Thursday, February 26, 2009

Recent Acorda Therapeutics Rumors

Rumors are a part of Wall Street. They always have been and they always will be.

For the most part I tend to ignore the rumors and not bother to mention them on the blog, but occasionally one is too interesting to pass up or illustrates a point I would like to make. With Acorda Therapeutics (ACOR) it is a matter of both.

The fun began on Acorda’s conference call (transcript courtesy of Seeking Alpha) on Tuesday, when President and CEO Ron Cohen found himself fielding quite a few questions about potential European partnerships for Fampridine-SR and about the path forward in the U.S. market. Cohen summarized his thinking on the subject as follows:

“From our perspective, the bar is extremely high to allow anyone to co-promote in the US with us. Obviously everything has a price and we’re going to be guided by what we think optimizes the value of the asset, but from our perspective right now, the very much most likely way to optimize the value in the US is for us to do that, and to commercialize it ourselves; whereas ex-US, the opposite obtains.

We think that depending on the nature of the deal we could do, it’s likely that partnering would be a more effective way to go, but again, that’s an outlook. It really depends on what sort of offers people make and we have to assess those on a as they come basis.”

Things got interesting after the conference call when a rumor appeared that Biogen Idec (BIIB) was in talks with Acorda and that an acquisition was one of the possible outcomes. This rumor helped to send Acorda stock up 19% on Tuesday on heavy volume. Yesterday Biogen Idec apparently denied the discussions with Acorda and Acorda’s stock gave back 5.5%. Today there are rumors of a possible Biogen Idec takeover of Acorda, with a price tag as high as $40 per share being floated, which is about a 70% premium over where Acorda is trading today.

With all the rumors, Acorda is down another 2% today and skeptics of the deal abound.

With all this speculation, one of my favorite sources for getting a handle on the options activity is Specifically, I like to look at the WhatsTrading 10 day chart of put and call activity, which I have reproduced below. In the chart, it is clear that Tuesday’s activity triggered more activity in puts than calls. Over the course of the past two days, however, volumes have been ramping up in the calls. The data is by no means conclusive, but at current levels, with the stock having given back a fair portion of Tuesday’s gains and implied volatility tracking only slightly above the average for the past four months, this has become an interesting long call play.


Disclosure: Long ACOR at time of writing.

(For those who may be interested, recently began offering some premium options services)


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