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To: kenhott who wrote (29828)	1/15/2009 3:21:14 PM
From: kenhott	of 40320

Still reading about CYPB... "We (CYPB) exercised our option to co-promote milnacipran and will detail to rheumatologists, pain centers and physical medicine and rehabilitation specialists in the U.S. when and if milnacipran is approved by the FDA. " FRX reimburse to CYPB FRX's equivalent costs to the 25% detailing." $205m upfront/milestones. $45m paid. Not too much for NDA approval. Most of reminding tied to sales. Up to add'l $45m if FRX gets other indications/sales. "Forest Laboratories also assumed the future royalty payments due to Pierre Fabre and the transfer price for the active ingredient used in milnacipran."

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To: Biomaven who wrote (29789)	1/15/2009 5:07:25 PM
From: tuck	of 40320

Peter, DNA missed by a penny today, and AH it's down to $84 or so. If the deal goes through at $89 or somewhat north of there, that's at least a good $5. Since all written calls above a deal price would go flat on a cash munch, regardless of expiration date, it would make sense to sell the 2011 leaps, no (as opposed to 2010s)? One should be able to get about 3 bucks for those, but the spreads are really wide, so hard to be very precise (one would have to probe with your bids to find where the real price is; starting on the high side and going lower until it fills). One should be able to collect at least 8 to 9 per cent on this play, and the faster it closes, the better the annualized return. It seems pretty safe even if the deal does not go through. Of course, if the DNA board manages to wring a bit more out of Roche and its bankers, it's even better. Anybody actually doing this? Throw in some leverage (margin yourself out to the max); you're talking really big bucks! That last was typed by a homeless former Lehman trader who is crashing at our house, pay no mind. Cheers, Tuck

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To: tuck who wrote (29842)	1/15/2009 5:23:53 PM
From: Biomaven	of 40320

Last time I checked the 2011 leaps barely returned more than the 2010, although it was hard to tell because the spreads were so wide. Basically nobody wants to buy these critters (for just the reason you mentioned), so expect to get absolutely creamed trying to write them. One key question is what happens if the deal fails? Then the stock might go down but the leaps might go up because the IV's would rise substantially. So you might lose on both ends of the transaction. I guess I'd be inclined to stick with the more conservative 2010's, where they would probably stay flattish if the deal fell through and the stock price declined. Peter

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To: Robohogs who wrote (29845)	1/15/2009 7:31:34 PM
From: Biomaven	1 Recommendation of 40320

Jon, I see two conflicting issues at play here: 1) We have the folks running around screaming "Wall Street bailout" who would clearly like to stick it to the banks' shareholders to the extent possible. 2) We have the folks at Treasury who want to be saying "Nothing to see here people - move along please" to all the people gawking at any potentially collapsing banks. The last thing they want to do is anything (like forcing banks to halt their preferred dividends) that makes the banks look more rickety than they actually are. Who wants to put their savings in a bank that couldn't afford to pay its preferred dividend? In the case of BAC, the Feds are going to have to pony up more billions to rescue the ML buyout. They aren't going to be imposing more conditions on what BAC can or can't do. It's not a cap-in-hand rescue - it's more like a hold-up. So bottom line I really don't see the BAC preferred at risk here and I'm holding. Peter

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To: Robohogs who wrote (29845)	1/15/2009 8:06:37 PM
From: IRWIN JAMES FRANKEL	1 Recommendation of 40320

>>They can change these clauses in Tarp II OR there is also a provision in Tarp I that they govt can unilaterally make changes based on law (i.e., Congress can unilaterally change it). I think Cramer is worried about the former but I ask what is to stop the latter? IJ? I haven't read the statute. But it is long enough that there is no telling what lawyers will make of its provisions. No doubt Congress could pass further limitations applicable to the prior loans but those would face Constitutional vetting. But then what bank wants a fight with Barney Frank? They might prefer to just repay the loans than face onerous terms even at the cost of contracting their lending and selling off assets. Congress will soon be solidly controlled by the same party whose leaders (Frank, Summers, Obama) are espousing harsher terms for supporting the banks. It would be comic if it were not so serious. We infuse $250B into the banks and then we start threatening them with further restrictions and the cancellation of portions of the trillions of mortgages already outstanding - more than wiping out the infusion. Just when we need carefully coordinated policies we get brain-damaged self-mutilating behavior. Few money center banks will successfully run this Congressional gauntlet if the Democrats in power continue the recently articulated approach to banking. ij

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To: Biomaven who wrote (29844)	1/15/2009 8:40:15 PM
From: tuck	1 Recommendation of 40320

Yeah, Peter, And the other problem is the IV is silly low for all the DNA options. You aren't getting paid much for the risk of the deal failing. Of course, looked at the other way, it implies the smart money thinks the deal will go through. One issue is the low interest rates these days. As I'm sure you know, but for the benefit of others who don't, LEAPs are more sensitive to interest rates than shorter series options. The higher the interest rate, the higher the time premium. So ideally, one would want to sell LEAPs in the expectation of falling interest rates. Obviously, they can't go much lower, if anything they'll go higher. But before the deal is done? Just a crap shoot versus the time premium decay. The IVs really start to sink after February expiration, so apparently the smart money thinks the deal is done by then, though OI is highest in March. Either way, if that's so, the annualized rate of return on this play is pretty darn good. I also note OI in the options is about even for January -- with the $85 strike looking pretty good for max pain theorists -- but the OI in calls drastically outweighs that of puts in all other series. I bought a few shares of DNA after hours. Tomorrow I'll probe the LEAPs. I'll let you guys know how it turns out. If I can get filled in the middle of the range, it might be worth doing. There is open interest, and a smidge of volume in the 2010s. Didn't see any volume in the 2011s today, though. Cheers, Tuck

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