No, today's NOT the day to go buy another biotech in search of the next Receptos (RCPT).
I am being deluged with thanks for recommending Receptos for the last 130 points and for that I am most grateful. I have liked Faheem Hasnain and believe in Ozanimod as the pipeline within a drug with remarkable prospects for all sorts of inflammation and immunological illnesses, including possible best in class work on MS, Ulcerative colitis, irritable bowel and Crohn's disease.
I think it is worth every penny of the $7.2 billion that Celgene (CELG) is spending and anyone just looking at the 12% premium from where the stock went out last night is simply not getting the fuller picture: this stock has been going higher for months now, as the data kept leaking out about the superiority of the drug's profile. There are three tests going on for a multiple of indications, and as they get closer and closer to completion it's certain that this one will be a blockbuster.
I thought it was interesting that Celgene thought this drug could be $6 billion without a Crohn's diseases indication.
All that said, the idea of finding the NEXT Receptos today and buying shares in the NEXT Receptos today -- something that i am being besieged to do -- is just plain stupid and I am not going there.
These stocks, including all that I have liked of late, such as Radius Health (RDUS) and Alder Biopharmaceuticals (ALDR) for osteoporosis and migraines respectively, will be up so much today that even potential acquirers will say "no thanks, I don't need it that bad."
And that's the phrase you must know. Even as Celgene guided up earnings huge in addition to making the announcement of the buy of Receptos, lots of buyers of Celgene today are short-coverers who were simply betting that Celgene, even after all of these different buys and stakes in companies, still was too dependent on Revlimid. That is a wonder drug with eventual patent issues, that could be and are being challenged by generic companies as well as even hedge funds betting on Celgene losing protection for its biggest blockbuster.
This is how Celgene could rally as much as it did on this acquisition -- an addition equal to the cost of Receptos. It was perceived as desperate despite all of that amazing earnings power, including the $13 number put out for 2020.
But no one else is in a situation like Celgene. Sure, Gilead (GILD) has plenty of cash from its amazing Hep C cure and it's on the prowl. Merck (MRK), Pfizer (PFE), and most definitely Action Alerts Plus charity portfolio holding Johnson & Johnson (JNJ) SHOULD be on the prowl, especially given Celgene's advance and the run even Abbvie (ABBV) had for its severe overpayment for Pharmacyclics.
The fact is, though, there will be better days. These stocks always have their swoons. Always. You buy them on the day after a gigantic takeover bid, and you almost always get skunked. It would be better if you SOLD them than bought them.
So with those cautionary words I am going up to Deliver Alpha for my other job, an interview with Bill Ackman and Nelson Peltz, where I hope we can break some news and re-define activism as a way to make money for all.