Friday, December 23, 2011

Year End Adjustments and Pharmasset

As the year end approaches, it’s time to trim the weeds. I’ve been selling positions that I have losses to offset the gains for the year. It’s also a good strategy as it forces me to dump the laggards and prepare for a fresh start to the New Year.

Right now, I just have just one arb position and that is in Pharmasset Inc. (Ticker: VRUS), which is in the process of being acquired by Gilead for $137.00 per share in cash via a tender offer. The spread remains large as the market was spooked by high liver toxicity results in a phase two trial for PSI-938 for hepatitis C, which resulted in a halt to the clinical trial for PSI-938. This does not in anyway affect the merger agreement as Gilead is purchasing Pharmasset for their lead hepatitis C drug, PSI-7977. The clinical data for PSI-7977 has been clean, but the market as always over reacts.

The next market moving news for Pharmasset will be the HSR approval from the FTC. According to the proxy statement, Gilead filed for HSR approval on or prior December 15th, which means that they should know by December 30th. I would expect a press release on the HSR status in early January since they are unlikely to do anything much over the weekend / holiday.

Receiving HSR approval (early termination of review) is a must for a January closing. I do not for see any anti-trust issues. The hepatitis C market is very competitive right now with several major players such as Merck (Ticker: MRK), Vertex (Ticker: VRTX), Roche (Ticker: RHHBY), etc…. Gilead wants this deal done as fast as possible based on their tender offer route. I have a strong conviction on this merger arb play and see this as a very good risk / reward opportunity.


At January 10, 2013, Anonymous Anonymous said...

Was wondering what your yearly profits (or losses) were for 2011? Might be buried in another post so I'll keep reading. Great blog!

At January 10, 2013, Blogger Money Turtle said...

My 2011 return was - 4.4% so not a good year.


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