>> why lighten up? <<
Because the risk-reward ratio has changed.
The risks as I see them are:
(1) that the FDA rejects the "reformatted" BLA (we agree this is pretty low risk -- on the assumption that CLTR and SBH have worked closely with the relevant FDA people and done what is necessary to do it right, and this assumption is probably right, but the very long time to redo the BLA still leaves me with some skepticism and worry);
(2) that the FDA will be ultra-cautious with the first radioactivity-tagged monoclonal antibody, and will not approve it without something further.
The CRXA deal announcement has not increased the BLA-rejection risk, except that CLTR now trades higher, and has farther to fall if the BLA is again rejected next month. And the Bexxar non-approval risk to CLTR's price is presumably reduced, since the CRXA merger will have closed by the time the FDA acts, cushioning the downside somewhat.
But the rewards have been much reduced by the CRXA deal: CLTR shareholders will have about 43% of the combined company, i.e. roughly 43% of the upside from Bexxar's approval.
So I took some winnings off the table (keeping about 40% of my position).
>> The best way to make big bucks is when the conventional wisdom is wrong and you bet big with your conviction. <<
Agreed, which is why much of my position was bought in the low teens, not long after the BLA rejection, on the conviction that the setback was temporary; and most of the rest at 18-20, after the string of posts in November and December; and why, e.g., I recently added a bunch of INCY at 28-29 (ridiculously cheap in light of its 30,000+ royalty agreements, even without valuing the rest of its business).
But my conviction level on CLTR remains a bit lower than yours -- I'm still given pause by the long delay before the BLA resubmittal, which I don't think has been adequately explained.
And I'm probably more cautious than you, and generally love to take some profits, while keeping some of the upside potential -- here, I've got back out of CLTR more cash than I put in, but still have a good position in "free" CLTR shares.
>> now I have to figure out Corixa << Yes, we do, but I know enough now to buy some CRXA, on the logic suggested by Peter -- you trade away the premium CLTR will get in the merger and some of the upside but get to sleep well at night. CRXA will take a good part of the benefit from BLA acceptance and Bexxar approval, and none of the downside if the BLA is rejected, since it can (and surely would) walk away from the deal. But CRXA will surely also go back up if the CLTR deal tanks, since the market (I agree stupidly) drove its price down 20% or so on the weird notion that it was overpaying for "tainted" and "risky" CLTR. CRXA at least seems a good bet at least for a short-term trade.
--RCM |
