Abu Bakr Hussain

Abu Bakr Hussain
Contributor since: 2012
The short interest in RLYP has become really quite alarming. 14 million shares short out of 42 indicates there is a massive movement towards pushing Relypsa lower. One can only be thankful that the DDI results were positive, otherwise this stock could have hit $15 or less.
There is now only one way to break this tremendous downward pressure on the company and answer its critics - Positive news from scripts take-up and hopefully within 2-3 months, an upward revision on peak sales predictions. Even so, we could be in for a bumpy ride as the market deliberately mistakes relatively slow take-up of a drug designed for LT use for some sort of failure.
The market share split is currently 76-19-5-1. A four-five fold fall going from one product to the next. A classic textbook example of a concentrated market split. What we have here is a colossal failure in traction by Bunavail. That is deeply disappointing. The aim here should be to move from 4th to 2nd at least. i.e. move from having a 1% market share to a 20% market share.
On the balance of probabilities. Do we think that is likely to happen? What is BDSI doing to excite us. To tell us that it can really get that 20%? A few little tidbits here and there are not going to change anything. Doctors being able to prescribe more Bunavail is not going to change anything beyond move from maybe 2500 prescriptions per week to 5000. That might sound great, but it needs to do much more. It needs to start thinking about how to get 20,000+ per week. Anything less than that seems pointless.
I was very bullish on BDSI at some points. Now I'm not sure what to expect. If ENDP were to offer $7.50 for BDSI, I think the management should take it. That might be half of the 52 week high, but I don't see how BDSI will ever get back to $15 on its own steam in the next 3-4 years.
I hope he won't be treated as a scapegoat. Market irrationality cannot be blamed on a regulator. I think it's up to investors to take some individual responsibility here.
The US also has circuit breakers does it not, or was the Chinese structure deficient to a much greater extent than it is in US?
Hi Medtech - That's indeed interesting thank you. So it is a reformulated/improved version of Keyexalate/SPS. I'm genuinely curious as to P3 trial design. Would it continue to use SPS as the comparator or Veltassa? It would seem appropriate to use Veltassa as that will be the only hyperkalemia treatment of choice in the chronic setting till ZS-9 gains approval.
It's interesting that no matter the source of the rumors, they exist.
FT Alphaville clearly appeared to have a different source to Bezinga who clearly had a different source to many of the people on social media.
If we read how ZSPH was sold, what is happening with Relypsa seems very similar. As people may recall, a story did indeed surface that ZSPH had received a non-binding takeover offer. That appeared to be legitimate. It was sold around 2 months later.
Now, from the perspective of RLYP longs, there's an added benefit here. Because ZSPH has been sold, there's only 1 hyperkalemia company left on sale, and that's RLYP. So if companies want a piece of that action, this is their last chance. It's simple market mechanics here. If there are 2 companies for sale, there is always a slight depressive effect on sale prices because if the valuation goes too high, buyers will start eying the other one on sale.
As it happens, we know this is very likely to have happened in RLYP's sale as Actelion dropped out of the bidding for ZSPH the day after Veltassa was approved. If that's a coincidence, that's the most remarkable coincidence.
So here we have a situation, where rumors appear to have merit, we have a drug which is at the very least, as good as ZSPH's, and a company which is currently only worth $1.2 billion. Even $3 billion for this company is chump change. I strongly feel with how RAASi drugs are titrated to prevented hyperkalemia, Veltassa will effectively grow the market. Every time someone takes a RAASi drug with a chance of potassium build up, Veltassa will be co-prescribed.
So what does that mean for us? There's no 'hype' here. A solid drug, a solid company with 1 drug. Only valued today at $1.2 billion. When 'small' pharma companies are regularly exchanged for up to $10-$12 billion, this is the cleanest take-out profile you can imagine for big pharma. This gets sold. The only slight disappointment is, if it hung on for another 6 months, its price would be higher.
As it is, this will probably get sold early-mid January once the holiday season is over.
Thank you for another excellent and informative article White Coat.
