to highlight "Dr. Frost's excursion into Chinese fraud". Saying this is kind of like saying "Mister Rogers goes hunting in the Amazon" - it just doesn't work. Aside from the fact that Frost is not a prolific investor in China (he principally backs Israeli bio-pharma), to say nothing of fraud (his business dealings and philanthropy are highly respected), it really just strains the imagination to argue that a billionaire is somehow a failure and that "investors should apply a discount to Opko's shares" as that same billionaire acquires more and more shares.
Having netted billions in value creation over the course of his career, Frost ranked #2 by InsiderScore.com as an insider whose shares have appreciated the most. His investment in PROLOR Biotech (PBTH), which I have covered several times, has been an incredible home run. And I anticipate likewise for his investment in Opko.
Why Opko Looks Undervalued
As the Chairman & CEO, Frost owns a near majority stake in Opko and has been aggressively increasing ownership. His purchases have been made on the open market and most of them have been above the current $4.57 price per share. The purchases have been consistent, substantial, and reinforced by purchases from the Director, Vice Chairman & CTO, and Executive Vice President. In fact, in the last six months, more than 3.8M shares have been purchased in over 91 transactions by insiders. The amount that has been sold? Zero.
Click to enlarge.
Source: FINVIZ.com. Description: Insider transactions since May 1st. Insiders have continued to buy increasing amounts of Opko, and this reality has been consistent dating back to the IPO.
Insiders of OPKO actually love the stock, and are putting their money where there mouths are: They own 52.7% of the outstanding shares. Respected hedge funds appear to be taking a similar view on the stock. Aletheia Research & Management owns 3.3% of the firm; Jana Partners owns another 0.9%; and institutional investors collectively own 20%, which is a figure that is very high for a rising biotech given the insider ownership.
But it's not just about the abundance of support from institutions and leading healthcare investors that make Opko undervalued. It is ultimately the firm's diversification and catalysts that will drive value creation. Opko's proprietary Claros Point-of-Care Diagnostics Platform can produce quality lab results for testing blood in just 10 minutes. The product is potentially revolutionary, since it is attempting to transition in-vitro medical diagnostics from the laboratory to the bedside. With healthcare costs rising, suppliers are looking for an efficient clinical workflow and improved customer experience. Claros accomplishes both with minimal provider training.
Claros is just one potentially billion dollar product that Opko owns. It is noted for "technologies… and vaccines to diagnose, treat, and prevent neurological disorders, as well as infectious diseases". The Israeli firm is also developing a software product that helps doctors quickly obtain test results. Rolapitant, which is currently in its Phase III trial, has already demonstrated solid efficacy for treating chemotherapy-induced nausea and vomiting (ie. "CINV"). Phase II results demonstrated that patients treated with just one dose had impressive five-day activity in CINV prevention. Emerging market focus through the acquisition of a Latin American pharmaceutical company adds yet another layer to the upside story. And diagnostic tests for Alzheimer's have been so productive that Bristol-Myers (BMY) signed a deal with Opko for continued development.
Based on the above pipeline momentum, I believe the $1.4B market value understates the firm's potential. Frost is not just good for market confidence; he is also good for networking. Since Opko's products target multi-billion dollar markets, it follows that its multi-billion dollar Chairman & CEO can connect the firm to partners that will provide access to large patient populations. What partner? Frost chairs Israel's largets biotechnology firm, Teva, so it makes sense that he would link a local firm (ie. Opko) with his flagship holding.
In light of the catalysts and positive continual reinforcement by both leading healthcare investors and major institutional shareholders, it should not be surprising that the company has a 1 year price target of $8.25, which is at a more than 80.5% premium to today's value.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OPK, PBTH, TEVA, PFE over the next 72 hours.
Disclaimer: The distributor of this research report, Gould Partners, is not a licensed investment adviser or broker dealer. We are a consultant to a third-party representing Opko and have received five hundred dollars for independent research. Investors are cautioned to perform their own due diligence as information contained within this report has been derived from public sources and cannot be guaranteed by us to be fully accurate. Always discuss investments with a licensed professional before making any financial decision. Statements made herein are often "forward-looking statements" as defined under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. Since these statements are uncertain, actual results may be materially different from those expected."
