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Jake, The only disappointment is the delay. It would have been nice to kick this into gear after four months. Fortunately, ANIP is not drowning in debt, so the delay is manageable.
Not a good day for anyone.
Unsurprisisingly, the Federal District Court refused to reconsider its verdict in favor of CMS. Mallinckrodt will file an immediate appeal. $640 million on the line for allegedly illegal Acthar pricing dating back to 2013.
https://seekingalpha.com/pr/17886828-mallinckrodt-will-appeal-district-court-ruling-in-case-involving-ongoing-acthar-medicaid-drug
Stock went up a little.
It will not surprise me, and should not surprise you, if ANIP gets sued.
The current situation - witdraw the application - is so different from previously stated ebullience in conference calls and in investor meetings.
This is very disappointing. It's not the first major goof on Corti.
The 2016 acquisition of Corti from MRK's Dutch subsidiary was done with a newly created ANIP Dutch entity. I forget the details, but ANIP paid a lot of unnecessary taxes to get it back to the US.
I'm not faulting Arthur as a human being, because I see it all the time. A decent CEO with a shoestring budget (Arthur) does not have access to top lawyers, and when he does he does not know how to coordinate them. Some of this is the fault of his directors, always worried about expense, but it's also part of the smaller CEO mentality I deal with as smaller clients grow. The CEO never outgrows the old days when talent was unaffordable, and is a bit unwilling to grow into a bigger situation and spend the money wisely for smart advisors.
Unfortunately, guys like Arthur who are skilled on a shoestring, and very good at small details, are not really good at hiring (and controlling) top talent. It's never been part of their DNA.
I am a great fan of Arthur personally, for his integrity and his ability to have gotten ANIP into a much better place than the undiversified days of the Biosante deal. His Board members may, however, have been less sentimental.
For ANIP investors, this is actually a good long term development, because ANIP had outgrown Arthur. Not crying for him; he's cashing big checks.
About shareholder meetings. Maybe new stuff gets announced that's not on the agenda, but I've never seen that except in the movies.
There is a specific agenda of items to be voted on, and unless the person running the meeting is weak, loose ended questions will not be allowed.
This agenda is as follows:
1. Election of directors. Four instead of five. Saves money. No need to have Brown's 73 year old buddy on the board sucking fees. Even JTFM, who knows something about the company, could not be elected.
2. Confirm Eisner Amper as auditors.
3. Non-binding vote on executive pay. Silly. By outrageous public company standards, ours have been reasonable.
4. Another non-binding vote about executive pay. See #3.
5. Reload the equity plan, so that company can dilute shareholders by up to 10% to hopefully keep good executives from walking out the door. Fact of life. Equity only "aligns" key people with shareholders when share price goes up. Otherwise, shareholders pick up the tab.
As for Q&As, I doubt they turn this into a free for all about the FDA process, or anything not on the Agenda. They will politely decline and limit to what's on the Agenda. In sum, the shareholder meeting day is not a red letter day on my calendar, and the last thing I would expect is meaningful discussion.
Jake,
Unless some horrible bomb gets dropped, the stock is well-priced in the low 30s, with great upside if any possible surprises occur, such as:
1. Announcement about progress with the FDA, which could be as easy as confirming the application is alive without the requirements of safety testing trials (which technically should not be insisted on for this previously approved but ancient product, but you can't discount the possibility that the FDA might overreach).
2. Announcement of a new CEO with stature.
3. Announcement of an actual deal or at least reactivation of a deal committee.
Hard to believe there would be too much downside from here, but there can always be something with a pharma you never thought of. Young people may not appreciate. These companies make things that go into human bodies, and it only takes one lawsuit to cause great commotion.
Jake,
Most purchases you see on the Form 4s are usually option/restricted stock grants to employees and directors under shareholder-approved plans, which exempt the grants (and sales) from the 6 month rule, because grants (considered purchases when granted) and sales often occur within 6 months.
If we were to see a big purchase from an insider, it would be a clear indication that the insider has no inside information.
