by Ian Harvey
November 25, 2019
The Medicines Company shares reached a record high Monday after the cholesterol drug maker reached a $9.7 billion takeover deal with Swiss pharmaceutical giant Novartis AG.
“Stock Options Made Easy” “Armchair Traders” members were already up 136% potential profits. But, after the market opened Monday this P.P. jumped to 362%.
See where to now for The Medicines Co.!
Swiss drugmaker Novartis AG (NYSE: NVS) is betting on heart drug prospect inclisiran in a $9.7 billion takeover of The Medicines Co as it challenges cardiovascular medicines from Amgen Inc, Sanofi and Regeneron Pharmaceuticals.
Novartis is paying $85 per share in cash, a 24% premium over The Medicines Co's closing price of $68.55 on Friday, to acquire the U.S. biotechnology company's lone drug, the cholesterol-lowering injection inclisiran.
The Medicines Co. shares surged 22% in pre-market trading Monday following news of the deal to indicate an opening bell price of $83.50 each, just shy of the Novartis offer but an all-time high that values the group at more than $9 billion.
After the market opened the stock hit a high of $84.10. At close of the day the shares were up 22.25% (+$15.25), to settle at $83.80.
Prior to the offer.....
At the time the trade was based around the upcoming earnings report.
The Recommended Trade on The Medicines Company.....
“Biopharmaceutical concern The Medicines Company (NYSE:MDCO) will report earnings tomorrow, Wednesday, October 30, before the market opens. The report will be for the fiscal Quarter ending Sep 2019. Analysts' expect an EPS forecast for the quarter of $-0.84. The reported EPS for the same quarter last year was $-0.74.
MDCO shares have quietly rallied nearly 200% in 2019 so far, and the stock's recent pullback could be an opportune time to jump in on the next leg higher, if history is any indicator.
The Medicines Company stock touched an all-time high of $58.48 on October 22, taking out its former April 2017 peak of $55.95. Since then, however, MDCO shares have pulled back to within striking distance of their 30-day moving average. Over the past three years, similar dips to this trendline have proven to be buying opportunities for bulls, therefore the call trade.
The Medicines Company stock has moved higher the session after all of the firm's earnings reports so far in 2019. Over the past eight quarters, MDCO has moved 2.2%, on average, the day after earnings, regardless of direction. This time around, the options market is pricing in a much bigger move of 15.1%, per at-the-money implied volatility data......read more.....”
** OPTION TRADE: Buy the MDCO JAN 17 2020 65.000 CALL at approximately $4.20.
YOU NEED TO BE IN TO PROFIT!
The Earnings Report…..
The Medicines Company reported third-quarter 2019 loss of 92 cents per share, wider than the Zacks Consensus Estimate of a loss of 84 cents and the year-ago loss of 74 cents. The reported loss includes share-based compensation and other non-cash items. Adjusted loss for the quarter widened 2.8% year over year to 72 cents per share.
The Medicines Company’s shares fell 4.7%, following the earnings release on Oct 30. However, shares of the company have soared 186.5% so far this year against the industry’s decrease of 0.9%.
Rumors of a Deal…..
About a week ago the Medicines Company attracted takeover interest from suitors including Novartis AG.
The stock surged as much as 26%, the biggest intraday gain since 2010.
Novartis said its main target in the acquisition was Medicines Co.'s cholesterol specialty drug inclisiran, which Novartis CEO Vas Narasimhan called a "potentially transformational medicine that re-imagines the treatment of atherosclerotic heart disease and familial hypercholesterolemia."
The drug had successful results in late-stage clinical trials which found it could be an "important and promising potential therapy option" in patients with an inherited form of hypercholesterolemia.
The medicine could become one of Novartis’s biggest sellers and help boost profit margins in the company’s innovative drugs division to a percentage in the mid- to high-30s in the medium term, Narasimhan said on a call with investors Monday. “There’s also significant upside potential” with the asset, he said.
At 11 times consensus 2023 sales, Novartis appears to be paying a high price relative to recent deals. The $9.7 billion valuation is on a fully diluted basis, including convertible debt and stock options.
Both companies expect the deal to close in the first quarter of 2020.
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The questions remain......Where to now for The Medicines Company ?
What is the plan for members still holding options on The Medicines Company?
Will we recommend another options trade on The Medicines Company?
Should we look at Novartis?
What will “Stock Options Made Easy” advise members to do?
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!