writser Posted April 9, 2018 Share Posted April 9, 2018 Novartis today announced it will take over Avexis for $218 / share (currently trading around $206). Avexis is a gene therapy play - it was the target of a Citron piece two years ago (link). That was with the stock trading around $50. So I understand that this name could be controversial and that there is significant downside if the deal breaks. Novartis will commence a tender offer no later than April,17. Deal is expected to close in 'mid 2018'. Novartis can extend the deal deadline to October, 6 if they increase the deal price to $225 under 'specified antitrust related circumstances'. I can't imagine there would be antitrust issues with a big Swiss player buying a speculative drug pipeline (unless the Novartis CEO has insulted the Donald in the past ..). Novartis seems to agree, they pay Avexis $400m+ if they fail to get regulatory approval. Novartis can easily finance this deal and I assume they did some DD. The price seems too good for AVXS shareholders to turn down (and only 50% tender required). Based on my limited information I'd say the chances of the deal closing are huge. I don't understand why the spread is currently ~6%, IRR seems decent until closing so I bought a few shares. This all after my customary 5 minutes of research. At this point the information available is very limited anyway. What am I missing? Am i misjudging antitrust issues? Are there pending medical trial results or whatsoever that could influence this merger? Deal looks attractive but I'm not sure what my edge is here .. Small position. Novartis letter: https://www.novartis.com/sites/www.novartis.com/files/novartis-media-release-avexis-en.pdf Investor presentation: https://www.novartis.com/sites/www.novartis.com/files/avexis-investor-presentation.pdf Link to comment Share on other sites More sharing options...
writser Posted April 9, 2018 Author Share Posted April 9, 2018 Sold for a small gain. Around $211.50 it's maybe still on the cheap side but not nearly as attractive as it looked around $206 - especially given my limited knowledge / low conviction. The daytrader strikes gold again .. Not uncommon for mergers to trade up slightly just after the merger announcement. Link to comment Share on other sites More sharing options...
valueyoda Posted April 9, 2018 Share Posted April 9, 2018 Sold some May $190 puts this morning, as a low risk cash alternative. Link to comment Share on other sites More sharing options...
given2invest Posted April 10, 2018 Share Posted April 10, 2018 This is a very good idea. The MAC is as iron tight as anything I've seen (came out after the close). Literally nothing can let NVS walk absent actual fraud. Pays 3.5% gross for 45-60 days. Link to comment Share on other sites More sharing options...
writser Posted April 10, 2018 Author Share Posted April 10, 2018 Yeah, that info wasn't out when I was looking. I'll have a look today. Link to comment Share on other sites More sharing options...
writser Posted April 10, 2018 Author Share Posted April 10, 2018 Seems like today's price reflects the extra information. 2.5% in 3 months or something, probably decent but not really what I'm looking for. Link to comment Share on other sites More sharing options...
writser Posted April 17, 2018 Author Share Posted April 17, 2018 Stock drifted down a bit yesterday. Today the tender offer was announced. The tender will expire on May, 14th and is conditional upon 50% of shares being tendered and HSR antitrust. The official tender offer statement isn't out yet, but if this is a simple cash tender offer without a second traded line or other shenanigans then a 3% return in a month seems very juicy. We'll see where it trades today. Link to comment Share on other sites More sharing options...
given2invest Posted April 17, 2018 Share Posted April 17, 2018 The spread is fantastic. Should be half of what it is (1% gross yield not 2%). Link to comment Share on other sites More sharing options...
Guest roark33 Posted April 18, 2018 Share Posted April 18, 2018 Not really following closely, any reason for the decline today? Link to comment Share on other sites More sharing options...
given2invest Posted April 18, 2018 Share Posted April 18, 2018 Not really following closely, any reason for the decline today? BAML out with a really lame "short" report saying risk reward is there to short it for the lotto ticket that it breaks either from anti-trust being a hiccup (they don't have a reason it will be) or a MAC being triggered 90+ days from now while anti-trust is still outstanding which gives them a pass to walk via anti-trust loophole. It's a lame report and I will add if it gets to 205. Link to comment Share on other sites More sharing options...
