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This shoe getting exercised in $BPMC is idiotic with stock down $5-10 from offering. It is allowed by law to allow underwriters to short the stock to buy in for support. No buy in if exercised. So obviously no support thereforebb
Peter. Sorry did not see your post and posted the same. Exactly right.
Guys, I used to do this for a living. It was a tiny part of what I did and I was the corporate facing banker not the equity guy.
But here is how it works.
First, SEC allows the banking syndicate to support price. One of few exceptions out there.
Second, let's say the offering is 10 miliion shares with a shoe of 1.5 million. Syndicate will distribute all 11.5 million.
Third, if price goes up, they do nothing and shoe is exercised.
Fourth, if price goes down, they buy in all or part of the shoe. This leads to partial exercise or no exercise. But as long as share price stays above some price near offering level, either gross or net of fees, shoe probably exercised.
The best is when price comes in and breaks support, they buy in the shoe at a profit and then stock bounces and they flip it back out higher.
Jon
I think I made that same argument here a few weeks ago with data!
I find it interesting no complaining about Trump today. Spicer said the Pres still wants to negotiate Medicare on Tuesday - what led to the quick 1+% drop. XBI, on backs of TSRO, PBYI, CLVS and 1-2 others, is back to where it was at time of press conference, despite that news and GILD. IBB is not so lcky, almost purely due to GILD. It is actually quite a good performance. My one complaint is that the small fry got killed both days. Larger midcaps are again the flavor of the day.
Superior to epo on one metric. Wow!
Jon
Interesting read for facts at beginning on buyout atmosphere in bio-land.
http://www.marketwatch.com/story/were-in-the-year-of-the-biotech-buyout-and-here-are-five-prime-targets-2017-01-23?siteid=yhoof2&yptr=yahoo
Key quote: "In an Ernst & Young poll conducted late last year, 43% of biopharma executives said they had five or more deals in the works"
Key Fact: And the cash for buyouts was $212B at companies listed. Total mkt value of $250 Mm-$4 B cos is $200B (from my datasets). BMRN/INCY at $4B+ not in the number.
That factor plus premiums plus some cash kept back LESS any crazy debt financiers WILL probably limit midcap and smaller buyouts to what? $100 B? That is prob 1/3 - 1/4 of companies bigger than $250MM but less than $4B. And this happens as we approach extreme O/S again.
And the targets are as expected: incy tsro bmrn acad in the article.
FGEN poster at ASCO GI from twitter. Note overall survival is statistically significant while progression free survival is trending only. Problem of small numbers.
https://twitter.com/coreyhorohoe/status/822623620052746240
If I recall correctly, prices had recently gone up 4x over 1.5 years before that crash. Now, stock are down 20-30% over 1.5 years.
The govt site dashboard talks about current discounts of 17.5% from stated price. It could be stated price is below list?
Thanks. I knew it was inpatient and should have figured rates set!
It is obvious btw that Trump just after publicity. Pharma is goung to have to give the pound if flesh like Boeing/Carrier/LMT. He talked in te article about using publicity as tool - regulation out? Sounds like his style. If so, companies will need to do something - though none of this helps reduce insurance costs.
I remember someone years ago suggesting that companies like Biogen could start a Taiwan Semi type business using this expertise. This expertise probably behind many attempting biosimilars.
Thanks mate - numbers generally consistent with others I saw. 10% direct costs plus something buried in other categories (think hospitals). it all depends on what is in and out. Prescription, generic, OTC? Overall number probably $400 million give or take. It does not really change story though. Broadest category probably only 15% of spending. Solving that does not solve healthcare costs overall. In fact, if one killed innovation, I bet other parts would grow fast enough to INCREASE costs. You do need to kill the bad actors though.
Anyway, only government capping ALL drug prices would impact private insurance. And even getting power to negotiate Medicare might be hard. B? Or D? What about A?
Interesting article:
https://www.bloomberg.com/view/articles/2017-01-13/trump-s-strategy-for-cutting-drug-prices-is-doa
Drug producers are being painted as evil which strikes me as harsh. $1,300 must be gross. Numbers I have seen have net in 300s of billion dollars, so closer to $1K per capita. The rest of the system even higher vs. other countries.
Even if drugs became a free good, insurance would drop 10%? Not the solution to insurance costs.
Since when is a 10-15% cost item the central key, esp when govt is only 1/3 of that and 1/5 of govt spend us already discounted 23-24%? Does he think Medicare would set private pricing too?
He us delusional. But it plays well.
If I were put front and center below the pulpit, I would offer up VA discount to Medicare and call it a day. 3% of global revenue gone.
I mean it is not like Carrier/Boeing/Lockheed are really giving up that much either. All he wants is a tweet.
Do you think Trump knows Medicaid already gets 23% off?
I just went through lots of sites and still come away confused.
It appears US govt spending near $120 B with $30 billion discounted 23-24%. I assume the other $90 B is Part D with some part B. This appears low vs. some other data sets but close enough. Medicaid is like $20 of the $30 B for those who want to know. Total US spend is $400B or so before rebates/discounts of $100B netting about $300B. Global spend is $800B.
Couple of questions pop out:
1. We are talking about maybe losing $20-40B in govt sales?
2. Is main fear contagion to $300MM gross other sales in US?
3. Considering discounts of $100B, where do those go? Does this mitigate pressure a bit?
4. Do companies respond by charging more elsewhere?
5. With many prices 5x Canada, why is US drug spend ONLY 40% more per person? (Generics?)
6. How muchof high US spending is excess US drug spend pricing vs. usage?
7. US heathcare is around 3 trillion (17-18% of GDP). US pharma spens is $300 Mm, maybe a bit more. Tgat us the magical 10% I always see. How is pharma the whole problem then?
