Buying Nabi Biopharmaceuticals for below cash

Nabi Shares Plunge After Smoke-Cessation Drug Shown Ineffective in Study. The initial Phase III study for NicVAX is a double-blinded, placebo-controlled study comprised of approximately 1,000 patients. Both the company and investors are caught by surprise. Its sold off to 1.55, as I am writing now. It represents an unique opportunity to get paid to own an option on NicVAX.

Nabi has 108M cash and marketable securities on their balance sheet and about 35M in present value from remaining milestones and royalties from Fresenius Medical Care AG. At 1.55 per share, Nabi stock is traded at about 45% of the cash value. Nabi spend 5M per quarter on R&D and the majority of the spending is on NicVax. I don't expect Nabi to invest more capital on NicVax, unless there is significant chance of success. Raafat Fahim, President and Chief Executive said in the statement "the board of directors is actively evaluating any and all appropriate strategic alternative actions to preserve shareholder value, while management is working to further control the operational expenses of the company."

Daily Clueless Musings 7/15

The European stress test 2.0 is nothing but a joke. Moody's predicted 26 failures, Eurostat gives us 8. EBA says 5 Spanish, 2 Greek, 1 Austrian Bank fail as of April 30. The so called "stress" scenario does not consider a default by Greece or other peripherals. It is not even close to the probability of default implied by the CDS market. Market cannot wait to sell the short lived rally in Euro. Eurodollar front contracts are also under heavy selling pressure after the release. Yield spreads between the European peripherals and German bonds widened again. Market is not as naive as the European politician hoped to be. The under-stressed stress test won't buy any confidence for the EU banks. According to a report by JPMorgan published on Wednesday, US prime money market funds reduced their exposure to European banks by 11.6 percent to a total of $675 billion at the end of June. Herman Van Rompuy ,President of the European Council, tweeted that a meeting of the Euro area Heads of State or Government will be held on Thursday, 21 July, at 12.00 in Brussels. Maybe a soft default of Greek bonds will be announced? The timing is also perfect. It happens to be just a day before the US debt ceiling legislative deadline. The overhang of debt ceiling issue in the US and the weakness of USD helped buffering the credit shocks.But the time left for EU/ECB to act is running out.

Things are not rosy at all in the States as well. The University of Michigan sentiment index fell 7.7 points to 63.8 in July ,the lowest level since March 2009, despite lower gas prices. Although core CPI came in at 0.25% month over month, higher than expectation, the median one-year inflation expectation fell from 3.8% to 3.4%. The five year inflation expectation fell from 3.0% to 2.8%, approaching the 2.7% level pre-QE2, when deflation rather than inflation was the topic of the time. As long as the inflation expectation remains low and stable, it helps the Fed doves insisting inflation to be "transitory" (AKA the BoE "Bury your head in the sand" way), which may be paving the road to QE3. The weak Manufacturing IP also helps tipping the balance to more easing. Industrial production increased 0.2% in June but May (from 0.1% to -0.1%) and April (0.0% to -0.1%) were both revised down. The key manufacturing production was flat in June and the growth for May was revised down from 0.4% to 0.1%.

More updates on Hanny

Hanny just announced that they sold all the ITCP convertible notes to Charles Chan for 311.8M (5% above their book value). It is a positive news, as Hanny continue to disengage itself from Charles Chan. Now the only link between them is the 50% stake in the ITCP China. Also after the sale, Hanny will have about 1.6 hkd per share (part of the cash will be used for real estate development.)

If you are Hanny's shareholder like me, please contact me. We should put more pressure on the company to return those access cash to shareholders

Daily Clueless Musings 7/08--Nonfarm payroll

After a strong ADP number and retail sales yesterday, hope is high for today's Nonfarm payroll. Everything about the June employment report was a major disappointment. There is nothing positive in this report. Nonfarm employment increased a pathetic 18k, after a downward-revised 25k increase in May. Bulls can no long blame the earthquake, flood and storm. Japanese PMI bounced nicely in June, however manufacturing employment rose by just 6k, after declining 2k in May. The average workweek fell a tenth to 34.3 hours and average hourly earnings declined 0.04%. The declining consumer income does not bode well for spending. The unemployment rate increased 0.1 to 9.2% in spite of the participation rate falling to 64.1%. Futures jumped higher, as market was caught by surprise. Vols were soft. Gamma options are lower after the number, but bounce back slightly as futures continue to move. It is interesting to see how the CPI and PPI print next week. Although the headline inflation might be lower due to lower gas prices, core might continue to trend higher, merely as function of easy year over year comparison. Eurodollar futures rallied toward their highs and 2 year dropped to 38 basis points. Stocks were surprisingly resilient, they ended higher than the pre-ADP level.

Daily Clueless Musings 7/06

The ISM nonmanufacturing index declined from 54.6 to 53.3 in June. The new orders index declined 3.2 points in June but still came in at a decent level of 53.6. The employment is up 0.1 points to 54.1. Although the data start to beat the lowered expectation, global PMI (ex Japan) continue to decline. 9 out of 14 available country level PMI declined in Jun. Euro area wide service PMI declined to 53.7, the lowest since last October. Futures rallied again after Monday's move, as people rushed to covered their short position which they put on before the EU/IMF approving the 12 Billion Euro to Greece. Front contracts are sold off again, as people now realized no problem can be solved by throwing 12 billion Euro to the insolvent Greece. European banks are meeting to sweeten Greek terms and German Financial Minister insisted that private investors must play central role in Greek aid and saw “many arguments for alternatives” to French plan. CDS on many European Sovereign debt all widened today. Moody's released a list of 26 banks (out of 91banks) that will fail the second European stress test. Market has been trying to sell fronts to trade/hedge the credit risk, however fixing has barely moved yet. BBA announced that it would change calculation method for dollar Libor on August 1, removing highest and lowest 5 rates (instead of 4). The move will reduce the volatility in LIBOR fixing by removing one more low quality banks.