Munch rumours...
QLT options soar on takeover talk
LEONARD ZEHR
Speculation of a takeover and further restructuring hit QLT Inc. yesterday as investors made a huge bet trading options of the drug developer.
The price of QLT options more than doubled on contracts to buy its shares next June at a price of $7.50 (U.S.) apiece.
Volume soared as 12,874 contracts changed hands, compared with 813 contracts previously outstanding and a daily average volume of 28 contracts.
Optionetics analyst Frederic Ruffy told the Dow Jones news service that the focus on QLT's June options suggests that investors expect the company's shares to shoot up some time in the first half of 2006.
On the Nasdaq Stock Market yesterday, QLT shares rose 15 cents to $6.35. Volume was 1.5 million shares, with most of the action late in the session. The stock was quoted as high as $17.30 last January and recently hit a 52-week low is $5.97.
The Vancouver-based company has been struggling this year under a management upheaval in the wake of the disappointing $650-million acquisition of Atrix Laboratories Inc. last year.
QLT is best known for its blindness drug Visudyne, which until recently controlled the market for wet age-related macular degeneration, the leading cause of blindness in seniors. But the company now faces competition from new rivals eating into Visudyne's cash flow.
That prompted QLT to begin retrenching earlier this month, with plans to trim down by selling non-core assets. It also plans to cut expenses for research and development and general overhead by 20 per cent, while narrowing the company's focus to ophthalmology and one other therapeutic area, still to be selected.
"Some [options] investors could be betting on the success of the restructuring," Infinium Capital analyst Steven Salamon said in an interview yesterday. He said a restructuring by QLT "is what has to be done because this is not a growth company right now."
Raymond James Ltd. analyst Brian Bapty said QLT is likely to undergo more restructuring in 2006 and could be a possible takeover target.
"A cash-strapped biotech company with a good-looking pipeline and needing near-term cash flow, would find QLT appealing."
QLT had $449-million of cash at Sept. 30.
"The stock is inexpensive compared with its peers and the company has a good balance sheet. While it's not an exciting growth story, the guys who are buying [the options] are value players," Mr. Bapty said.
"If somebody takes a fancy to the company, the stock could respond incredibly quickly. So the easy way to play it is to buy a call option." |
