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Stevie Cohen's Red Herring Plan Works As Orexigen Gets Slaughtered By The FDA

Tyler Durden's picture




 

When we observed Stevie Cohen's odd and sudden purchase of 5% of OREX stock, announced in the last minutes of trading yesterday, we speculated that either this was another blatant attempt by the man with the golden touch to purchase shares in a company which would come up with the golden grail: a drug for obesity, or "we would not be surprised if this is the first, maybe of many, red
herrings thrown by the legendary hedge fund manager to indicate that he
does not have a 100% batting average when it comes to predicting FDA
outcomes." Well, it was the latter. OREX just got the worst news possible and the stock is about to open 60-80% lower. This will be a ~$20 million loss for the Connecticut man. One wonders, more than ever, what is the quid pro quo?

From the just issued press release:

The FDA noted concern about the cardiovascular safety profile of naltrexone/bupropion when used long-term in a population of overweight and obese subjects. Specifically, the letter stated that "before your application can be approved, you must conduct a randomized, double-blind, placebo-controlled trial of sufficient size and duration to demonstrate that the risk of major adverse cardiovascular events in overweight and obese subjects treated with naltrexone/bupropion does not adversely affect the drug's benefit-risk profile." 

"We are surprised and extremely disappointed with the Agency's request in light of the extensive discussion and resulting vote on this topic at the December 7 Advisory Committee meeting," said Michael Narachi, President and CEO of Orexigen.  "We plan to work closely with the Agency to gain more information to determine the appropriate next steps regarding the Contrave application."

The bottom line - is a key condition for Cohen's continued fund management now the incremental, and very visible, addition of such bad bets?

 

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Tue, 02/01/2011 - 08:18 | 923149 NewThor
NewThor's picture

Sorry to start with a distraction,

but Tyler, I'd like like you to answer...

 

WTF happened to wikileaks GD BOA disclosure?

 

 

Tue, 02/01/2011 - 08:24 | 923154 Tyler Durden
Tyler Durden's picture

Perhaps you should direct your question at @wikileaks

Tue, 02/01/2011 - 18:30 | 925441 NewThor
NewThor's picture

ZOMG. TYLER DURDEN TALKED TO ME.

LIFE = COMPLETE

 

Hmm. Who would win in our fight club match, you are

tyler Durden, the pinnacle of man, I am THOR.

 

 

Tue, 02/01/2011 - 22:31 | 926064 StychoKiller
StychoKiller's picture

You think you're Thor, I can't even pith!  Just could not resist!

 

Tue, 02/01/2011 - 08:27 | 923158 blackbox
blackbox's picture

+1

Mad Karl D was calling them out as frauds yesterday. Not sure I'd like to pick a public fight with them, but it was funny.

Tue, 02/01/2011 - 08:37 | 923176 HelluvaEngineer
HelluvaEngineer's picture

Obviously wikileaks = /dev/null

Tue, 02/01/2011 - 22:33 | 926072 StychoKiller
StychoKiller's picture

cat wikileaks/BOA_files/*.doc >/dev/null

Fixed it for ya! :>D

Tue, 02/01/2011 - 09:58 | 923385 lunaticfringe
lunaticfringe's picture

Watched that JA segment on 60 mins. Sun. I waffled between arrogant plick and nutjob. Thinkin Julian may have maginalized himself. Every. Word. Measured. Do I need JA to tell me BAC is a bunch of crooks? Old news.

Tue, 02/01/2011 - 08:29 | 923160 firstdivision
firstdivision's picture

Tyler, the stock is still up nearly 1.75% in AH.

Tue, 02/01/2011 - 08:31 | 923163 blackbox
blackbox's picture

no it's not. currently 3.40 / 3.50

 

edit: make that 2.99 now ...

Tue, 02/01/2011 - 08:42 | 923183 firstdivision
firstdivision's picture

Guess I was checking the price before the traders cared ;)  It's about to punch through $2.40 now. 

Tue, 02/01/2011 - 09:45 | 923360 alien-IQ
alien-IQ's picture

should be a 600-1000% gain on the Feb 6 puts.

damn...wish I had some of them:-(

Tue, 02/01/2011 - 08:31 | 923164 Sathington Willougby
Sathington Willougby's picture

This "Connecticut man" doesn't travel in my circles, but if he did I'd remind him that losses aren't to be suffered. They are to be pawned off on [bleating] taxpayers. Otherwise it's not a risk worth taking.

Tue, 02/01/2011 - 08:37 | 923172 Tic tock
Tic tock's picture

I know with some degree of certainty that the wikileaks diplomatic cables revealed 'conversations' which never took place.

Tue, 02/01/2011 - 08:38 | 923179 Hephasteus
Hephasteus's picture

Let's see. The legitimacy gap is about 4 billion light years across. This gets them about 2 feet. Keep throwing millionaires into the pile.

http://www.poptech.org/popcasts/juan_enriquez__poptech_2006

 

Tue, 02/01/2011 - 08:39 | 923181 A Man without Q...
A Man without Qualities's picture

"Of course, with old blue eyes indicating his last minute participation, we are 100% confident that the firm will pass with flying colors."

