I think you need to add to the ABGX/CEGE relationship, that there are likely to be many players playing arbitrage/hedging games. The game can get rather complex with both CEGE options and ABGX shares involved. Traders may be buying one form (say CEGE), shorting the other (ABGX), then selling puts, then buying calls, then buying ABGX etc. Not an easy thing to predict in the short term.
Since a number of major institutions bought around $750 mill of ABGX at $105 post split, my guess is that ABGX will eventually settle at a price higher than this. At $105, CEGE has about $500 mill in ABGX stock. They also have $250 mill in cash.
They will also be getting $45 mill from Japanese Tobacco over the next two years and probably $10 to $20 mill/year from their patents. They will also be earning about $12 mill/year in interest on that cash until they start to use it.
So that may be revenues this year in the range of 22+15+11 or about $48 mill. That means that they may well be profitable each quarter.
On top of that, the company will likely show a gain of over $5/share this last quarter dropping their p/e into the single digits. And that ABGX stock should allow them to take out $100 mill a year for several years.
In addition, they are collaborating with several companies using CEGE's technology, and if any of those companies succeed then CEGE receives quite significant revenues - as with Transkaryotic's Epogen.
In addition, they are developing cancer vaccines that have shown very promising results in Phase II. More results of these studies will be released in May.
It may take a month or two or four, but I believe CEGE's price at minimum should be $500 mill over the price of the cash and equity value. That is only a price to sales of about 10.
Their updated site provides more details (updated this month)
cellgenesys.com |