8. I have seen estimates of oharma spend up to 15% of US healthcare. How? It does not jibe with numbers unless pre-discounts.
Thanks.
On the tweet reactions, the one thing that caught my attention was that small caps went vertical after the last HRC tweet. I have old files all over, and as I get ready to replace the tickers, I was perusing them. Small caps, on average, rallied 20%+ in the month and a half after that tweet, easily recovering the 4+% drop. The issue is we are still below those early Oct highs. The Oct swoon knocked fully 30% off the small caps, almost all recovered in two weeks around Trump's win (bio rally started a week before). Small caps then lost 5-7% through the rest of the year. Price had just recovered the late Nov/Dec modest losses and were near the ealy Oct high before the latest.
Large caps just don't move at all any more....other than the 1 day Trump rally! I think they may all be value traps....big enough they need generalist support, cheap enough that they are obviously cheap, but with the biggest price overhangs and research producrptivity issues. Some midcaps becayse of models have even bigger issues here.
Jon
People know it as a rkrw stock. His stocks get picked a lot. So do some of yours, even by him!!!
Actually the premise to which you responded was false. There have been 4 tweets/articles/press conference attacks.
1. 9/21/15 HRC tweet with XBI falling 5+% on 9 million shares. It fell 20+% more to 60ish over few weeks.
2. 8/24/16 HRC tweet with XBI falling 4+% on 15 mm shares. It flopped around $60 for 2 wks, then up.
3. 12/7/16 DT Time quote with XBI falling 4+% on 13 mm sh. It rallied Day 2, flopped near $60, broke down a bit.
4. 1/11/17 DT presser with XBI falling 3+% on 16 mm sh. It gapped down Day 2, rallied fully back and ???
I would hazard sound bites can only kill things for so long. Each time the effect lessens unless something happens. Also, (2) and (3) were likely impacted by tax selling - no more. Additionally, each event drove price to same exact point: $60 +/- on $ XBI. $IBB prob even closer.
I do think this scares generalists away. $XBI shares out have fallen 5% since the presser.
My guess is this stuff happening (new bill plus O'Neill) will hand more pore power to later stage gatekeepers. Now the main gatekeeper is FDA with an assist by formulary setters and doctor thought leaders. These changes will move the line toward those who decide what is covered - doctors, hospitals, govt, insureres.
By the way, it is unclear to me but this might hurt pricing power giving more power to that group.
I think latest downturn coming from concern GOP WILL kill/try to kill Obamacare AND cut Medicare. HHS appointee a real hawk and close to Ryan.
Thanks Peter. Interesting read. Main issue is 5% of 99,900 was calculated wrong.
Interesting article on current Trump plan on healthcare. Details potential fda trial changes.
http://www.pharmalive.com/trumps-promises-to-reform-the-fda-in-post-election-mission-statement/
Jon
Seriously? Stock was near highs before offering. It does mean though folks WERE worried on financing.
CAR-T stocks took down all bio indexes today. Any news?
Yeah the vrtx drop all continued with a presentation with some discussion of q3 numbers. Stock had been rallying but fell 5-6% in seconds and drifted further as scrips came in weak. Company had been looking for bounce back - now not I guess. Stock is moderately OS by my metrics, an area from which it almost always bounces ST.
I didn't report that!!!!! Just kidding. Hilarious!
I am Robohogs on SI!
My micro cap tracker jumped 5-10% on this. Yikes!
Just so folks are not surprised, realize that for some reason NVAX was in almost every single etf, including the three main ones: IBB (minor), XBI - will shave 1.3% off ETF absent other moves, FBT - 3% shave coming. Most important is that FBT parent index is BTK and it is still used by most as health of bios. Health looks much worse on 1 minor company failure! OMG bios are selling off. Most commentators know not of what they speak.
Pretty standard for whole industry too - procedures may be different but similar mechanisms for hospitals, doctors, etc. My dad's final bill for his hospitalization was $3-400K - included brain surgery. Medicaid probably paid 1/4. Retail would pay full price with help from "charity" funds/writeoffs - just like pharma help to patients. It really destroys transparency something that has really helped all health providers.
My tracking databases are now showing a new recovery high for an equally weighted index of 150 smaller biotechs. This group had been badly lagging until mid August. Now getting overbought for first time since April but with room for more.
I have not found magic sauce yet. I mainly use as macro tell for now. S/N?
I have a visualization sheet showing different bios. Nktr showed up on the extreme movers over many days part of the sheet.
LGND flying U would guess on retail shorts getting run over on RTRX clinical news and Citi upgrade.
http://finance.yahoo.com/news/ligand-partner-retrophin-announces-positive-132500104.html
I agree. And they are threatening the filibuster now. BUT she cannot unilaterally fine drug companies. BUT I remain of the view that HRC might not win too. In that case, who knows?
And why LT as a bear - SHE has NO teeth and WILL NOT. A GOP House blocks her.
Are you trying to imply something?
News media stink these days but Reuters picked up on the need of Congress to bless fines.
http://www.reuters.com/article/us-usa-election-clinton-drugs-idUSKCN1181DM?il=0
Best article to date.
Best article so far on HRC proposals. Of course, if she thinks she can do this without legislation, good luck.
https://www.thestreet.com/story/13693219/1/biotech-stocks-hold-steady-on-news-of-hillary-clinton-s-new-drug-price-task-force.html?puc=yahoo&cm_ven=YAHOO