Ironically, in the short term, that's "bad news," because we all hope that the insiders are sitting on positive info about a possible deal, so if they are allowed to buy, there is no imminent deal or secret positive info.
On the plus side, a big new buy would show long term confidence, but I would not bet on a big insider purchase in the near term.
Jake,
If I were making the call as general counsel for ANIP, I would not allow insiders to trade shares at this time, unless under a pre-filed 10b5-1 plan that was adopted at a time when there was no insider knowledge. I probably would not allow a new 10b5-1 plan to be adopted at this time.
I don't know the insider trading policy at ANIP, but in a well-governed company there is a prohibition on insider trading outside of a brief post-earnings window, and even then a requirement to secure approval of the general counsel. A conservative policy is important because of litigation threat and charges of insider knowledge, whether substantiated or not. A general counsel would not want unfettered insider trading (to buy or sell) in circumstances like this.
There is also a six-month rule, preventing buys and sales within 6 months. It's ministerial with automatic liability, even if sales or purchases are innocent with no inside information. To avoid this problem, companies will also have set policies for automatic cashless exercise (the typical option exercise), to allow sales needed to pay the ordinary taxable income when options are exercised. People who don't understand this and see sales on a Form 4 often misinterpret such sales as a negative indication when they are just being done to pay taxes.
Bottom line: I think that virtually any insider sale will not be a real indication of what is happening with the stock. As for new purchases, I doubt they would be allowed now. Very subjective.
A favorite quote from Boston Legal:
"It's raining cash out there, Denny. We're not getting wet."
Even though Arthur is a former employee and no longer an insider, he is still subject to the 16(b) short swing profit rule. He can't make a discretionary sale for 6 months following his last "purchase."
I don't recall him getting any new grants of stock or new option grants
(which would be considered purchases even if non-vested) when he got the new employment contract in January.
If my memory is right, Arthur would accordingly have no sales restriction and no Form 4 reporting requirement after leaving. (The acceleration of vesting for his options due to termination w/o cause is not a "purchase.")
Of course, if he has special inside knowledge he can't sell due to the anti-fraud restrictions of rule 10b-5.
This is memory, so if you happen to be a corporate insider of a public company, don't make any short-swing transactions based on this!
JTFM, I definitely defer to your expertise on this.
I don't know the legalities, although I deal with them daily in the non-pharma context.
Under Securities laws ('33 and '34 Acts) public company investors are supposed to get fair disclosure of what they own. I don't understand how something as valuable as this never comes up in the 10-Ks and 10-Qs, or in conference calls, or in road shows. That's why I'm skeptical that Libigel means much for ANIP owners, except possibly CVR holders. Believe me, I hope you are right.
Big company partner for key products, or private equity deal to purchase the whole company? That is the question.
If we have a big company suitor, I really don't think they would want the whole company. A big company acquirer would probably be thinking of the pint-size manufacturing facilities as a liability, not an asset. A big company would just want to work a partnership / marketing deal for Corti and maybe the branded products. So, a big company licensing/joint marketing deal with a big company for select products is a possibility.
Otherwise, the alternative is to sell the whole thing to a private equity group. The company has sufficient cash flow to make this bankable. I doubt the directors would sell for less than $70, and it could be back to $80, even higher, but the price would be contingent on Corti. Maybe there would be Corti CVRs if the deal occurs before approval.
For Libigel, honest, I still can't follow all of the well-reasoned arguments why it is worth much without a huge additional investment. I think any Libigel deal would be separate, and would mainly have value for CVR holders. ANIP is not going to spend years and hundreds of millions to pursue Libigel.
CORRECTION.
Pseudonymous, not anonymous, when referring to social media postings.
Pardons for that gaffe.
We should maintain standards of basic literacy.
LD
Nothing secret, Catty.
You are admirable. Getting into BioSante at such an early stage shows vision, even if you were drinking, (but some of the best advances in Western civilization come from that pastime).
And you invest on margin? You are more courageous than I.
