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Here is something for you all to consider - check it out.
We tracked the recent corporate history of REGN since December 1996 and
juxtaposed news items with messages about the company on internet message
boards from America Online, Motley Fool and Silicon Investor. We wished to test
an a priori assumption: can proprietary information about a company be leaked by
anonymous individuals onto the internet in advance of significant corporate
developments? If so, is the information reliable? How far in advance do the leaks
lead news releases? Does dissemination of proprietary information by individuals on
the Internet represent a reaction to a perception that management divulges
information in advance to institutions? Consider these questions in the context of the
recent event surrounding Tarrytown, NY based Regeneron Pharmaceuticals
(REGN).
Most Significant News Items from 12/1/96 - 4/9/97
REGN is applying its technological expertise in protein growth factors, their
receptors, and their mechanisms of action to the discovery and development of
neurotrophic factors for the potential treatment of neurodegenerative diseases,
peripheral neuropathies and nerve injury. More recently, REGN has used its
technological expertise to attempt to identify treatments for diseases outside the
nervous system such as inflammatory and muscle diseases, angiogenesis,
hematopoiesis and cancer.
On 12Dec96, Cincinnati, OH based Procter & Gamble (NYSE:PG) and REGN
signed a deal to jointly develop drugs for muscle diseases. The terms were that
P&G would buy $10 mm of REGN stock and make annual payments to REGN of
up to $3.75 million for five years to support research. The price per share paid by
P&G for REGN stock will be determined in the first half of 1997, based on a 27
percent premium over the then-average market price of the shares. On that day,
REGN stock traded between 19 and 22.
On 13Dec96, Smith Barney downgraded the stock from a "buy" to an
"outperform."
On 10Jan97, REGN announced that the Phase 3 clinical trial of Brain-Derived
Neurotrophic Factor (BDNF) did not demonstrate clinical efficacy in patients with
amyotrophic lateral sclerosis (ALS). While the trial confirmed the safety and
tolerability seen in earlier trials, it showed no statistically significant or clinically
relevant difference in breathing capacity or survival between treatment and placebo
groups.
On 14Jan97M, REGN issued a three page letter directed toward institutional
holders. Management suggested that the company had a vast product pipeline and
that its $95 mm cash to sustain operations for three years.
On 5Feb97, REGN reported a net loss of $32.4 million, or $1.33 per share for
1996.
On 20Mar97, REGN announced that P&G completed purchase of $10 million of
REGN common stock by taking delivery of 800,000 shares at $12.50 per share.
On 4Apr97 The University of Texas Southwestern Medical Center at Dallas and
REGN announced receipt of a patent for their MAP2 Protein Kinases product.
Significant posts from the Message Boards
18Dec96 - "I don't understand the latest selling in the stock...I couldn't find
substantial news for the run-up to 24 last month, but now there is good news behind
(the PG investment). So, are there words leaked out on the clinical results?? I hope
that's not the case."
18Dec96 - "REGN always sells off on good news. It's gotta be a leak. I still think if
it gets past the low 20's it goes. But I'm not adding on right now. Everyone says the
biotechs are ready to go. Makes me nervous."
28Dec96 - "With a one point drop yesterday, I am becoming concerned. There
seems to be more stories than we know, particularly people's guessing on the
outcome of the trial. I am digging into news articles and still came up empty. The
latest news I found was on the PG collaboration."
30Dec96 - "The 10Q doesn't look that good particulary there seems to be little
confidence in the success of the trial."
31Dec96 - "At the time of [P&G] announcement, stock was traded at 20. Also
REGN has good cash position, and no need for immediate increase in cash balance.
If REGN closes last ten-average price with 27% premium (at the time of
announcement), the deal is valued at 25 1/5 or 390000 shares. To speculate,
REGN price will rise if BDNF clinical results are positive in 1Q97. On the other
hand, if REGN knows that the outcome will be negative, the share price would drop
on non-positive result, and it will hardly recover during first half of 1997. This will
postpone milestone and equity investments by AMGN and force REGN to burn
cash on additional BDNF trials. This will make REGN accept immediately 10M
investment from PG at the March price."
2Jan97 - "An options analyst, Larry McMillan, last night said that REGN options
have 'high implied volatility'. Whenever you see that, over a period of a few days
(Tuesday was day one) a high-percentage move usually follows. 6Jan97, McMillan,
told his daily fax clients to buy REGN stock today, based on increased speculative
buying in the calls. (He said to buy up to 18.5, I'm sure he used that number
because of the resistance there. From there to about 19.)"
7Jan97 - "Speculation in calls/puts often precedes sharp movements. When that
kind of activity shows up, it may be because of leaked info, or impending
disaster/takeover/whatever."
10 Jan 97 - "The stock went up to 21 today and I was figuring to sell it and bang,
the bid and the asked went off the quotescreen. When it finally came back on line
about 3:38EST they had refigured it to 12 7/8. I threw in the order to buy back 10
Feb171/2 calls I had sold at 3 5/8 and bang! they went through at 1/4, along with
like only 81 other calls. Stock ended at 10 7/8 down 8 1/4 a few minutes later!"
12 Jan 97 - "Face it, this stock is in trouble for now. They made arrangements with
P&G because they wanted to cover themselves with needed capital if this study
failed. It did!! The insiders sure did not have any faith they have been selling. This
stock is not oversold under 14.5 no way."
15Jan97 - "I speculate that AMGEN manipulated REGN stock through a
'designed' info-leak to a selected investor - a Smith Barney analyst in three weeks
changed his projection for positive BDNF from 80% to 30% without explanation."
Hmmmm...... |
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