Esta dicho pero : GNOM
Saturday, 14 July 2012
As Roche Wants in on DNA Sequencing, Complete Genomics is Next on Their Radar
Roche recently offered $6.7B to shareholders of Illumina Inc. (ILMN) for their DNA-sequencing technology that the world’s biggest maker of cancer drugs desires in order to tailor their drugs for their customers. As that bid failed, rumors of the Swiss company's focus moving on to Complete Genomics (GNOM) has heated up after a paper published in the scientific journal Nature describes the accuracy of the company's Long Fragment Read (LFR) technology which will result in accelerated use of whole genome sequencing by physicians in order to diagnose and treat their patients.
Roche's rumored takeover of GNOM would be a natural step for the company to take as a buyout price on GNOM of $7.50 would be a significant premium over GNOM's closing price on Friday of $2.44 and would cost the company only around $250M as opposed to the over $6B offered to Illumina. As GNOM's business is currently in the growth phase, Roche would incur losses in the DNA-sequencing division for a few quarters until scale was reached, but it would gain access to their technology immediately and for much less cost than the takeover of Illumina.
Rumors of the GNOM buyout plans started in April after the Illumina deal was rejected, but have heated up this week after the Nature paper and how the stock has traded over the last few days. Recent speculation includes a buyout between $215-$250M and one in excess of $250M, valuing the stock at over $7 as there are just under 34M shares outstanding. An analyst from WSJ.com proclaims a $15 target price on GNOM.
An excellent comment from the investor speculating over a buyout in excess of $250M:
"Roche tried to take Illumina by means of a hostile bid and failed. It is clear, Roche wants to incorporate DNA sequencing into its business. Illumina has over a 5 billion dollar market cap. A buyout would cost at least 7.5 billion dollars (or more)!! Wow!!
Now that GNOM has announced they have a higher quality and more accurate way of DNA sequencing, I see Roche as a suitor and I am not ruling out a bidding war. Even Illumina may try to bid for GNOM so they can eliminate the threat. As for the lawsuit that Illumina has filed against GNOM, I am convinced it is nothing more than a stall tactic. Unfortunately, we will have to wait unit this lawsuit is sorted out before Roche will make a bid. Or, Roche may send in their legal team to investigate whether or not Illumina has a case. Considering GNOM has the better product, I don't see Illumina's case? It is a stall tactic! I'll explain....
Roche buying a DNA sequencing company (with better and more accurate technology) is a SERIOUS threat Illumina. Roche is a multi-billion dollar company with unlimited amounts of cash on hand. Once GNOM's technology is in Roche's hands, Illumina will quickly fade into the darkness. How can you compete with Roche when they have a higher quality product and unlimited price control?
Here are a few things to consider with Roche taking over GNOM:
1) Roche has a massive highly skilled marketing team. They will take GNOM's product to places GNOM only dreamed of.
2) Roche is a very trusted name in the medical industry. Most phyician will choose Roche because they are familiar with the name.
3) Roche has major connections in the medical industy. Physicians, health care systems, insurance providers which could push for the more accurate company (it's not Illumina).
4) Better pricing control. Roche could give the service away for years just to put Illumina out of business. Won't be the first time a company has done this. Or, Roche will reduce the price so that it beats Illumina's cost triggering physicians to go with Roche and not Illumina.
5) R & D. Roche has the cash to improve this technology and the products that administer it.
6) Roche has access to the best physician and scientists available. Talent makes a company successful.
7) Roche has world wide exposure and world wide distribution.
I'm buying blocks of 500-1000 shares on dips. I am confident GNOM will be taken by Roche. As far as price goes, I think 250-300 million will be the first bid (maybe the last). That is more than a triple people. Now lets just wait and see where this lawsuit goes. I think it is nothing more than a stall tactic by Illumina because if Roche buys GNOM, Illumina is burnt toast! I wouldn't be surprised if Illumina just forks out 300-500 million just to stomp out the threat. Of course Roche could bid higher. Or another company may join the bidding as well.
Strong buy for an inevitable takeover!!!"
An interesting comment regarding the stealthy accumulation of GNOM shares in preparation for the buyout is as follows:
"They are liquidating into the hands of Roche for a buyout per their organized agreement that we will soon be privy to.
You have to understand the history of Charles Waite and Orbimed. They are the venture capitalists who dumped millions, maybe hundreds of millions into GNOM for several years before it went public.
As the company is now coming to an agreement with Roche, Waite and Orbimed make these side deals with Roche so they can acquire significant chunks of stock without sending the stock price through the roof a la ROSG. Then they can acquire a smaller amount of stock on the open market after announcing the deal. In the meantime the stock price remains low where some of the stock acquired is from Waite, the rest is from poor longs who gave up too soon. Waite and Orbimed win because they will probably get some sort of payoff in the end for their compliance either monetary, cushy GNOM leadership job or otherwise.
Look at the volume yesterday. Orbimed's dumping coincided with the heavy volume we saw just after 11am. Where else could they have dumped 500K shares above $2.50? Do you think they just lined up a random person with a spare $1.2M in their pockets to invest in a company that's about to head to sub-$2? Or someone in the know who wants in on that technology? Not only did that entity who bought the Orbimed shares put in $1.2M, they doubled down, buying another 400K or so which took the price up over the $2.70's. Things that make you go hmmm."
This comment was in response to the insiders Orbimed and Charles Waite selling their shares. Referring to the NASDAQ filings, every other insider listed has purchased shares.
Referring to a 1-day chart on Google Finance, we can see that heavy buying in large blocks in the $2.50's indeed took place after 11am on Friday with further large block buying leading to the spike in stock price to the $2.70's only to have the market makers take the stock price back down to $2.44 by day's end on very light volume. Someone did not buy over $2.5M worth of stock in the matter of minutes with the intention to see GNOM fall in stock price.
Further evidence that shows the imminent nature of a transaction taking place can be seen with heavy buying on $2.50 call options expiring next week. While close to 400 contracts were purchased during the day, 200 were purchased near the day's close for about $3000 at the 15 cent ask, a fairly heavy investment for such a short-term call option. For most of the day those options traded at 25 cents thanks to the higher stock price, adding fuel to the suggestion that the market makers took down the stock price in order to load up on cheap call options in preparation for a week of strong gains on GNOM as speculators will drive up the stock price ahead of more buyout or partnership rumors.