Finally, you have never typed an uncivil word - also worth of admiration in the new era of anonymous social media.
Cheers.
LD
I'm all in favor of Catty making some money! Go CVRs.
LD
"Wall St hates uncertainty. They rather know they have cancer than that they may have cancer."
Ha ha. I may frame that and put it on the wall.
Cheers!
I'll stay with Arthur's statement that these are easily resolved matters, and that much of what was asked for was in the submission.
The people at the FDA are human, and finding an application "incomplete" is a natural bureaucratic reaction to get a little more time and to be sure you won't be faulted for making a mistake.
In government bureaucracies, there is no reward for good and creative response. The killer, on which you are evaluated, is whether you made a mistake. It's a different world from small business.
I'm not going to continue this line of discussion further with you, Jake. I know you are nervous, but there is a point where this turns into "therapy" rather than productive discussion. I don't mean that harshly, but let's wait for something new to surface and quit the repeated worrying. I don't want to put you in the "Ignore" club, also.
Jake, I've been working all day and was looking for enlightenment and good spirit, not controversy. Of course we are not related. I am much better looking. A few thoughts:
1. You actually have had some good valuation points, especially about cash flow, that many of us were too giddy to ignore. So why get distracted because a poster insults you? Put him on ignore and stay focused on the mission, which is to analyze the company. I feel there is good news in store that will change sentiment and push this back over 60 before October. After the last month, just reading that the Baudette plant hasn't been swallowed in an earthquake might be worth 5 points.
2. Next, I've said it before. You are WAY TOO NERVOUS about the RTF letter. The only issue is whether the hoped for July 23 PDUFA date will be pushed out. I frankly thought that 4 months was too ambitious, and ANIP never predicted that date as a certainty, only an aspiration. Reproducing this incredibly complex molecule is not child's play, and I have no reason to believe it was not done professionally.
3. Finally, as for the poster you referenced, I put him on "ignore" a while ago and encouraged him to do the same with my posting. Too much vitriol and not enough information. I still wish him well. The goal should be to get information and exchange meaningful opinions.
That's it for now. Belmont Park has just announced it will open June 3 and that the Belmont Stakes will be run on June 20, without live attendance. What a bummer.
Jake, for what it's worth, the positive Raymond James analysis on Corti filing is exactly what I believe. The RTF "issues" can be worked out. My "target" is higher than Raymond James in the near term. I see this well over 60 by October with some good news causing a reversal in sentiment.
Thanks, Jake
I don't have an account with Raymond James and little info other than Elliot Wilbur lowering his target to $49 from $65. If you can provide a little more detail on their view of the company, I'm sure everyone would appreciate it.
My broker is Charles Schwab. It continues to have an "A" rating on ANIP as of 5/15/2020. That's in spite of the misses and the recent change in the C Suite. I'm not sure how reliable the rating is, but there are three categories:
Valuation - A
Quality - A
Sentiment - C
Have a good Sunday.
Jake,
If you go to their website for past presentations, you will find this has been a very disciplined process, with milestones that have been met on time, everytime.
In laymen's terms, they need to show they can reproduce a molecule that has been out of circulation for decades, and they need to show they can produce it in commercially stable quantities. Done.
Last Fall they felt the need to show that the product would be present in sufficient quantity when introduced to a test sample of volunteers. Done.
Bottom line: I'm not much worried about ANIP getting approval. Whether they need to do more work to satisfy bureaucratic conservatism is a jump ball. Might be more than the hoped for 4 months.
My only concern about ANIP's rainbow prospects is the pricing pressure I expect from MNK or its successor for Acthar. Much of the ANIP enthusiasm was based on MNK not moving the price of Acthar. With hindsight, that may have been a little naive. Monopolists don't surrender easy, and the CMS and Opioid suits are pushing MNK to find a way out, and my hunch is that will be through expanding Acthar markets with lower pricing, and more safety tests. Testing is a hugely expensive program MNK started a while ago which MNK really can't afford on its own, but it gives an edge, in addition to provider familiarity with the product. (ANIP lags for testing and familiarity, and its sales force is dwarfed by that of MNK.)