Slightly OT, but balancing the earlier one I posted.
http://seekingalpha.com/article/667561-opko-health-shorts-likely-to-get-frostbite?source=email_rt_article_title&ifp=1
"Opko Health: Shorts Likely To Get Frostbite
June 18, 2012 | about: OPK
Last Friday, Aspara Biotechnology Research published an article to help its owners profit from a self-disclosed short position in Opko Health (OPK). Unfortunately, the article contained numerous factual errors and cherry-picked examples of investment failures by Opko Health's CEO. This article responds to Aspara Biotech's article and also provides additional facts that should be considered by any Opko Health investor. Investors will discover that Opko Health's CEO actually has an envious investment track record, despite the small failures highlighted by Aspara Biotech, and he has extreme confidence in Opko Health at $4-5 per share with enough wealth, lest we forget, to personally buy back the entire float.
Dr. Frost: Not a Billionaire Because of Bad Investments
Aspara Biotech's article leaves the reader with the impression that Opko Health's CEO, Dr. Phillip Frost, is a terrible investor with a list of failed investments that can scarcely be counted. In reality, however, Dr. Frost is a self-made billionaire whose investment returns have far exceeded his losses by thousands of percentage points. The only way that Aspara Biotech was able to create this temporary impression was by singling-out a few investment failures and disregarding his large successes.
The most important counter-argument to the entire article can be summarized in a single sentence. Dr. Frost, Opko Health's CEO, would not be a self-made billionaire if he was a poor businessman. Anyone can single-out a few investment failures and write an article insinuating that these failures might repeat themselves for Opko Health. However, this type of argument is fallacious and certainly not compelling for the investors who vote every day (with real money, not anonymous articles) on the true value of Opko Health.
Aspara Biotech disregarded the successes of Dr. Frost that far exceed all of his losses combined. Here is a brief list of Dr. Frost's overlooked wins:
Continucare (invested $16.8M that became $170M) +900%
?Dozens of SEC filings were used to calculate profit, and the Forbes link provides additional citation.
Dreams (invested $2M that became $15M) +650%
?Fanatics bought Dreams in April 2012 for approximately $183M; Dr. Frost's Frost Group Investment invested $2M in November 2006 and profited approximately $13M including all stock/options/warrants/debt. Dozens of SEC filings were used to calculate profit.
Whitman Education (invested $6M that became $175M) +2800%?
Career Education Group bought Whitman Education in July 2003 for approximately $230M; Dr. Frost's profit was approximately $169M including all stock/options/warrants/debt. Dozens of SEC filings were used to calculate profit.
Key Pharmaceuticals (invested $5M that became $180M) +3500%?
Schering-Plough bought Key in 1986 for approximately $825 million in stock; Dr. Frost's profit was approximately $175M including all stock/options/warrants/debt. Dozens of SEC filings were used to calculate profit.
Rolapitant (invested $29M that became $190M) +580%
Ivax (invested $100M incl. open market purchases that became $1.5B) +1400%?
Teva bought Ivax in January 2006 for approximately $9.2 billion (including assumed debt); Dr. Frost's profit was approximately $1.4B including all stock/options/warrants/debt. Dozens of SEC filings were used to calculate profit.
ChromaDex (combination of personal and corporate investments) all up at least +200%?
According to dozens of SEC filings for ChromaDex, Dr. Frost's cost basis is less than $0.20 per share, and ChromaDex last closed above $0.60 per share. He has not sold any of his investment in the company.
North American Vaccine (invested $10M that became $140M) +1300%?
Baxter bought North American Vaccine in 2000 in a cash/stock-for-stock transaction valued at approximately $370 million; Dr. Frost's profit was approximately $130M including all stock/options/warrants/debt. Dozens of SEC filings were used to calculate profit.
