Over the next 5 years, Bayer will pay out ~US$2 billion or 1.45 billion Euros, in Net Profit to ONXX as part of their agreement. That works out to 1.75 Euros per share (1.45 bill / 827 mm shares O/S) or Euro 0.35 per year. Multiplied by 13X P/E and that is worth over 4.5 billion Euros in additional market cap or 10%. A 50% premium to ONXX enterprise value of 0.94 Billion Euros is 1.4 Billion Euros or 1/3 of the market cap boost. These rough numbers excludes additional redundancy costs that are stripped from ONXX, perhaps making Nexavar even more profitable to Bayer. And this values Carfilzomib, ONXX's promising phase 3 multiple myeloma candidate, at zero; its JAK inhibitor, at zero; its Cell cycle kinase inhibitor, at zero - even knowing all these programs could be monetized or spun off. Adding to the list of acquired biotechs over the past 3 years, we can add BMY's recent buy of ZGEN. Based purely on financial considerations, I think ONXX is close to the front of the line.
For the first time since April, ONXX has closed for 9 consecutive days above its 200-day & 50-day moving averages, yet the company generates NO interest. The 10-day Call-to-Put Ratio has declined to 1.63 and was just 0.60 a few days ago, the lowest reading in 21 months. In contrast to a year ago when ill-founded takeover rumors were swirling, that ratio exceeded 11X Call to Puts. The current Call open interest at 39K is near the lowest Call exposure in 7 months, confirming the disinterest and lack of bullish exposure to the stock. The # of Funds holding ONXX also continues to decline, falling from 144 funds at the beginning of the year to 123 at the end of September. While long exposure continues to fall, short bets continue to rise.
ReplyDeleteIn fact, short interest has risen to 6.5 mm shares or almost 12% of the float - a 10% increase in the past 2 months. Furthermore, in contrast to Call open interest, the Put open interest has risen 35% in 2 months to 28K, even as the stock has slow risen. Perhaps the increasing bearish bet, and declining long exposure is justified and will be proven to be the correct bet, but the contrarian in me can't help but wonder if doesn't represent an opportunity to be long a scarce asset that is acting well yet fails to generate any bullish interest. GLTA