Due to my doubts about MNK carrying the water on its own with its other financial burdens, I feel it needs an Acthar partner, who can afford to lower Acthar pricing for a few years to suppress upstart competition from ANIP. MNK must be thinking on these lines. MNK CEO Trudeau is clear that everything is on the table.
ANIP will still make money, but not in the huge amounts so many have hoped for. That's it for now. Stay safe, everyone.
@pcinsurto First, I like your approach (and the approach of most everyone on this board) to discussion. There is always room for respectful discourse.
I agree that the $600M fine is based on multi-year alleged mispricing of Acthar. It doesn't matter how many years it took. A $600M judgment comes due all at once after a judgment becomes final. Appeals (with judgment interest accruing) can put off the day of payment, but it's $600M. The additional amount to states that claim Medicaid pricing fraud is extra.
On the merits, I think MNK has a winner if it had time to pursue appeals (because the lower court judge is unlikely to reverse himself). MNK can't have an indefinite overhang, however. The CMS suit is standing in the way of the Opioid settlement, much of it owed to state and local governments. It's preventing refinancing. And CMS is on record in its most recent filing that it is willing to work out a multi-year settlement. It's not going to do something which trashes the separate Opioid recovery of so many state and local governments. (Think back to tobacco.)
We've potentially got a $600M overhang on the Acthar market, with the likelihood that MNK could agree to settle all (or part) with bargain priced/free Acthar. Most importantly, MNK becomes a preferred provider, simply through pricing, to the governments. Arthur hadn't predicted who ANIP's best customers would be, but I strongly suspect he was thinking of the medicare/medicaid programs.
Sad for any of us who bought at $60 (or above).
Still, I think with some good news from the FDA and a deal announcement, we'll be back to 80, but that's not scientific. Just looking at the fact we've been there before.
MNK is a fascinating puzzle, and the CEO is really impressive. This COVID 19 hiatus is going to be tough for them. The litigation summary for all the litigation - opioid suits, etc. - requires extraordinary strategy. I think they could pull it off, but it will require lots of luck.
That's it for tonight.
This is actually getting to be ridiculous. The company has a solid business. (And thank goodness the Ignore button works; who needs sour grumpiness from Mr. Crankypants?)
I've said this before, but the real overhang is Corti, in spite of the AP drama. Even if it succeeds with the FDA there is the overhang of Acthar competition.
I've read the MNK 10Q CMS litigation summaries, and have a pretty good handle on how this will be addressed, assuming that the judge does not reverse himself as he has been asked to do. MNK is not going to wait years to resolve an appeal. They will settle the $600M judgment with CMS, and the additional state Medicaid suits (all based on Acthar pricing) with free/bargain-priced Acthar instead of cash.
That's the overhang for Corti. Everyone has been assuming that ANIP would pick up the government business with low pricing. Instead, they will be competing with free Acthar, a proven product.
MNK is no bargain, even at $3/share, and it could go out of business, but someone will acquire Acthar if MNK stumbles. Corti can still be very positive for ANIP. Nonetheless, this MNK fight with CMS is whiplashing back against ANIP for anyone actually thinking about this.
For me, ANIP's prospects are good, at $30/share, but not the stuff that dreams are made of, which is disappointing for all of us who dreamed along with Arthur P. I'm along for the ANIP ride with my calls, but am on the fence about whether to buy back the stock I fortunately sold.
Jake and others, with hindsight, everything about the convertible strategy was wrong.
Let's hop in a time capsule. (I have the movie rights.) It's December 5, 2014. NASA successfully launched its Orion spacecraft, the hope for the future of manned space travel and an eventual trip to Mars. ANIP also raised $125M in convertible debt. Only 3% interest, but holders could convert to shares at $69.48/share.