Regarding the Blood pressure difference, it appears that ZSPH is using 180/105 as the upper threshold at which to measure an adverse event. This seems remarkably high. I'm not an expert here, but it seems 180/110 is a hypertensive crisis e.g. http://bit.ly/1ltBwxQ#
So it's not just an adverse event, its an incredibly adverse event with the need for immediate acute response.
On the other hand, Veltassa's trial had an AE for blood pressure set at 130/80 (correct me if I'm wrong, I'm going on memory here). That is not even classed as hypertension, but pre-hypertension. There appears to be a significant difference here that I cannot help but feel the experts at the FDA will pick up on.
As you say, Veltassa already has its label. ZSPH does not, if they see the raw data, true cases of hypertension are likely to be much higher than what has actually been reported as an adverse event.
If that is the case, a 'black box' would still be a decent achievement for ZSPH because it's hard to see it getting through with AE's in the range of 20%+ if a drug already on the market has no such AE worries.
I don't quite see how Saudi Arabia producing oil is an act of economic war on US shale. The Saudis can produce as much as they want, the US shale industry can produce as much as they want, all together, that helps form the world price for oil. Sure the Saudis could voluntarily produce less to increase profits for the US, but I doubt it would happen in return, so both sides behave as they should do, act in their own interests.
Finally, it's worth adding that Saudi Arabia and the US have a hugely beneficial trade relationship, the $11bn+ agreement just last month for Saudi to purchase 4 advanced warships is just further evidence of that.
Regarding the original article:
I have a feeling in the near term, OPEC is effectively broken. It used to be a group of junior nations who Saudi would effectively carry by cutting its own oil output and tolerating excess production by its partners. I don't think Saudi will want to cut its production anymore considering OPEC is breaching its own agreed quotas by 1.5million barrels already. That's the difference between $40 oil and $55-60 oil. The whole cartel would benefit if that excess production would stop, but it won't, because of the myopia of 'sovereign rights'.
Finally, with Saudi and the GCC on one side, and Russia and Iran on the other, effectively fighting proxy wars, I can't see how they would mutually enforce cuts to oil production. It's in each others short term interest to breach the quota limits if the other side cuts. It's a form of game theory here and the more probable outcome is lose-lose, rather than win-win.
iPhone indeed my friend, iPhone indeed.
The Dave Callen prank at the end was priceless.
That cash flow has to be going somewhere. I'm surprised we didn't see a further announcement related to that. What are folks thoughts here?
Mark - Good points, and you can see why. Just to add to that, as Iran and Saudi are not on the best of terms now, there's a bit of game theory going on here too. It'd be in Iran's interests to keep pumping if Saudi cut, so Saudi would rather not cut. Leading to a lose-lose situation.
(Prisoners dilemma?)
It's an interesting point Windy. It seems to me that OPEC wants Saudi to cut. The non-OPEC countries, want Saudi to cut, but no one wants to cut themselves.
So who benefits? Everyone else but Saudi Arabia. The only way an oil price rise would work from the Saudi end is if everyone cuts, and I don't think the trust levels are there for Saudi to believe everyone else will follow suit.
So Saudi is behaving perfectly rationally here, drive other producers into the ground, and it will gradually, inexorably lead to a rise back of Saudi control over oil prices. They might not be able to do it indefinitely, but they can certainly continue to pump as much oil as they can for another year without blinking, if they want to.
Considering they have presumably listed in the Isle of Man for tax reasons, it is a bit strange to see them stating 'Isle of Man, United Kingdom'.
The IoM is not part of the UK but a self-governing British Crown Dependency. It's a rather unique relationship but they do not send MPs to the British Parliament but have their own legislative bodies.
It's kind of ridiculous that we have to parse statements of a $30 million dollar company to such an extent to effectively say absence of evidence may represent evidence of absence.
Identiv needs to shape up fast, it has caused colossal self-inflicted share price destruction because it cannot even get the basic things right.
