Two takeaways from the recent news
Posted: Wed Apr 25, 2018 12:27 pm
First, It seems JNJ has finally updated their clinical trial site. It was said this was done to coincide with JNJ's call or Geron's shareholder meeting, and that possibly may be true, but more likely it seems, as Geron said it would happen in the 2nd quarter, the trial has finally hit the pre-specified number of deaths - whatever that number is. It seems very positive that the OS details are moved up in significance to "key secondary endpoint" and that the trial moved from suspended to "active". I'm just not sure JNJ will be able to fully evaluate the data of the trial in time for Geron's shareholder meeting, and certainly not in time for their own call.
Second, the drop in shorts concerns me. My background is running a trading desk and managing money. Seeing the run-up in shorts to 44 million, then back down 9 million tells me two things. First, word got out that Geron was going to execute their shelf offering (hence the pop in shorts anticipating shares to hit market), then second, they did indeed sell shares in the market (bought back by shorts), probably their $50MM shelf, and the short number dropped back in alignment near the 34MM mark. I'm not sure it's true, but an educated guess. If it is true, that was a crappy execution and Geron should find a different investment banker that doesn't let the word out to shorts in advance. If the shelf was indeed done, it's a positive that the overhang is behind us. It is also possible 10MM shorts added to their positions on the pop from $3.50 to $6.50 and covered perfectly on the drop. Though, 10MM times $4 comes pretty close to the shelf amount. Time (shareholder meeting?) will tell if I'm right, maybe I'm not.
I have told people it looked 65-80% in my eyes that JNJ would continue and affirm their partnership, but if I am right, why would Geron execute their shelf? Probably because the share price popped recently and it looked like a decent time to raise capital ($50MM), however, if they felt JNJ was continuing, why in the world would they execute their shelf at lower levels (assuming a soon-to-be JNJ agreement boosts the stock)??? That makes no sense to me and tells me Geron isn't sure that JNJ is indeed a done deal. If JNJ doesn't continue, Geron would need the money to cover the MDS P3 trial. The confirmation bias side in me says they raised the money because they do in fact think JNJ continues with their deal and Geron wants to also opt in on their side and will need some additional capital on top of another $65MM for multiple clinical trials (which they share costs) and a sales team. Wishful thinking...
I still believe JNJ does want the drug and the deal, but interesting times...
P
Second, the drop in shorts concerns me. My background is running a trading desk and managing money. Seeing the run-up in shorts to 44 million, then back down 9 million tells me two things. First, word got out that Geron was going to execute their shelf offering (hence the pop in shorts anticipating shares to hit market), then second, they did indeed sell shares in the market (bought back by shorts), probably their $50MM shelf, and the short number dropped back in alignment near the 34MM mark. I'm not sure it's true, but an educated guess. If it is true, that was a crappy execution and Geron should find a different investment banker that doesn't let the word out to shorts in advance. If the shelf was indeed done, it's a positive that the overhang is behind us. It is also possible 10MM shorts added to their positions on the pop from $3.50 to $6.50 and covered perfectly on the drop. Though, 10MM times $4 comes pretty close to the shelf amount. Time (shareholder meeting?) will tell if I'm right, maybe I'm not.
I have told people it looked 65-80% in my eyes that JNJ would continue and affirm their partnership, but if I am right, why would Geron execute their shelf? Probably because the share price popped recently and it looked like a decent time to raise capital ($50MM), however, if they felt JNJ was continuing, why in the world would they execute their shelf at lower levels (assuming a soon-to-be JNJ agreement boosts the stock)??? That makes no sense to me and tells me Geron isn't sure that JNJ is indeed a done deal. If JNJ doesn't continue, Geron would need the money to cover the MDS P3 trial. The confirmation bias side in me says they raised the money because they do in fact think JNJ continues with their deal and Geron wants to also opt in on their side and will need some additional capital on top of another $65MM for multiple clinical trials (which they share costs) and a sales team. Wishful thinking...
I still believe JNJ does want the drug and the deal, but interesting times...
P