Don’t Sell Your Puts

But first . . .

GAY MARRIAGE – THE WORKAROUND

As explained with rueful humor here, all you need do to get spousal health insurance coverage, if you’re gay, is go down to any City hall in the country with a couple of lesbian friends in the same boat and inter-marry. It’s okay that you don’t live or sleep together or love each other. The state doesn’t care about that (unless you are trying to beat the immigration laws). The way the state sees it, marriage isn’t about love, it’s about economic and legal issues. And as the Republican leadership sees it, it is so important to deny equal treatment to gay and lesbian couples when it comes to things like health insurance, Social Security, inheritance rights, and the like, that we need to amend the United States Constitution.

I don’t agree with that view, obviously, but I respect their right to hold it – and yours to share it, if you do.

And now . . .

DON’T SELL YOUR PUTS

The usual disclaimer: puts are risky, and even if we’re right and the stock drops from $22 (its price July 6 when first introduced here) to $3 or $4, you can still lose every penny you bet if that drop happens only after your puts have expired.

Still, closing at $18.42 last night, things are going in the right direction.

As you will recall, this is a company with one product, BiDil, which recently came on the market to replace its two generic components which are prescribed thousands of times a day at a small fraction of the price. The advantage is that taking one pill instead of two is – unarguably – easier, and so will lead to greater compliance and, thus, better outcomes.

With more than 30 million shares outstanding, the company is selling for nearly $600 million.

It projects expenses in 2006 of $125 million.

Prescriptions are being written at the rate of around 50 a day.

The bulls are confident that insurers and Medicare will all happily (or at least reluctantly) cover BiDil rather than switch patients to the generics. The company told me that more than four state Medicaid plans already have approved BiDil for reimbursement – but they will not say which ones. (Why not? If this is a life-saving drug, why would you want to keep that secret?)

The only state I know about for sure is Virginia, which, as noted here, has placed BiDil on its NON-approved list.

And, as reported here, BiDil has also made Public Citizen’s worstpills list.

The bulls are unfazed. One brokerage firm has recently raised its target price for the stock from $28 to $32. They believe the insurers will cover the pill, making its price largely irrelevant (though not entirely so, because of what could be a hefty co-pay, especially for someone already on five or six other prescription drugs, as most BiDil customers would be). They believe doctors will be afraid to keep prescribing the generic combo, for fear of malpractice suits. But so far, at least, sales oomph just doesn’t seem to be there.

Monday, the company made a presentation at a Bear Stearns conference. The CEO announced that things were on track and that 14,500 of the company’s 17,000 target pharmacies had Bidil in stock. But it’s one thing to get a pharmacy to stock a new drug and another to get a patient (or insurer) to swallow it. The report that follows, from Texas, is only anecdotal evidence, to be sure . . . but what would life be without anecdotes?

Bob Fyfe: ‘I was chatting this afternoon with my neighbor who is a pharmacist. I asked if he had heard of a drug called BiDil. His reply: ‘What a joke. That drug is just the combination of two old generics that cost pennies a pill wholesale.’ I asked what he would do if a patient came in with a BiDil prescription. He told me that he would check their prescription plan and almost always be able to recommend that they could save a lot of money by asking their doctor if he could substitute the two generics. Apparently this is not only cheaper for the patient but the pharmacy makes more money on the generics as well due to the vast difference in price between them and BiDil. He originally had two bottles of BiDil on the shelf but returned one when they checked and saw that a generic combination was available. They returned the second bottle a few weeks later after no one had come in with a prescription for it. So there is no BiDil on the shelf at this particular pharmacy. They have bottles of 1000’s of each of the two generics in the combination on hand.’

☞ For the week of September 2, reports IMS, the industry monitor, 383 BiDil prescriptions were written, up from 315 the week before. It’s not clear how many were filled at full price (not switched to the generics), but even assuming 100% were, it’s hard to see where $125 million in sales would come from next year, for a breakeven.

Don’t sell your puts – unless you bought them with money it would hurt to lose, in which case sell them immediately, and lash yourself with a jagged metal object.