Medarex Stock Options Activity Resembles Dendreon's
by Jon C. Ogg
24/7 Wall St.
When traders made bets and saw a move of more than 200% at one point on Friday in Dendreon (DNDN), this is the sort of news that can get biotechs with upcoming events (and even some of the old dead biotech zombies) going. Don't be shocked when you look back to Friday or even over the next two weeks as traders are parsing through trades to find what could be the next mover like Dendreon (DNDN). Before reading further, understand that trying to look for a 200% gainer is not the norm and trying to predict a gain or loss of anything remotely close to this in a biotech company is one that even industry and corporate insiders have charred their fingers on many times.
But what can be done is looking out on the horizon as far as options trading and open interest is telling you, and this will at least give a shot to see where some of the smart money and aggressive traders are placing some bets and where they see a big potential move down the road. Medarex Inc. (MEDX-NASDAQ) is one of those names as one of the upcoming biotech review stocks to watch. This is already a battleground stock as traders have placed bets in favor and against this name, just like they did in Dendreon, and the short interest has risen. The company's financials have been left off for a space-saving since this is already a long note, but they have ample operating capital and partnerships that should keep them going for years. The short interest grew from 13 million shares in February to 16.7 million in March, and its market cap is almost $1.6 Billion. At a $12.72 close MONDAY, shares are in the middle of a $8.51 to $16.23 52-week trading range; shares have been significantly higher and lower over the last 10 years and more.
The one thing that may be different in Medarex (MEDX) is that if any its candidates turn out to be duds, they have a substantial pipeline and a broad group of diverse partnerships that may generate revenues on an ongoing basis. As you will see later, the partners are impressive and they are in Phase II and Phase III in more than one candidate. Its primary focus is in monoclonal antibodies to make potential drug development much faster and less expensive. Cancers are the primary targets here, but if you read on you will see they have many other targets as well. The company has two kep approaches: (1) collaborative partnerships with partners to jointly generate, develop and commercialize human antibody products (more than a dozen collaboration partners as of 2006); (2) out-licensing partnerships to license its human antibody generation technology to partners in exchange for license fees, milestone payments, and royalties (claims two dozen partnerships here). MEDX lists Abbott (ABT), Amgen (AMGN), Centocor-J&J (JNJ), Eli Lilly (LLY), MedImmune (MEDI), Novartis (NVS), Novo Nordisk (NVO), Pfizer (PFE), and Schering Plough (SGP) as partners as of 2006. Here is the list:
MDX-010 Phase III for Melanoma and other cancers with Bristol-Myers Squibb (co-promotion/profit share); was granted "Fast Track" designation in 2004:
- CNTO 148 & CNTO 1275 for inflammation both in Phase III with J&J's Centocor (milestones/royalties).
- HuMax-CD4, CD20, and EGFR in Phase III's for cancers and lymphomas with Genmab/Serono (equity interest).
- MDX-066 and MDX-1388 in Phase II for C. difficile Disease with MBL (co-development).
- MDX-060 in Phase II for Hogdkins and other lymphomas (wholly owned).
- AMGN Antibody #1 in Phase II for undisclosed treatment with Amgen (milestones/royalties).
- MDX-018 in Phase I/II for undisclosed treatment with Genmab (co-development).
- CNTO 95 in Phase I/II for Cancer with J&J's Centocor (milestones/royalties).
The company also has numerous PHASE I studies going on (partner name, then treatment indication): Celldex for cancer, wholly-owned study for Ulcerative Colitis, PharmAthene for Anthrax, MedImmune for Lupus, Ono Pharma for cancer, Novartis for Autoimmune diesease, more undisclosed studies with Amgen and with Eli Lilly, Bristol-Myers for cancer, Imclone for cancer, and more partnerships or wholly-owned candidates.
Medarex has upcoming presentations May 2-4 at the Morgan Stanley Global Healthcare Unplugged Conference and May 22-27 at the Citigroup Healthcare Conference. It has also recently begun a Phase I clinical trial for the potential treatment of Psoriasis and just last week noted some positive activity in its primate study to potentially treat Anthrax. Anthrax is a potential win for the company, but its pipeline in Phase II & Phase III studies is what you want to focus on. A number of these could become blockbuster drugs, and Medarex operates as a royalty company that would collect fees if these go to market.
2007 is the potential pivotal year, because it has two BLA's to be filed this year and next and has numerous updates coming in Phase I and Phase II trials (plus all of the preclinical candidates). This isn't without problems: it is in need of some steadiness in leadership and in its SEC filing history. We should have more detailed information on its phase II & III studies for melanoma later this year. The pop up in the stock from the Anthrax preliminary results was probably magnified because traders saw Dendreon go up 200%, but this stresses the forward "wild cards" that can be catalysts. The problem is that the data, filings, and news may come "later this year" or any of it can be delayed. Traders are betting on "later this year" if you look at the options open interest.