ANIP also had visions of the stars. It was deathly afraid that these 3% lenders would convert at such a "bargain" price. So they spent $13.6M of the $125M to buy hedges against that possibility.
As we know (or should know) due to Arthur P's responsible and conservative stewardship, ANIP lined up low interest traditional debt to redeem the converts late November, 2019. Pay $100M + to redeem the remaining convertibles, rather than risking dreaded conversion at $69.48/share. At the time of the conversion, we had dropped from $79/share on Nov.4 to about $61/share due to the missed 3rd quarter.
You can't blame the Board for second guessing the strategy, all predicated on Arthur's persistant ebulience. I think that is why he was tossed. The company took on over $100M in debt to prevent dilution at $69 +/share. That's the story. Not as sexxy as a secretary in the washroom, but that is my conclusion. It was time for business to take over, and the new employment contract that followed in January was a way to ease him out, hopefully in a graceful manner. I think Arthur's pride may have taken over in the days leading up to the call, and necessitated this bizarre departure.
I think this is better news than the possibility that there is something horribly wrong with the CORTI application. So let me retract musings on that. I do not think this is as bad for ANIP as a pessimistic market is forecasting.
I fully agree. There is no fraud on Arthur's part.
Thanks, Big B. I'm riding with you with my options.
Catty, What makes me suspicious is the conference call:
1.It almost seemed like a vaudeville show where a hook pulls the entertainer off the stage.
2.There were no analysts allowed. Clearly, that means they are hiding something. Even the dim "crowd" that covers ANIP would have asked questions which they apparently did not want asked in a public forum.
Were it not for that call, I would simply have concluded that they were stuck with a contract and not happy with him for the long term. They probably discussed this in January, gave him the 1st quarter enhancements, and hoped for a smooth departure, and hoped to have bought away some of his unhappiness.
That scenario makes sense as a fairly typical way to get rid of a CEO who has a strong contract and who has lost his Board's confidence. What does not click is the conference call. What are they hiding?
What happened between the March 28, 2020 stock and option grants and the April 14 termination?
The FDA RTF letter did not get announced until April 29. I'm assuming (naively, perhaps) that the company did not have knowledge of it when the April 14 termination was announced or they would have had to make an earlier announcement.
Was this just a negotiated termination, with a gentlemen's agreement that Arthur would forego getting 3 x severance in connection with a change in control? I doubt that. Arthur leaving hurt the stock value more than that extra possible severance over 2 x.
Could there have been some office pecadillo with a secretary that came to light, or some other bad conduct which the Board felt easier to sweep under the rug? (It won't get a tax deduction for payments to an abused employee who signs a non-disclosure, but that's small potatoes).
I am thinking there is something undisclosed which, if disclosed, would hurt the stock value worse. They felt they had to get rid of Arthur and are hiding something. We will know much more when the choice of the new CEO is announced. If s/he is a heavy hitter, that will mean that person sees a real future with ANIP, even if just to make a deal. That will be the best news.
ANIP is the company of mystery.
The Libigel mystery is above my paygrade, but focusing just on the Arthur P. mystery, the weirdest fact is that on January 17, 2020, the Board gave him an enhanced employment contract with confirming a big boost in salary. If terminated without cause - 24 months of severance. If terminated in connection with a change in control - 36 months of severance. Arthur P's severance will be 2 x base salary + 2 x target bonuses (which are 90% of the new base salary) and there is more.
On February 14, 2020, he got a cash bonus of $703,350, which was 100% of the target bonus of 90% of his base salary for 2019.
On March 28, 2019, he got new options to purchase 45,106 shares at an exercise price of $66.39 per share, the closing price at the time. He was also given 37,280 shares of restricted common stock, which were meant to vest over 4 years. All of the restricted stock vests and all of the options remain exercisable for their term because he was terminated "without cause."
This is a huge amount of money they committed to in the first quarter. On April 14, 2020, he is terminated "without cause."
CONTINUE TO THE NEXT POST.
Catty,
My hat's off to anyone who bought at $5/share.
