The buyout talk is heating up concerning Obagi Medical Devices (NASDAQ:OMPI) as Cantor Fitzgerald's Irina Rivkind said the company could be attractive to "multiple suitors." The analyst named Valeant (VRX), Medicis (MRX) and Allergan (AGN) as potential interested companies, and also said a pure-play cosmetics company could also get involved.
Shares of Obagi might actually trade higher than the proposed tender offer, as short interest in the stock has recently risen to over 5% of the trading float. Once again, short sellers might be finding a way to wreck themselves, as any seasoned investor and trader should easily see an acquisition as imminent at this point. In my most recent YouTube video, I remark about why short selling is very risky and can lead to infinite losses if not approached and executed in a correct manner. Shorting a company with very strong acquisition rumors associated with it is about as risky as it can get.
Yesterday, Antares Pharma (NASDAQ:ATRS) made a fresh 52 week high of $5.25 a share, before pulling back on profit taking to close at $4.77, up $0.51, (11.97%).
In a recent article, I remarked that we could see Antares reach $4.25 a share based on warrant expiration, which I believed would lead to a massive short cover rally. I also remarked on my twitter feed a couple of months ago that I expected Antares to reach $5 a share in July.
However, after carefully watching the trading action the last 2 sessions, I now believe something else might be driving the stock price higher. In the beginning of this year, I heard a rumor from a source of mine that there might be a kind-of 'handshake' agreement between Pfizer (NYSE:PFE) and Antares for Pfizer at some point to buy out Antares. I feel it is a bit too early for a buyout offer to come for Antares at this time. First off, Antares shareholders might not get a fair premium speculation value bid for the company, which I believe should be between $13 and $15 a share, or roughly $1.3B to $1.5B dollars. For Pfizer, paying this kind of price for a company that has not yet rolled out it's top-line product, the VIBEX line of injectors, would be hard to justify to it's shareholders.
I do feel as we move closer to the end of this year, as Antares plans to file a New Drug Application (NDA) to the FDA for VIBEX MTX, then an offer of $13+ might be more easily justified to Pfizer's shareholders. I project that if the Antares management stays the course, and executes as planned, a share price of $50 in 5 years would be reasonable to expect. Antares is definitely one company that long term small cap investors should consider doing serious due diligence on.
Questcor Pharmaceuticals (QCOR) saw its price rise on above-normal volume yesterday, as 6.48 million shares were traded. Shares rose to an intraday high of $58.91 before closing at $57.64, up $7.41 (14.8%).
The company estimated it sold 400 to 410 paid prescriptions for its drug Acthar, which is used to treat multiple sclerosis. This marks an increase of 50% from its June 2011 sales.
Also, its Anti-nephrotic syndrome prescriptions saw a 5 times increase in sales. There were also three prescriptions filled for a rheumatology condition called dermatomyositis/polymyositis, for which Questcor announced commercialization plans last month.
I remarked in an article from January of this year that Questcor should reach a high of $45 a share this year. Obviously, I was way off in my opinion on this one. Questcor is a very solid company, with top notch aggressive management, so I am not at all shocked that the stock price is nearing $60 a share. Questcor might see the $70 range before this year is over.
Arena Pharma (NASDAQ:ARNA) closed yesterday's trading session at $11.46, up $0.44 (3.1%) on speculation from a Bloomberg article that the company might have acquisition interest from larger pharma companies. Arena recently saw it's weight loss drug Belviq, gain FDA approval on June 27th.
Stephen Brozak, president of WBB Securities in Clark, New Jersey, said in a telephone interview with Bloomberg,
The large pharmaceutical companies are all on the edge of their seats looking at Arena. Obesity is a global pandemic. There are people that absolutely are in need of these types of products. Large pharma are wonderful at marketing drugs and this is a product that lends itself to marketing.
Arena might also see a much larger price increase if Vivus's (NASDAQ:VVUS) competing weight loss drug candidate, Qnexa is rejected by the FDA on or before July 17th.
On February 22, 2012, at the meeting of the U.S. Food and Drug Administration Endocrinologic and Metabolic Drugs Advisory Committee, the Advisory Committee voted 20-2 to recommend that Qnexa be granted marketing approval by the FDA for the treatment of obesity in adults. The FDA is not bound by the recommendations of the Advisory Committee, but will consider the guidance during the review of the Qnexa NDA.
On April 4, 2012, following the FDA's request, VIVUS submitted a Qnexa Risk Evaluation and Mitigation Strategy, (note that the FDA made no such request of Arena for Belviq) which was considered a major amendment to the NDA. Since the receipt date was within three months of the PDUFA, the FDA has extended this date by three months to provide time for a full review of the submission.
It is my opinion that Qnexa will be approved, but I am not as confident with the drug as I was with Arena's Belviq. The fact that a REM was requested gives me a little pause, not to mention the well documented issues that Phentermine, one of the main ingredients in Qnexa, has caused in the past.
Phentermine is closely related to amphetamines and works as an appetite suppressant. An UN International Narcotics Control Board report published in 2007, (page 26, 86) warned that phentermine is one of the most commonly used and abused prescription drugs in the world.
Also, Qnexa contains Topiramate, a generic form of the drug Topamax, which the FDA recently warned may cause birth defects. The FDA has said that the drug, if taken during pregnancy, increases the likelihood of the child being born with either a cleft palate or cleft lip by 1.4%. The FDA has even placed the drug into the category "Pregnancy D", which is for drugs that health care providers should consider avoiding when prescribing medication to a pregnant woman or woman of childbearing age. Still, there is no news if the agency will issue a recall.
If Qnexa is rejected by the FDA, this would leave Arena's Belviq as the only FDA approved weight loss drug of its kind, potentially grabbing an entire market share to itself. Institutions would likely scramble out of Vivus, and pour their collective money into Arena, causing the stock to perhaps see a price nearing $20 a share.
Arena currently has a market cap of a little over $2B which assumes a split market share with Qnexa. Having an entire market to itself for an extended period, I can easily see a valuation for Arena approaching $4B. Many traders I have talked to about Arena are learning towards the company being a short sell. I think shorting Arena now would be very foolish. The downside with Arena does not appear to be a huge factor now, as acquisition talks are heating up, and the upside would be gargantuan, if again, Qnexa fails to gain FDA approval. I strongly feel traders and investors should carefully consider these factors before making any move in either stock.