Will Vermillion, Inc. (VRMLQ) Be Acquired By Quest Diagnostics Inc. (DGX)?
Posted by Timothy Sykes on Thu 12th of Nov, 2009 06:00:27 PM
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Last time I bought VRMLQ on its breakout the stock jumped $5/share within a week and TIMalert subscribers banked $13,000+…see details.
Sensing another high volume breakout was afoot around mid-day today, I alerted TIMalert subscribers:
Bought 2000 VRMLQ at 21.50ish (using 80%+ of assets in my new aggressive covestor auto-trade portfolio)…its already up $2/share today, but its on heavy heavy volume (for this stock) on news of a broad patent covering ovarian cancer detection…remember the debtholders could still shut this company down so it’s a risk, but their shares convert at $20 so anything over $20 and this company has a good chance of the debtholders converting into shares…still just a $133 million company, their FDA approval and now this patent, once known by everyone, could make this “the” ovarian cancer play…do your own digging, this could be a billion dollar company since this is a bigtime disease affecting 1 in 57 women (thats around 3 million US women…tests will probly cost 100-200 dollar each, thats a looot of revenue, forget about international potential and of course the fact that basically every woman over 50 needs the test whether they have ovarian cancer or not) and while lots of newsletters present hype like that every day, this one actually has the FDA now US patent credentials….still just a pink sheet stock in bankruptcy though too so that’s all that’s really holding this stock down…after all, its up from 5 cents/share in just a few months…although it has consolidated nicely in the 19s the past few days…a pure technical breakout would be above 22, which is what i am counting on, then shorts get squeezed and momentum traders join in, it could surge to 25+ or even 30+ with any positive debtholder news…mental stop loss to get out asap if it cant break 22 by the end of today.
The stock did indeed breakout past that key $22 level (and not right away either, it took about 1.5 hours for it to really jump $2/share!) and the volume was tremendous…so I held overnight because the chart is a clear breakout and my goal is still to sell at $25+ in the next few days.
Several TIMalert subscribers took quick and easy gains:
But I also held due to this interesting SEC filing today from VRMLQ partner/bigtime shareholder DGX which says they want to raise $750 million…and look at what they want to do with the proceeds:
USE OF PROCEEDS
We estimate that the net proceeds from this offering of notes, after deducting underwriting discounts but before deducting other expenses of the offering, will be approximately $745 million.
To the extent all of the notes in our concurrent tender offer are tendered, we intend to use approximately $518 million of the net proceeds from this offering to purchase those notes and pay related premiums, interest, fees and expenses. If fewer than all of the notes are tendered and the amount of net proceeds used to purchase those notes is less than $500 million, we intend to use up to $500 million to repurchase notes in our tender offer and repay amounts due in September 2011 and December 2011 under our term loan due May 2012. As of September 30, 2009, we had approximately $1.1 billion of indebtedness outstanding under our term loan due May 2012 at a borrowing rate of LIBOR plus 0.50%, or 0.75%.
In addition, we are currently considering the potential cash acquisition of a diagnostics testing business. If we enter into a definitive agreement with respect to this acquisition, we would expect to use a portion of the remaining net proceeds from this offering to fund the purchase price of the acquisition in its entirety.
To the extent that any net proceeds from this offering remain after we repay indebtedness, as described above, and fund the potential acquisition, if consummated, we intend to use those net proceeds for general corporate purposes, including other acquisitions, capital expenditures, share repurchases and repayment of other indebtedness.
Notice what I emboldened “considering the acquisition of a diagnostics testing business”….hmmmm, who could they mean? Could others think they mean VRMLQ and that’s why VRMLQ broke out on strong volume?!?!?!
Yes, of course that’s the reason. The VRMLQ patent is nice, but the FDA approval is more important. Today’s move is takeover speculation and it makes sense considering VRMLQ’s Ovarian Cancer test has massive massive potential, but they do need cash and marketing, which Quest has.
Take away the $513 million from the $745 million raised which Quest wants to use on themselves, we get $227 million for the consideration of a diagnostics testing business…do a little math and calculate VRMLQ’s price per share on 6.38 million shares outstanding and we come up with a potential acquisition price of $35.57….that’s some nice upside from VRMLQ’s closing price of $22.20.
Now this is just speculation, but it does make sense, especially with today’s heavy VRMLQ volume. Another explanation for today could be VRMLQ’s debtholders are converting to shares, which is also a major positive.
No matter how you slice it: technically, takeover-speculationy, debtholder conversionally, VRMLQ is looking good and I’m proud to be long 2,000 shares overnight, up approximately $1,500 so far…TIMalert subscribers will know later tonight what I expect for tomorrow.
TIMalert subscribers are also very happy, they profited biiigtime $4,500 so far today:
Banked $2600 on VRMLQ Tim ☺
-Red
Sold 200 shares for $300. So $750 profit so far. Holding 800 @ $22.
-Bill
SOLD -$VRMLQ @22.00 held from last spike. Dirty pump n dump. Luck I was not burned. $205 in profits.
-geckler
nice! up $400 paper! might book profit 3/4 and ride the rest for $1B Market Cap
-enslaved
+$188 on 200 shares, holding 200…sold my other 200 shares for +$349
-Reaper
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TIM Trades
View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| Nov 19 | AENY | $2.80 | $3.02 | $1148 |
| Nov 18 | NLST | $4.16 | $4.40 | $947 |
| Nov 18 | IMGG | $1.42 | $1.64 | $2094 |
| Nov 17 | NLST | $5.04 | $5.59 | $2195 |
| Nov 13 | VRMLQ | $21.50 | $22.97 | $2901 |
| Nov 11 | EONC | $2.61 | $2.80 | $687 |
| Nov 10 | EONC | $2.74 | $3.36 | $9784 |
| Nov 6 | QXM | $4.31 | $4.80 | $1936 |
| Nov 4 | COT | $8.66 | $8.88 | $642 |
| Nov 4 | QXM | $4.61 | $4.89 | $822 |
| Oct 30 | DDRX | $25.70 | $26.53 | $812 |
| Oct 29 | CTDC | $4.00 | $4.42 | $781 |
| Oct 26 | AWSL | $3.24 | $4.10 | $2516 |
| Oct 23 | RODM | $5.27 | $5.23 | $301 |
| Oct 22 | AMLM | $2.69 | $2.97 | $820 |
| Oct 22 | USEG | $6.12 | $6.09 | $85 |
| Oct 20 | CBOU | $8.93 | $9.06 | $243 |
| Oct 16 | VRMLQ | $16.79 | $18.65 | $2773 |
| Oct 13 | YONG | $11.05 | $11.66 | $1202 |
| Oct 13 | NPHC | $0.59 | $0.71 | $583 |
| Oct 12 | IMGG | $0.60 | $0.70 | $682 |
| Oct 9 | ZAGG | $5.50 | $6.10 | $2380 |
| Oct 7 | GVBP | $0.03 | $0.27 | $702 |
| Oct 1 | NPHC | $0.70 | $0.85 | $1482 |
Total: $98,094 (681%)
