A Cheap Biotech

I’ve pretty much done with the arb plays. I’m just waiting for Nova Chemicals (Ticker: NCX) and Legacy Reserves (Ticker: LGCY) to close. I’m still targeting a mid May closing for Nova Chemicals and looking for a price boost in Legacy Reserves (probably ~ $15 per share). I’m still kicking myself for not jumping into Sum Total (Ticker: SUMT), which received a higher bid today.

I’m back to sniffing around some cheap value plays. One of my favorites right now is Genzyme Corporation (Ticker: GENZ). The stock just sold off hard on an earnings disappointment and retested its recent lows. The company has reaffirmed its numbers for this year. It’s a nice double bottom formation and all the bad news is out. The market should start to anticipate the eventual approval of the 2000 liter Lumizyme bioreactor, which should occur around the end of June. Once this happens, this stock will easily hit $70 +. On another note, activist investor Ralph Whitworth of Relational Investors has taken a 6.9 million share stake in Genzyme. This guy doesn’t mess around and will press management to maximize shareholder value.

Legacy Reserves LP Arb Play

I picked up some Legacy Reserves LP (Ticker: LGCY) at $13.01 per share. This company received a “Going Private” proposal from Apollo Management for $14 per share. The company is evaluating the proposal and will make a recommendation in 2 – 4 months. Apollo Management is acquiring this company on the cheap and there’s a possibility that they will increase the bid. This company is paying out a dividend of $0.52 /share each quarter ($2.08 per year). If the deal takes awhile to close, there's also a likely hood of a dividend payout. I see minimal downside in this arb play.

Nova Chemicals Arb Play

I entered into a new arb play: Nova Chemicals Corp (Ticker: NCX), by picking up some shares at $5.84. This company is being acquired by International Petroleum Investment Corp (IPIC) for $6.00 in cash. The shareholder vote is scheduled to take place on April 14th with an expected closing by April 30th. If the deal closes by April 30th, we’re looking at an annualized return of ~ 35%. This looks like a fairly solid deal as opposed to Forsys Metals (Ticker: FOSYF.PK), where there has been a lot of talk and no action.