Bryan, Biotechs again showed strength yesterday. Although some of the big gainers on Thursday gave back some yesterday, another set of Biotechs (ALRIZ, AMGEN, CHIR, CNTO, GENIZ, GILD, HGSI, IDPH, INCY, IPIC, LIPO, LTEK, PDLI, REGN, SEQU, ORG, VRTX, ZONA) showed gains of a point or more yesterday. Only a few of these stocks (AMGN, IPIC, LIPO, LTEK) failed to register the gain of a point or more at the close. HGSI, IDPH, and VRTX were the biggest point gainers. Yesterday, the smaller investor "discovered" ALRIZ (Allergan Ligand Retinoid Therapeutics). ALRIZ is usually thinly traded (averaging 1000 shares per day), but Thursday it traded almost 60,000 largely due to LGND's announcement (LGND traded 1.5 million). Yesterday LGND fell due to profit taking (and volume declined to less than 400,000), but ALRIZ traded over 80,000 shares and rose to 30 before settling back to 29 1/2 and a 1 1/2 point gain. Thursday it had moved up 4 3/4 and the gain of over 20% placed it in the #6 slot in USA Today's table of largest % gainers on the NASDAQ. ALRIZ is a cheap way to play LGND since it includes 2 five year warrants to buy LGND at approximately 7 1/8. As long as LGND and/or AGN call the ALRI shares (which seems extremely likely in view of Thursday's news since ALRIZ controls most of the retinoids and all of the intellectual property contained in the LGND/AGN joint venture), ALRIZ is cheap as long as it selling for less than 2 X LGND. Yesterday, it closed the gap (LGND is around 15 while ALRIZ is about 30), but its still a deal since the call price of ALRI begins at $22 and more than covers the $14.25 required to exercise the two LGND warrants (LGNDW). Of course ALRIZ is a long term play since the units do not separate until June, 1997 and LGND and/or AGN could wait until June, 2000 to call ALRI (although by then the call price would have increased to approximately $37). However, ALRI and LGNDW will begin trading separately on the NASDAQ in June, 1997 and I expect ALRIZ to soon begin trading at more than 2 X LGND (the association between LGND and ALRIZ also provides an arbitrage play which acounts for the vast majority of the huge short position on LGND).
Henry |