Aspara Biotech's article highlighted a few million dollars of legitimate investment losses from Dr. Frost's past. However, the article ignored billions in investment gains that made up for those losses by literally thousands of percentage points. Again, Dr. Frost is a self-made billionaire. He made small mistakes, as anyone else does, but he moved along to crush those losses with wins that were 10, 100, or 1,000 times as valuable.
SEC Filings Versus Aspara Biotech's Article
Aspara Biotech's article contains significant errors that can be discredited using public SEC filings. To begin, their article discussed Protalix (PLX) as the most obvious investment failure of Dr. Frost's life. The truth is that Dr. Frost earned +400% on his Protalix investment. Had Aspara Biotech read SEC filings, they would have realized that Dr. Frost's $13.7M original investment in Protalix turned into $70M.
Regarding the "single utterly incomprehensible day" when Dr. Frost allegedly destroyed "$1.8 billion of shareholder wealth" in Protalix, this is also an error. The initial investors from the Protalix reverse merger in December 2006, including Dr. Frost, invested at less than $1.50 a share (in average cost basis after factoring in their multiple investments), and all of these investors agreed to a lock-up period during the fall of 2007 when Protalix was trading at (extremely overvalued) $30-40 prices. The reason Protalix stock traded this high was simply because freely tradable shares represented less than 1% of the outstanding shares. From SEC filings:
In connection with the merger, substantially all of the former shareholders of Protalix Ltd. entered into lock-up agreements to satisfy Israeli tax laws and contractual obligations. The lock-up agreements prohibit such former shareholders of Protalix Ltd. from, directly or indirectly, selling or otherwise transferring the shares of our common stock issued to them as a result of the merger.
Although the public market capitalization displayed as though Protalix technically lost a large amount of its market capitalization, this public figure was being calculated using the only those freely tradeable shares for which was there was not enough supply given the lock-up. The reality is that during this time, no insider or large shareholder was able to influence the price of the stock and a tiny 1% of the outstanding shares were pricing Protalix at an unrealistic $2B+ market capitalization. Again, all of this is described in the SEC filings that Aspara Biotech's article omitted. Protalix's stock was artificially inflated because of the lack of liquidity, and only low-volume trading gave the company its unrealistic market capitalization.
Prior to the closing of the merger, on September 12, 2006, pursuant to a share purchase agreement dated August 21, 2006, Protalix Ltd. completed the sale of 163,774 ordinary shares, or 14% of its outstanding ordinary shares, and warrants to purchase an additional 57,691 ordinary shares, or 5% of the outstanding ordinary shares, of Protalix Ltd., on a fully diluted basis, in a private placement to a trust controlled by Dr. Frost, Glenn L. Halpryn and certain other investors introduced to Protalix Ltd. by Dr. Frost. Protalix Ltd. received gross proceeds from the private placement equal to $15,000,000. In connection with such share purchase agreement, prior to the closing of the merger, the investors invested an additional $122,988. As a result of the merger, the shares received by these investors were converted into 10,054,600 shares of our common stock, representing 12.99% of our total outstanding capital stock on a fully-diluted basis after the closing of the merger, and the warrants were converted into warrants issued by us that are exercisable into 3,875,416 shares of our common stock, representing approximately 5% of our total outstanding shares on a fully diluted basis at the closing of the merger.
In any event, Protalix was a significant winner for Dr. Frost and all of those who invested when the company was merged in December 2006: below $1.50 per share to over $7.50 per share or higher. It is interesting that the top investment "failure" from Aspara Biotech's article was actually a +400% gain for Dr. Frost.
Additionally, Aspara Biotech was incorrect when they said that Non-Invasive Monitoring Systems (NIMU) relies on revenue from Lifeshirt sales. This could not be further from the truth, as the company openly discloses that it only receives royalty payments from this technology and, instead, is focused on its Exer-Rest product line (omitted from Aspara's article). From SEC filings:
Non-Invasive Monitoring Systems began business as a medical diagnostic monitoring company to develop computer-aided continuous monitoring devices to detect abnormal respiratory and cardiac events using sensors on the human body's surface. It has ceased to operate in this market and has licensed the rights to its technology. The Company is now focused on developing and marketing its Exer-Rest® line.