If they do not desire public scrutiny of their actions, they should simply go private. If they do want to be a professional outfit, the beginnings of their requirements should entail being either compliant, or telling us how they plan to achieve compliance.
If they did this, they'd be at the very least a $100m company. I cannot believe they do not realise this. The reason the SP is so low is a direct reflection of the stock market's belief that this is not a professional outfit.
DWD - I am not an expert at all in the mechanics of this. My understanding is just that starting 25 Nov an unlimited buy offer is placed on OCAT shares at $8.50 by Astellas. Once they have 51% of company, they effectively control it and whoever remains gets the right to have their remaining shares converted at $8.50 (or they could go to court to try to claim something higher). I don't see at present any significant vocal activists clamouring for a better deal. If that is to happen, they've got two weeks to make it so.
Scrying - Once we get our ticker and list officially, you'll be first to know =)
The more I read these articles, the more I want to shake the hands of every single ZSPH Board member for pulling off one of the deals of the decade. $2.7 billion.
2.7 billion dollars ... let that sink in ... and ruminate on just what they gave in exchange.
Scrying - Amarin does indeed seem interesting. There's almost a fourth characteristic also of many of these stocks (has disappointed shareholders in the past). This can actually be a 'good' thing as this is where the largest mispricings occur. Thanks for the tip, would love to read your thoughts on it, but for now, enjoy the peace.
DWD - Good to see you. It's not often you see a company reject a near doubling of share price. Dew Dilligence maintains a very nice list here:
http://bit.ly/1OCME8c
Most are even below 100% (as was this). It must be the pre-determined psychological magic number which motivates BoDs to sell. So even if this stock was worth $15, the BoD wilted.
Now interestingly, this appears to be an open tender offer where effectively the buyer puts out an unlimited buy order at $8.50 starting 25/11.
The way funds and market makers work, it wouldn't surprise me if fully 1/4-1/3 of total share volume occurs that day. By Day 3, the buyer may already own 51%+ of OCAT.
Therefore IF an alternative bidder is to emerge, they'll have to do their DD very very quickly and do something before 25/11. So if people are waiting for other bidders, I doubt there would be much point waiting beyond 1/12, but that's just my own personal uninformed opinion. Maybe, perhaps even more likely, it'll play out different.
Ahh Scrying apologies, I should have rightly mentioned you also. Great to see OCAT validate your thesis, we may have indeed watched a bluebird go by.
In last 2 weeks, three stocks which I keep an eye on (and 1 I own have been bought out), HTCH, ZSPH and OCAT. I don't know if that is indicative of anything (probably not as that's just anecdotal), but M&A's do seem to be on the rise.
I wonder what will be next? ISIS, TRVN, RLYP?
Congrats to OCAT longs and especially Dr.Hartman for introducing many on SA to OCAT!
KSA is Kingdom of Saudi Arabia (better than 'SA' which has multiple meanings)
GCC are the Arab Gulf states, similar to NATO and the key bloc within OPEC
To put it bluntly, KSA is moving from a world where it is the swing producer to a world were high-cost oil such as US Shale or Canadian Tar is the swing provider.
That makes perfect sense from the GCC point of view.
This would probably make any oil price movements short-term bearish but long-term bullish. After all, as KSA themselves indicate, this is reducing CapEx across the world and lowering new supply coming on line.
Ha! I just started researching ZS Pharma as their drug seemed superior to RLYP's. Sadly, multi-billion dollar AZN completed their DD first before I could own one millionth of ZSPH.
Congrats to ZSPH longs!
For what it's worth I've invested (and sold) my position in MNKD twice for a profit. I was speaking with my Dr wife yesterday about this product and asking her why from her medical perspective the drug wasn't selling well. From my description, she loved Afrezza similar to the doctor above. She thought an applications like this would be well loved by diabetics as no-one likes needles (especially multiple times a day) which leads us to the most important financial question of all.