Guest roark33 Posted April 19, 2018 Share Posted April 19, 2018 Although the tender period closes on May 14, this does not mean that the deal will be done that soon and that date will determine the payment of the $218 price. Link to comment Share on other sites More sharing options...
valueyoda Posted April 19, 2018 Share Posted April 19, 2018 implied vol on the 180-200 May puts is too high in my opinion, offering a very appealing short term income opportunity. Link to comment Share on other sites More sharing options...
given2invest Posted April 19, 2018 Share Posted April 19, 2018 implied vol on the 180-200 May puts is too high in my opinion, offering a very appealing short term income opportunity. it's very odd. only way those pay off is if major AE's happen in the trial. anti-trust 2nd request won't send the stock to that level. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted April 20, 2018 Share Posted April 20, 2018 Although the tender period closes on May 14, this does not mean that the deal will be done that soon and that date will determine the payment of the $218 price. Can you elaborate on what exactly you mean here? If you mean that (assuming the tender conditions are met) payment won't be made to tendered shares until the takeover is complete, I believe that you are wrong. Link to comment Share on other sites More sharing options...
Guest roark33 Posted April 23, 2018 Share Posted April 23, 2018 I am saying that the other conditions to the merger, HSR approval, etc, may not be complete when the tender offer period closes on May 14. This may have been obvious, just thought I would point it out. Link to comment Share on other sites More sharing options...
Guest roark33 Posted April 23, 2018 Share Posted April 23, 2018 This is an interesting 13D, back and forth on the sales.... https://www.sec.gov/Archives/edgar/data/1165408/000090266418001994/p18-0992sc13d.htm Link to comment Share on other sites More sharing options...
given2invest Posted April 23, 2018 Share Posted April 23, 2018 This is an interesting 13D, back and forth on the sales.... https://www.sec.gov/Archives/edgar/data/1165408/000090266418001994/p18-0992sc13d.htm Yah, don't see stuff like this very often. Importantly they made it huge post deal. Link to comment Share on other sites More sharing options...
writser Posted April 23, 2018 Author Share Posted April 23, 2018 implied vol on the 180-200 May puts is too high in my opinion, offering a very appealing short term income opportunity. it's very odd. only way those pay off is if major AE's happen in the trial. anti-trust 2nd request won't send the stock to that level. Yeah, seems like the market is a) wrong or b) pricing in some bad medical stuff (e.g. trial results). Because apart from that this basically seems a done deal to me. I really don't see antitrust being a dealbreaker (does somebody disagree with me?). And given the interest from multiple parties I'd assume that the value of their pipeline is relatively robust (i.e. won't implode after one trial). I bought a few shares. Way too hard for me to judge their actual research so I'll keep this a small position. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted April 25, 2018 Share Posted April 25, 2018 Some clinical data out this morning. https://www.fiercebiotech.com/biotech/novartis-bound-avexis-posts-early-look-at-data-from-pivotal-sma-gene-therapy-trial Also, Novartis has a new CEO. He is probably quite motivated to not have his first big deal fall apart. https://www.bloomberg.com/news/articles/2017-09-04/novartis-names-narasimhan-ceo-after-jimenez-retires-next-year Link to comment Share on other sites More sharing options...
given2invest Posted April 25, 2018 Share Posted April 25, 2018 Some clinical data out this morning. https://www.fiercebiotech.com/biotech/novartis-bound-avexis-posts-early-look-at-data-from-pivotal-sma-gene-therapy-trial Also, Novartis has a new CEO. He is probably quite motivated to not have his first big deal fall apart. https://www.bloomberg.com/news/articles/2017-09-04/novartis-names-narasimhan-ceo-after-jimenez-retires-next-year NVS was made aware of that data pre-announcement so no surprise there. We should know Monday if they get a 2nd request from HSR. If so, stock will go down a lot but will be a buying opportunity. I'm long. Link to comment Share on other sites More sharing options...
Guest roark33 Posted May 1, 2018 Share Posted May 1, 2018 HSR waiting period expired, with this news, probably close shortly after may 14. Link to comment Share on other sites More sharing options...
Hielko Posted May 1, 2018 Share Posted May 1, 2018 Still a decent IRR if you model a close one week after the expiry of tender offer IMO Link to comment Share on other sites More sharing options...
writser Posted May 2, 2018 Author Share Posted May 2, 2018 Pricing is now more in line with what I'd expect. I am left wondering whether this was actually mispriced or whether I underestimated the risk of regulators messing with this deal. I guess the truth is somewhere in the middle. I still own a few shares, as Hielko pointed out it still looks moderately attractive. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted May 2, 2018 Share Posted May 2, 2018 I just sold my tiny position as it no longer meets my IRR threshold. Link to comment Share on other sites More sharing options...
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