The May CALLS had over 50,000 contracts in the open interest and the same PUTS were only about 28,000 spread out. It is quiet for the summer and in NOV07 PUTS/CALLS, but if you go out to JAN2008 you will see that the bets are on. And they are on big time. Look at the JAN2008 open interest levels:
JAN $12.50 CALL 60,061 contracts / JAN $7.50 PUTS 19,683 contracts
JAN $15.00 CALL 39,065 contracts / JAN $10.00 PUTS 14.869 contracts
JAN $17.50 CALL 84,943 contracts / JAN $12.50 PUTS 42,187 contracts
JAN $20.00 CALL 9,376 contracts / JAN $15.00 PUTS 19,122 contracts
An at the money straddle ($12.50 strikes) out to JAN08 would run you roughly $5.65 right now, so you don't have to claim where you think the stock will trade in 8 months to be able to recognize severe volatility is being priced into the stock. The "positive Anthrax news" was not priced ahead of time in last Friday, but that isn't even one of the immediate candidates that could be the homerun or flop that traders are betting on.
We can't predict that the price action will be anywhere close to Dendreon's move. It would be reckless. But what is fair to say is that if you look at the open interest in the JAN08 PUTS & CALLS then you will be able to tell that there are many bets that Medarex could see some of the same sort of anticipated action. DNDN was "only" pricing in a 50% to 60% move based on last week's option trading right up to the stock halt, but that was merely a snapshot and you can't use the math as gospel. That's what we are seeing here in Medarex with a less certain date. Talk about time value.
We'll be following up on this one as we get closer and closer and as we see more news and research this year. We operate on a two-way street so any outside data or information that is factual or able to be confirmed will be welcomed. This was one we initially saw 10 days ago in a preliminary option screen, and constantly look at many of these to see if there is value that can be added.
Source: 247WallSt.com
RELATED READING:
- Medarex: a Developing Monoclonal Antibody Story
- Dendreon's Stock Activity Ahead of FDA Review
- Dendreon: Trading Strategy Ahead of FDA Review
_______________________
24/7 Wall St.
When traders made bets and saw a move of more than 200% at one point on Friday in Dendreon (DNDN), this is the sort of news that can get biotechs with upcoming events (and even some of the old dead biotech zombies) going. Don't be shocked when you look back to Friday or even over the next two weeks as traders are parsing through trades to find what could be the next mover like Dendreon (DNDN). Before reading further, understand that trying to look for a 200% gainer is not the norm and trying to predict a gain or loss of anything remotely close to this in a biotech company is one that even industry and corporate insiders have charred their fingers on many times.
But what can be done is looking out on the horizon as far as options trading and open interest is telling you, and this will at least give a shot to see where some of the smart money and aggressive traders are placing some bets and where they see a big potential move down the road. Medarex Inc. (MEDX-NASDAQ) is one of those names as one of the upcoming biotech review stocks to watch. This is already a battleground stock as traders have placed bets in favor and against this name, just like they did in Dendreon, and the short interest has risen. The company's financials have been left off for a space-saving since this is already a long note, but they have ample operating capital and partnerships that should keep them going for years. The short interest grew from 13 million shares in February to 16.7 million in March, and its market cap is almost $1.6 Billion. At a $12.72 close MONDAY, shares are in the middle of a $8.51 to $16.23 52-week trading range; shares have been significantly higher and lower over the last 10 years and more.
The one thing that may be different in Medarex (MEDX) is that if any its candidates turn out to be duds, they have a substantial pipeline and a broad group of diverse partnerships that may generate revenues on an ongoing basis. As you will see later, the partners are impressive and they are in Phase II and Phase III in more than one candidate. Its primary focus is in monoclonal antibodies to make potential drug development much faster and less expensive. Cancers are the primary targets here, but if you read on you will see they have many other targets as well. The company has two kep approaches: (1) collaborative partnerships with partners to jointly generate, develop and commercialize human antibody products (more than a dozen collaboration partners as of 2006); (2) out-licensing partnerships to license its human antibody generation technology to partners in exchange for license fees, milestone payments, and royalties (claims two dozen partnerships here). MEDX lists Abbott (ABT), Amgen (AMGN), Centocor-J&J (JNJ), Eli Lilly (LLY), MedImmune (MEDI), Novartis (NVS), Novo Nordisk (NVO), Pfizer (PFE), and Schering Plough (SGP) as partners as of 2006. Here is the list:
MDX-010 Phase III for Melanoma and other cancers with Bristol-Myers Squibb (co-promotion/profit share); was granted "Fast Track" designation in 2004:
- CNTO 148 & CNTO 1275 for inflammation both in Phase III with J&J's Centocor (milestones/royalties).
