June 20, 2018 - 2:47pm EST by
2018 2019
Price: 46.00 EPS 0 0
Shares Out. (in M): 55 P/E 0 0
Market Cap (in $M): 2,529 P/FCF 0 0
Net Debt (in $M): -60 EBIT 0 0
TEV ($): 2,471 TEV/EBIT 0 0
Borrow Cost: Available 0-15% cost

Sign up for free guest access to view investment idea with a 45 days delay.



This is a timely short based on the rumor that Roche wants to buy TSRO.


A few things why I think it's unlikely TSRO will be bought in the near term:


1. TSRO is a highly manipulable stock when it comes to buy out rumors.  And this isn't the first time it's happened (specifically, false rumors that led to a spike in stock price that then quickly normalized).  The last time it happened was when this https://twitter.com/petersmithu?lang=en Check out the avatar photo of that TWTR account and it's incredulous that TSRO would move on something that is clearly a poor quality TWTR account.  On 5/22, this account tweeted about GILD being interested in TSRO and the stock went up materially (5+%).  On 6/13, the same account stated a deal will be done with TSRO by July.  TSRO went up ~1% when the S&P Biotech index was up only 25 bps.  I think part of the reason the stock is so manipulable is simply because so many want to believe that TSRO is a take-out target.


2.  I don't think it's a take-out target because Roche just bot FMI, and FMI is the diagnostic partner to a TSRO competitor called CLVS.  Of note, TSRO's diagnostic partner is MYGN.  It is much less rational for Roche to buy FMI to turn around and buy the wrong PARP (i.e. TSRO) vs Roche buying CLVS, which makes a lot more sense.


3.  CLVS is slightly cheaper (on EV) basis than TSRO.  Oh, and I would argue that CLVS has the potential best-in-class PARP drug out there.  Why pay up for a subpar PARP drug?


4.  Business development at big pharma is conservative.  If they make a wrong investment or bet, it could be career risk.  To that end, why would Roche be buying TSRO now when CLVS just recently launched their own PARP in the bigger disease (maintenance ovarian cancer)?  Most rational and conservative BD at big pharma will take some time and watch the drug launches and see how CLVS does before deciding whether TSRO or CLVS makes more sense as a take-out target.  It would be very unconservative to jump in front of the CLVS PARP drug launch in the big disease setting and buy TSRO and then realize that CLVS does in fact have the best-in-class drug AND Roche could have bought CLVS for CHEAPER.

This is not an investment but really a trade based on pattern recognition.  Short as much as you can now.  History will likely repeat itself.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


No take-out news (actual take-out news, not rumors) will see the stock grind down.  

    show   sort by    
      Back to top