VRX

VRX and CEPH

Hamilton

vrx apr 2011 ceph

Recently we commented on VRX that it would be advisable to have a tight stop-loss on this stock. Today we would suggest that it is an outright sell. A few reasons for that. The count looks like %-waves up from the low could, repeat could  be complete. Also it went through the $41 target set by RBC DS and knowing how very astute these guys are it looks like we have gone far enough beyond that. Next, last time I went to an air show it did not take long for the bi-plane to drop back into its own exhaust fumes after going vertical, again it looks like we are there. Also I keep hearing that the King in Alice in Wonderland asked the people to believe six unbelievable things before breakfast. Recently an unbelievable thing did happen and that is when BOTH VRX and CEPH went up after announcing a takeover. Not at all a common occurrence, usually , that is almost always,  the acquiring company goes down (paying too much, dilution etc.) and the target company goes up ( you just have to pay a premium). When strange things happen you need to wonder why and lacking a reasonable answer the exit is the best place to go.

    CEPH claims that the $5.6 bln is not adequate. Maybe it is , maybe it isn’t but in the meantime ugly things are being said. Also this stock is just a few dollars under the plateau that it could not exceed after trying at least six times over twelve years. I would sell it too.

VRX, Valeant Pharma. Int. What’s in a name?

Hamilton

Biovale and Valeant merged in 2009, much to the chagrin of  the , larger than life, founder Eugene Melnyk . After  sordid allegations of accounting irregularities and lots of negative publicity, courtesy 60 minutes etc. ,  the company needed  to rebrand itself and it chose the merger and name change to achieve that goal. We all know the story of the pig and the hen that decide to merge and go into the business of selling bacon and eggs ; one of the two parties always dies in the process. In this case Mr. Melnyk confidently stated that the “business models of both companies were fundamentally broken” and that he would not want to own the stock four years from now. Half that time has passed, and the stock is up four-fold after announcing (today) another take-over, this time of privately held Swiss Pharma. Sour grapes perhaps? Here are the charts.

vrx 2011 vrx 2011 s

Looking at the Bigchart (still available under the ticker BVF) , it is clear that the stock completed the 5-wave ride up to $90 or so, followed, predictable, by a dramatic drop to about $7 (I already liked it at $16, too early as usual!). The drop appears to be an A-B-C (actually an a-b-c-X-a-b-c). The first logical rebound target is at about $32, than about $50, $58 and $70, wave 4, 50%, 62% and B-wave level respectively. We have no idea which it will be, but it is already possible to count 5 waves up and we have reached a one year target  ($41) at a very astute investment dealer already , which, by the way, has the stock on its Focus List (see elsewhere). We would recommend a very tight stop if you own this. Just remember Juliet’s words to Romeo; “That which we call a rose, by any other name would smell as sweet.”