Why isn't this drug selling? E2 million in sales per quarter is simply not good enough. I do not care if Sanofi are not investing in the product, I cannot ask them to. All I can say is I do not see how this is going to materially change over the next quarter. So I'm sorry, we may have a great product, but the financial metrics are not worth the investment. (yet).
If I see a material change in how its advertised, or some indication take-up is improving, then I'll invest (even if it costs $5-$6 which is fine as that's the price range I invested at before), but I'm worried about the metrics here and suspect this could go even lower. Sorry MNKD longs.
Good article - I think there is a not insignificant chance that HTCH may receive another Buy-Out offer in the next 2 months. I would imagine several interested parties are performing the preliminary work as we speak.
It could either be HDD manufacturers looking to vertically integrate their supply chain but also mobile camera manufacturers looking to acquire HTCH's OIS actuators which are supposedly the best on the market and poised for significant wins.
We are therefore dealing with a stock which is poised to rise a minimum of 10% over the next couple of months but could conceivably rise even more if we get a bidding war.
As someone on yahoo finance put it, we're in 'golden handcuffs'. There are lots of stocks out there worthy of investment, but it's difficult to beat a near guaranteed return.
I do have a question for others considering HTCH's situation.
A) Does it have to announce any OIS wins over the coming quarter as this could materially impact on its share price.
B) Is it possible for share price to go over $4 if it does announce any wins? And what would the repercussions of that be?
Hi Stock Market Mike - For whatever reason, the market is still undervaluing the deal, if you're happy to hold tight for up to another 2-3 months, you'll get $4. I'm pretty confident the final deal will close at that figure as the terms to gain the $0.38 seem very doable.
Hi George- similar to Tmoney - we'd appreciate your thoughts on Enanta again. I found my Enanta position halved this week and it seemed unmerited. I made the choice to hold my position as I do see it rebounding back to $40+ within a year (a 100% return in 12 months is fine for me), and I see very little downside as it has plenty of cash and a great product pipeline.
finally maybe figuring out why. twitter account @market_farce has some pretty serious accusations against EROS CFO. I have yet to find anything in Indian papers though.
Shows how much I know (not a lot). Eros now at $19.50.
Thank you Jonathan for yet another excellent article. I think from an outsiders perspective, it can be very hard to judge a consumer facing organization. Nevertheless, I've heard of Eros, I've even watched Bajrangi Bhaijaan (terrible movie but my wife liked it!) and I can attest that for such a cinophile country, the actual 'cino' element is quite lacking. As India grows, I'm sure that its cinema industry will grow considerably faster than its GDP as people can finally afford to become cinema regulars.
One thing I would say is that though I haven't used Eros now, Indians are rather good at obtaining 'free' movies through dubious means. The true value of a movie (it seems to me), lies in what it can immediately generate in the cinemas. After that, it's pretty much freely accessible. I'm not sure how well Eros Now can grow in such a market, especially as broadband remains slow.
Nevertheless, I've added Eros to my shortlist, this does seem to be a blue-chip in the making and I'll strongly consider establishing a position soon after some more DD.
Since April 1st to present date, Eros is up 61%, Shemaroo is up 43%. But still, since I haven't heard of Shemaroo care to elaborate on why you like it? It's market cap appears to be 7 billion Rupees while Eros is a $1.7 billion NYSE pick, which indicates a different type of organisation with a quite different risk profile.
That's great and I really like Elon Musk a lot too. But the share price still makes no sense vis-à-vis BMW. And please, don't give me that BMW aren't innovating. They are and have a tremendously loyal client base. Here in the UK, BMW are one of the most popular marques in the country despite being a premium brand.
I can't afford the car - but would love to drive one
I can afford the stock - but won't buy some
A great car doesn't mean it's a great stock. It appears for some they have bought Tesla stock because it represents the future rather than due to any sound valuation reason. For many such people, it wouldn't matter if the stock was $100 or $200, they just wanted a piece of the future. That cannot last. But hey, I remember when Amazon's stock completely cratered post 1999 but it still went on to become a multi-hundred billion dollar company because it really did have a great vision.