Discussion in 'Stocks' started by ironchef, Nov 28, 2019.

  1. ironchef


    BMY-RT is the contingency value right that was given to every CELG shareholder in the Cellgene buyout by BMY and is currently traded at NYSE.

    The CELG/BMY merger was closed last Wednesday. For every CELG share you received $50, 1 BMY share and 1 CVR (contingency value right). The CVR is currently listed @ NYSE ~$2 a share

    I am trying to figure out how to price the CVR. It acts like a binary option: If three CELG drugs currently on phase 3 clinical trial are approved within about a year, the payout is $9. If any one of the three fails to get FDA approval within the set period, the payout is $0. So the R:R is 2:9, all or nothing.

    Based on my research on the three drugs, two seemed to be a sure thing and the third is a timing issue. I took a gamble and bought some BMY-RT.

    Anyone here have any opinion or advice?
    jtrader33 likes this.
  2. ironchef


    BMY-RT $2.95 a share today.
  3. ironchef


    BMY-RT $3.00, ~ +40% in 4 weeks. I am done.
    jtrader33 and vanzandt like this.
  4. ironchef


    Hate to keep coming back to this puppy.

    I finally had a chance to read up on the three clinical trials. I think the first two each has a 90% probability of winning approval and the third perhaps a 70% if you factor in the time constraint of the option for a total expectancy of ~$5.7.

    Expiration of the CVR is 3-21, so add some time value? It is trading at $3.48 now. I am getting back in. :p
    vanzandt likes this.
  5. vanzandt


    Nothing wrong with knowing a stock intimately. That's where the money's at.
    ironchef likes this.
  6. ironchef


    I was actually not knowing and hope, by posting, someone more knowledgeable can comment and give me some guidance.
  7. Are you still in this position? I have the CVRs from the Celgene merger and was thinking of doubling down.
  8. ironchef


    Yes, still holding them after I did some more research.
    vanzandt likes this.
  9. Yes, I also did some research & found that the 3rd trial is still 50% which makes the whole deal 50-50. So basically at today’s price of $3.40 there is a 50% chance of making $5.60 per CVR or nothing. I doubled down but still a small position. I also found out that BMY could basically have bundled this in the deal but they chose not to, not a whole lot of info & transparency out there with regards to this and the CVR in general. But still worth being in the game I think.
    ironchef likes this.
  10. ironchef


    The third drug, bb2121 (ide-cel) indeed worked as intended.

    The questions are:

    1. Are the data compelling enough to get FDA approval? Yes. Risk: # of patients tested were small, but FDA approved other drugs in similar situation due to lack of treatment option.

    2. Is there enough time to get approval before march 31, 2021? Should be able to get it done in a year.

    3. Would BMY be dragging its feet so they can save a few billion dollars? This is the biggest risk in my opinion. The fox is guarding the hen house.
    #10     Feb 20, 2020