Question for you Pharmacydude,

let's say the insurance company pays $150 for V and $25 for generic V

after coupon and after insurance coverage the patient pays $10/month for V and $5 for generic V.

The doc writes a prescription for V 2 gm twice daily for CVD

The insurance company would prefer to switch the scrip to GV but the patient would gladly pay an extra $5 for the real thing. In this case the winner is the generic and the insurance company while the loser is Amarin and the patient. Is this how it works? ie. the substitution is based on the cost to the insurer not to the patient?

presumably Amrn could raise the coupon and the patient might pay nothing but the insurer would still switch to GV in order to increase their profits?

I try to not post very often. But this is the best advice ever for nearly everyone here

Zip, generally correct.

margin is a very profitable form of lending for the big firms. The rate is based upon a spread to their cost of funds and the spread decreases with the size of the account.

The willingness to lend is based mostly upon common sense. They will lend the most if the collateral are US treasuries, then high quality corporates, munis, etc. In the case of a stock portfolio, they will lend more on a diversified portfolio than on one single stock. They will also lend more on JNJ for example than a small speculative stock.

But they generally WILL lend against a single stock portfolio, even if it's AMRN. But what happened last week was they moved the maintenance requirement on AMRN to 100% (this means no release/ no wiling to lend). The decision was made based upon the volatility of the stock. They had no interest in extending a loan based upon collateral that was moving so wildly.


The implications can be very nasty if you're sitting there with a big margin balance and all of a sudden you need to bring in more money, sell securities, perhaps buy back your uncovered option positions (which require margin)


Fwiw, you generally get until day 4 to cover a margin call

Finally, just so you know.. firms lend at their discretion. The firm where I trade will simply not lend on defense stocks, tobacco stocks, probably gun manufacturers also.

To all those on margin:

hope you realize that your brokerage firm can change the marginability of your holdings at any time without notice.

Last week one of the large firms changed their policy and eliminated margin altogether for AMRN.

Suggest you plan accordingly just in case it happens to you

Goldman is a much smaller fund so it's possible. Also, btw, I'm pretty sure that you need $5mil in investable assets to participate with Eaton Vance. Not sure about Goldman

Chris,

fyi, eaton vance isn't accepting AMRN into their fund...at least not now

Zip, what you described is simply a rights offering. RO's are routinely done as a means of raising money by closed end funds in the US. Overseas, many public companies use them also. In the US, we're more likely to use secondary stock offerings, often spot secondaries.

But they are hardly a courtesy to long standing shareholders.

I hope everyone recognizes the extraordinary work that HDG does routinely. There are very few investors or analysts that are so willing and able to provide data like this, simply because it's very tedious and takes a lot of time and skill.

Kudos to you HDG.

Sam,

also want to mention that I appreciate your continuous good work

fyi...

Franklin received their shares via the convert. The shares were held in their convertible fund. Holding the shares did not fit the mandate of the fund so they liquidated the position.

The sale makes perfectly good sense. In no way, does it reflect that they hate AMRN as others suggest.

13f also from Franklin Resources

4,927,838 shares (new position). From the convert

Zip,

I am sure that you meant to say Kowa's Livalo (pitavastatin).

Lovastatin/Mevacor is a Merck drug

exactly, it's not an open market transaction. It's simply an internal journal of shares. I've done it dozens of times.

regards

JL, in order to collapse the trade you simply need to journal the long shares to cover the short.

Merc, you come up with some interesting comments and do so with unusual confidence. You're either an institutional salesman for one of the underwriters or work on the buyside. Either way I respect your input. While I can only make educated guesses about AMRN's direction you clearly have a closer peek at things.

Glad you're bullish. Hope we have a CPXX on our hands

very nice post....particularly with respect to the take-out clauses of existing & potential partnerships. many of your points make good sense.

simple answer is that they raised money because they could. The stock had risen nicely and they knew that there was still unsatisfied institutional demand so they pulled the trigger and did the prudent thing.

If they knew for sure that there would be a stop at interim, they can be criticized. But they don't know anything with 100% certainty. I have no problem with their actions.

JL, my personal view is that AMRN management is not pursuing a quick buyout path but is rather preparing for go-it-alone. I don't believe they would have hired Craig Granowitz or Michael Kalb if they were seeking a buyout. Thero was diplomatic but sounded frustrated with Kowa (my opinion) and stated more than once that the Kowa relationship expires in Dec 2018.

With a 60% interim win, they can't wait until Dec 2018 to move it into another gear. I don't know their present productive capacity but they admit they will need more sales reps and presumably other marketing efforts. They have shown the willingness to hire the best legal teams when required and I will assume that they have excellent patent counsel. I believe the company needs a LOT more marketing effort, perhaps more than a bunch of additional sales reps. This is will be an easy story to tell via direct-to-consumer ads, in fact it's a marketer's dream assignment. But it takes a lot of money to create a brand awareness at the consumer level. I'm also not sure that Aaron Berg is up to the task as it appears that his background is sales not marketing.

Bottom line is that they will obviously need money to capitalize on Reduce-it. My guess is that it comes first from a European partner.

btw,..ironically the best way to get bought out at a large premium is to prepare not to get bought out and rather establish a brand.

LOL there was nothing inappropriate in your comments. I wasn't even aware that you may have been taking a jab at me. Either way, I am very comfortable in my own skin and no longer take offense at things. If I can survive the AMRN saga I can survive anything.

fwiw, a very good friend owned a ton of PCYC and had a great trade...or so he thought. He left $100 mil on the table.