From a quick call to the company, I was able to determine that Exer-Rest products are priced around $8-10K apiece to individuals, hospitals, and other healthcare institutions for therapeutic treatment, especially for individuals with limited mobility. The motorized beds and platforms stimulate blood flow, improve circulation, and relieve minor aches and pains. Dr. Frost continues to hold his position in the company not only because of the imminent sales potential of these devices but also because he trusts in the leadership of Dr. Jane Hsiao, the same woman who was an executive at Ivax during the time when Dr. Frost earned +1400%.
Finally, Aspara Biotech was also incorrect when they assumed that SafeStitch (SFES) is going to run out of cash and be delisted. Quite to the contrary, I checked the latest SEC filing that did not show guidance, so I then called the company to see if they had any estimates on its sales of its AMID stapler (not including its gastrointestinal products whatsoever). From the call, I discovered that SafeStitch has expected first-year sales of approximately $8M for its FDA-approved hernia stapler. This is well within range of the market, as there are 600,000 hernia procedures per year with SafeStitch's one-time-use disposable device costing $495. According to the call and corporate filings, SafeStitch already has established its own sales team, and devices are being manufactured every day in Miami, Florida.
The sales team is currently taking orders for the AMID Stapler and product is available for immediate shipment.
Rather than investing to the "bitter end," as Aspara Biotech's article states, it instead appears that Dr. Frost is willing to hold through the normal R&D process of a small company until it reaches the phase at which it can generate actual sales. It should not be surprising to Aspara Biotech that a R&D company about to launch a national sales campaign does not show great revenue numbers for the prior year.
Who Is Aspara Biotechnology Research?
Aspara Biotech's website contains no human contact information and is little more than a landing page with stock images where its SeekingAlpha articles are repeated. The anonymous website seems to be designed primarily for acquiring email opt-ins so that their reports will have a greater market impact.
Prior to its article on Opko Health, Aspara Biotech has written nine articles on Seeking Alpha covering three companies, two of which are trading over 15% in the opposite direction that Aspara Biotech predicted. Now, Aspara Biotech has a short position in Opko Health and is trying to bash a stock with almost daily insider buying by one of the wealthiest men in the world. Indeed, Dr. Frost is a Forbes 400 billionaire who has personally invested over $30M in Opko Health in open market purchases over the past year, meaning that he believes in the value of the common stock at prevailing prices (not discounted warrants, placements, or options).
Conclusion
It is endearing to think that an anonymous article on Seeking Alpha could reveal a secret about one of the most published pharmaceutical executives in the world, a sworn member of Bill and Melinda Gates' Giving Pledge, a famous science and medical donor, and a proven businessman who built a company until it was acquired for $7.4B.
Shorts are placing large bets against Opko Health, with short interest at over 24% and an annual borrow rate of 7.5%, according to a call this week to Scottrade. At what price is Dr. Frost willing to buy shares? The last SEC filing says he was buying hundreds of thousands of shares on Thursday in the $4.70s.
In summary, Opko Health has daily insider buying by a multi-billionaire in a company with a remaining float worth at less than 1/5th his personal wealth and over 24% short interest, not to mention billion-dollar business opportunities like Claros and no cash or liquidity concerns. We wish the very best of luck to Aspara Biotech and all shorts in Opko Health.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
This article was sent to 600 people who get email alerts on OPK."
Bull, I understand that stuff on seeking alpha ranges between outright garbage and decent analyses. At least the guy's biases are evident, while some articles smack of the author being paid to post them without disclosing that payment. I just think that even a biased article like that helps me keep my eyes open and not simply accept pro or con articles uncritically. Steve
Umm, Bull, I did note he disclosed that he is short OPK. Sorry if my posting that article offended you.