Deciphering Medarex Earnings (MEDX)

Some traders might bother peering at the losses on Medarex (NASDAQ:MEDX), but all we are looking at for the time being is the forward study data and the company’s use of cash and burn rates.  When you see the explanation and the stock options activity you’ll understand why. Here is all that matters, to 24/7 Wall St. anyway:

• Medarex ended the quarter with approximately $396.1 million in cash and equivalents, with roughly $8.9 million related to Celldex. In addition, the fair market value of Medarex’s equity interest in Genmab A/S as of September 30, 2007 was approximately $297.0 million.
• It continues to expect total cash burn to be approximately $13.0 million per month for 2007, which includes approximately $3.0 million a month to support its net contribution to the ipilimumab program. The company noted that the cash burn guidance is consistent with the guidance previously provided on February 28, 2007.
• "We and our partners continue to make consistent progress in developing and advancing the clinical pipeline, building momentum for continual long-term growth for Medarex, and we anticipate seeing top-line data from the ipilimumab monotherapy studies in second-line metastatic melanoma patients before the end of this year," said Howard H. Pien, President and CEO of Medarex.

This "ipilimumab monotherapy studies in second-line metastatic melanoma patients" is the program with Bristol-Myers Squibb (NYSE:BMY) that has options traders making huge bets since this is still a relatively untreated killer with blockbuster potential.  This "before the end of this year" statement leaves the NOV and DEC options expiration dates as still having a chance of seeing the news, but the true tally is loaded up in the JANUARY-2008 options contracts:

• Of the 3 most active call option contracts for JAN-08 in Medarex there are more than 450,000 options contracts in the open interest, or 45 million shares on a fully leveraged basis.
• Of the 3 most active contracts in Bristol-Myers Squibb the contracts in the open interest total just under 1 million contracts, or 100 million shares on a fully diluted basis.

Recent key stories on Medarex:

• Banc of America started this recently with a "SELL" rating;
• Updated option review of Medarex;
• An earlier comparison to options trading in Dendreon.

Jon C. Ogg
October 31, 2007

Jon Ogg can be reached at [email protected]; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.