Kiwi, I'm hardly too smart for you or anyone else, but thanks.
also, I'm expecting you to live a very long time.

hope you don't sell your AMRN stock on this minor news

JL, fyi. I understand that the cost to borrow has increased to 2% today from 50 bps on Friday. Perhaps the institutions borrow at lower rates, but not necessarily.

2% takes a big bite of the 3.5% coupon.

Kiwi, what if HDG lent money to you at 3.50% for 16 years but also received a percentage of the growth of your net worth over that period. That's a better analogy. Would you take the money?

without the conversion privilege the rate obviously would have been much higher than 3.5%. AMRN chose to issue the convert because they did not want to pay the higher rate.

agree

thank you. exactly what I was looking for,

(actually this data supports JL's view that the buyers of the convert may have shorted common shares against it...unless it was forbidden in the agreement of the convert)

HD,

most converts are issued with a conversion price at or higher than the current stock price. Do you recall the stock price at the time of issue?

actually that's a great guess.

On Friday it was 50 bps. It ranged from 50-150bps last week.

my only point is that the cost needs to considered since the coupon is so low. And obviously the rate can change very quickly and can easily far exceed 3.5% at times.

Add that to the buy-in risk and I think long convert short stock is not a smart trade. I can't believe it's on in size.

regarding shorting against the convert.

the 3.5% coupon is offset by the cost to borrow. And holding a large hedged position exposes you to risk of buy-in.

what do you think the cost to borrow is?

agree....it is if anything a small positive longer term

fyi. I am familiar with their balance sheet and don't disagree with much of your post. It just seems odd to me that we would be getting real institutional demand simply because the 2nd shot on goal is 9 months away vs 21 months regardless of asymmetrical returns, which I totally agree with. 9 months of dead money is still a long time for most institutions.

Either way, I'm happy how things are coming together. This stock was $2 at Brexit. Who ever thought we'd be raising money at $3 so quickly?

it's not all that weird. Look at NRZ. They also announced a deal after the close....it's an overnight

although to your point, they at least announced the size

yes, OR there is finally broader institutional demand and the company is happy to spread their shares around.

My immediate reaction to the offering was a negative with respect to the chances of a 60% interim stop, but I'm now thinking differently. I just don't see portfolio managers buying shares now if they think the big catalyst is 9 months away.

curious if you think institutions are investing now if they see low likelihood of the 60% interim stop but high likelihood of an 80% stop. If it's the latter it seems to me that they would simply wait and accumulate shares over several months.

yes, I get it. But I doubt institutions are buying now only for the 2nd interim. Spring 2017 is a lot better than spring 2018 but it's still too long to wait.

completely agree that this sets a floor not a ceiling. The pricing will likely be set on some VWAP basis.

Ether way, the offering signals that there is institutional demand that hasn't existed for a ling time. Despite the big volume recently the underwriters must have assured the company that the demand is there. Also, consider why institutions are willing to buy now ...before a potential big event. Thero must be speaking more confidently to them privately about the timing than he is stating publicly.

jmo.

JL, thanks for the story. Here is why I (sometimes) proceed with these claims:

1) many years ago I took the advice of a good friend and bought shares in what appeared to be a very funky company. The balance sheet looked too good to be true, the margins too high, etc. The stock traded in the low 20's. Thankfully I bought just a small position because the company filed BK the very next day. Turns out the financials were fraudulent. I filed a class action claim form years later and ultimately recovered 25 -30% of my investment.

2) Just last week I filed another claim form for what was once regarded as a decent insurance company. The total settlement amount is $219 million...$69 million paid by the company and $150 million paid by their insurance company ..presumably from an E&O claim. The attorneys get 29% and the rest is divided between the stock and bond investors. The estimated recovery after fees are 50.4 cents/share for stockholders and $15.20/bond. These numbers are huge and justify spending the time to file a claim. If the majority of investors throw away the paperwork, I'll just say thanks and receive a larger check

definitely not true in my opinion.

I have received a check for several thousand dollars on a moderate loss. It's probably because most people don't bother to file the claim so the pot is split amongst people like me that do

fyi, I have completed more than a dozen of these class action claims. In fact I just received another claim form just 2 days ago from the US District Court of New Jersey.

The claim form requests last 4 digits of ss#, name of account, mailing address, and chronological list of buys & sells. All of this is very common. The documentation required will almost certainly contain your account #s but consider whiting it out if it concerns you.

also, btw. my brokerage firm will not complete the form for me. They will provide the confirms/statements but it's up to me to complete the form.

I don't hesitate to complete the form if I had any meaningful loss. The losses that you don't claim go to the investors that take the time to do it.

I can see quickly that it's another development stage company with dwindling cash. I will have absolutely nothing to add on this company although I may be able to get a research report if you care.

In any case, this is not the kind of stock that I am looking for at this time. I'm much more interested in quality on sale.

regards

Kiwi, unfortunately I agree with you again. I'm not expecting a quick turnaround so I won't use all of my cash on Monday.

But I also don't expect heavy margin selling on Monday. The market had been on an upswing so most accounts should have built some excess. In any case Monday will be day 1 for margin calls.
They won't need to be met until day 4.

thanks. Agree with your AMRN comments.

thanks also for the link. fyi. my friend was delighted to have a mortgage at 4.25%. Now he's moving to a 15 fixed at 2.875%. At that rate I doubt he'll pay it down early but you never know.