Curious if any of them are buying at today's price.
Catty, Your QQQ is a great long term investment.
As for the Board, I'll still hang around. I enjoy the company of you and some of our others.
Best,
G
Jake, you never hit them all. You just got to Man Up. There will be another day. You and I, as newcomers to the stock and with higher basis, just don't have the upside others do who have owned ANIP since Biosante days.
Think about better opportunites. There are good (and more predictable) small stocks to buy.
Right now, I'm buying smaller bank stocks in good market areas trading at a significant discount to book value. These smaller banks will be purchased at close to book and create 20 -50% profits for their owners in the next few years. The government will not let them fail, and their customers (if you select the right regions) are working from home and still collecting paychecks and still paying their mortgages. Those with difficulty will be helped by Uncle Sam. Small banks and their borrowers are the ultimate casino game. The casino owner, our Uncle, is paying the losers. I can't disclose which banks I'm focusing on, but urge you to do some homework.
Jake and everyone. As much as I would like to chat and predict, you don't want to follow my views. Remember, I'm the guy who bought with a $60/basis.
For ANIP, I sold everything because I thought (correctly) there was better money to be made as one of the herd. Bought lots of Facebook and a little Google.
Being a gambler, I also picked up a few long term ANIP calls. Maybe there will be a deal. Who knows? I want ANIP to be in the rear view mirror. ANIP is the worst investing decision I've made in decades. No tears; that happens.
Personally, there may be a good future for ANIP, but the bizarre departure of AP would keep me away from it for new money. There has to be something more profoundly wrong than what has been disclosed. Best case is a deal. whether it's for $40 or $80 or $100+ depends on the FDA process.
I will admit that after seeing this disarray with ANIP, and looking harder at MNK and its proven Acthar, I think MNK might be able to work out the overhang of Opioid suits and CMS suit. MNK has almost $1B in the bank, no immediate debt calls (due to the latest deferral they negotiated), and could bail themselves out simply by selling Acthar rights to a strong player. A strong player could annihilate ANIP's hopes by lowering Acthar pricing and developing Acthar safety data, for which ANIP lags, leaving MNK with its promising pipeline.
I'll confess. I see more light on the dark side, but that's my present view: MNK at $3/share and a few ANIP long term calls for a hedge. And if your brain hurts, buy Facebook.
Impossible to predict. And why bother?
Better not to put in new money when so many more trustworthy companies are for sale.
I think there is more amiss than what they have disclosed so far.
I'm expecting MNK to benefit from all this.
The only reason for this bizarre and curtailed call is that some lawyers told them to cut it short. There is never one roach in the kitchen. Something is amiss.
You cannot have heard this call without being sick, and revolted at the disloyalty of Arthur to his shareholders. He basically said "FU" to us, who trusted him for years.
I don't care how disappointed he may be with his Board, but this was a disgusting and immature display, and good riddance to him. Don't be surprised if his 200K +shares come on the block as soon as he is out.
So what does that mean for us? I'm now assuming that the CORTI application delay is not just a problem with fine print, and I've sold a few ANIP shares to cover repurchase of 50k MNK shares. There's money to be made in CORTI, so I'm covering bases.
This is very, very disappointing that ANIP management and directors cared so little for us. I will tell you that there is now the overhang of a class action suit, for significant and undisclosed difficulties with the FDA filing.
LordD
Jake,
Whatever you have seen predates current Securities laws. There will be no "private" debriefing of analysts.
This was definitly predetermined not to have analyst questions. Anyone's guess is as good as mine, but I fear additional cockroaches. This is the most bizarre call I have ever heard, for any company, ever.
If there was any question about the circumstances of Art's departure, they were answered on this call. He's bitter. It's clear from his tone.
For us, it sounds like they are hoping for a deal, but there's no assurance of an actual deal.
For Corti, what was glaringly absent was Arthur's earlier brave talk that the refusal to file letter was easily resolvable with the FDA.
We shareholders will continue to be mushrooms, kept in the dark and fed shit.