- HuMax-CD4, CD20, and EGFR in Phase III's for cancers and lymphomas with Genmab/Serono (equity interest).
- MDX-066 and MDX-1388 in Phase II for C. difficile Disease with MBL (co-development).
- MDX-060 in Phase II for Hogdkins and other lymphomas (wholly owned).
- AMGN Antibody #1 in Phase II for undisclosed treatment with Amgen (milestones/royalties).
- MDX-018 in Phase I/II for undisclosed treatment with Genmab (co-development).
- CNTO 95 in Phase I/II for Cancer with J&J's Centocor (milestones/royalties).
The company also has numerous PHASE I studies going on (partner name, then treatment indication): Celldex for cancer, wholly-owned study for Ulcerative Colitis, PharmAthene for Anthrax, MedImmune for Lupus, Ono Pharma for cancer, Novartis for Autoimmune diesease, more undisclosed studies with Amgen and with Eli Lilly, Bristol-Myers for cancer, Imclone for cancer, and more partnerships or wholly-owned candidates.
Medarex has upcoming presentations May 2-4 at the Morgan Stanley Global Healthcare Unplugged Conference and May 22-27 at the Citigroup Healthcare Conference. It has also recently begun a Phase I clinical trial for the potential treatment of Psoriasis and just last week noted some positive activity in its primate study to potentially treat Anthrax. Anthrax is a potential win for the company, but its pipeline in Phase II & Phase III studies is what you want to focus on. A number of these could become blockbuster drugs, and Medarex operates as a royalty company that would collect fees if these go to market.
2007 is the potential pivotal year, because it has two BLA's to be filed this year and next and has numerous updates coming in Phase I and Phase II trials (plus all of the preclinical candidates). This isn't without problems: it is in need of some steadiness in leadership and in its SEC filing history. We should have more detailed information on its phase II & III studies for melanoma later this year. The pop up in the stock from the Anthrax preliminary results was probably magnified because traders saw Dendreon go up 200%, but this stresses the forward "wild cards" that can be catalysts. The problem is that the data, filings, and news may come "later this year" or any of it can be delayed. Traders are betting on "later this year" if you look at the options open interest.
The May CALLS had over 50,000 contracts in the open interest and the same PUTS were only about 28,000 spread out. It is quiet for the summer and in NOV07 PUTS/CALLS, but if you go out to JAN2008 you will see that the bets are on. And they are on big time. Look at the JAN2008 open interest levels:
JAN $12.50 CALL 60,061 contracts / JAN $7.50 PUTS 19,683 contracts
JAN $15.00 CALL 39,065 contracts / JAN $10.00 PUTS 14.869 contracts
JAN $17.50 CALL 84,943 contracts / JAN $12.50 PUTS 42,187 contracts
JAN $20.00 CALL 9,376 contracts / JAN $15.00 PUTS 19,122 contracts
An at the money straddle ($12.50 strikes) out to JAN08 would run you roughly $5.65 right now, so you don't have to claim where you think the stock will trade in 8 months to be able to recognize severe volatility is being priced into the stock. The "positive Anthrax news" was not priced ahead of time in last Friday, but that isn't even one of the immediate candidates that could be the homerun or flop that traders are betting on.
We can't predict that the price action will be anywhere close to Dendreon's move. It would be reckless. But what is fair to say is that if you look at the open interest in the JAN08 PUTS & CALLS then you will be able to tell that there are many bets that Medarex could see some of the same sort of anticipated action. DNDN was "only" pricing in a 50% to 60% move based on last week's option trading right up to the stock halt, but that was merely a snapshot and you can't use the math as gospel. That's what we are seeing here in Medarex with a less certain date. Talk about time value.
We'll be following up on this one as we get closer and closer and as we see more news and research this year. We operate on a two-way street so any outside data or information that is factual or able to be confirmed will be welcomed. This was one we initially saw 10 days ago in a preliminary option screen, and constantly look at many of these to see if there is value that can be added.
Source: 247WallSt.com
RELATED READING:
- Medarex: a Developing Monoclonal Antibody Story
- Dendreon's Stock Activity Ahead of FDA Review
- Dendreon: Trading Strategy Ahead of FDA Review
_______________________
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