Tue, 02/01/2011 - 08:46 | 923193 SumDumGuy
SumDumGuy's picture

for real... a little bit of revisionist history in the updated post for sure.

Tue, 02/01/2011 - 08:41 | 923184 Tic tock
Tic tock's picture

Oh! A drug to fight obesity - how could that possibly exist - what would it do, melt cholesterol into energy, in someone's blood? surely, mushrooms and a dimly-lit salsa class, or something simpler.

Tue, 02/01/2011 - 09:15 | 923271 ToNYC
ToNYC's picture

 

Better to find a drug to fight Obsessive Consumption Culture...oh, that's right, there is one and it grows wild.

Tue, 02/01/2011 - 09:23 | 923296 LMAO
LMAO's picture

Oh! A drug to fight obesity - how could that possibly exist

The FDA found out that this drug already exists and is fully operational, it's based on the "Bernank inflate to deflate" model.

Merikans should not worry, it's underway.

LMAO 

Tue, 02/01/2011 - 08:43 | 923188 Tic tock
Tic tock's picture

At 'Man without a Q' , yeah, that's what I read too, Gosh, TD... is that pride in your own work finding its way into the way you walk, too?

Tue, 02/01/2011 - 08:54 | 923202 logicalthought
logicalthought's picture

This is seriously the STUPIDEST theory I've ever seen on ZH. So, the guy lost millions of dollars on purpose? And yet if he turned out to be right, ZH would be talking about how it's even further evidence of "inside information-driven corruption."

 

This site has become a joke-- kind of like Cramer, only on the opposite end of the jokedom spectrum.

Tue, 02/01/2011 - 09:31 | 923333 lunaticfringe
lunaticfringe's picture

Geezus, that's some harsh shit. Thinkin my sis would rather be called a fat cow than compared to Cramer.

I'm still scratching my head over Cohen's bet. Drooling actually. Like to play cards with him sometime.

Tue, 02/01/2011 - 09:58 | 923386 IBelieveInMagic
IBelieveInMagic's picture

Maybe it is to demonstrate that they didn't have access to insider information on their previous successful deals -- I read in WSJ another Hedge Fund Manager has been accused of tapping the "expert network" resources. Maybe like GS, Cohen is trying to prove after the fact that they don't have a 100% track record...

Tue, 02/01/2011 - 10:05 | 923407 logicalthought
logicalthought's picture

Of course, that's the ZH "theory," such as it is. However, no prosecutor would consider what they did today to be the least bit relevant to what they've been accused of doing for the past 15 years, especially as today they know how much scrutiny they're under. Additionally, however many millions of dollars they lost on this trade would have gone quite far in paying any potential legal bills that might arise due to allegations of incorrect past behaviour.

Tue, 02/01/2011 - 10:18 | 923444 Hephasteus
Hephasteus's picture

You are very logical.

You need some theme music.

http://www.youtube.com/watch?v=wrWPYOCcQv0

Tue, 02/01/2011 - 10:26 | 923473 logicalthought
logicalthought's picture

lol.. Geez, I've always hated that song!

Tue, 02/01/2011 - 09:38 | 923344 Hephasteus
Hephasteus's picture

An atom walks into a bar, orders a drink. Takes one sip and starts crying. The bartender says "What's wrong? The atom says "I think I just lost an electron!" The bartender says "Are you sure?" The atom says "Yeah, I'm POSITIVE!!"

Tue, 02/01/2011 - 09:48 | 923367 velobabe
velobabe's picture

you are so funny in the morning. you had me @POSITIVE†

Tue, 02/01/2011 - 11:32 | 923715 UninterestedObserver
UninterestedObserver's picture

I give you a D for douchebag. I bet you watch Cramer every night and complain about him too.

Tue, 02/01/2011 - 09:23 | 923298 Tic tock
Tic tock's picture

There is some circumstantial evidence to support ZH's position, which in itself, does put ZH out of Cramer's league.

Tue, 02/01/2011 - 09:25 | 923308 I Told YOU So
I Told YOU So's picture

Will someone make a market for ITM puts say P1000 for lets say........7 or 8.?

Tue, 02/01/2011 - 09:27 | 923316 lunaticfringe
lunaticfringe's picture

The FDA may have shit canned Orexigen but it worked fine for Cohen. Trimmed 20 m worth of fat in a day. I likes dem fatties!

Tue, 02/01/2011 - 10:09 | 923418 colonial
colonial's picture

I like this news.  At some point even people who supposedly know the outcome of the sometimes bizarre drug approval process get burned.  I like to see hedge funds take risks and take hits. 

I have argued that the SEC should have a similar process for creating new financial services products.  Not the consumer protection madness that's been outlined in Dodd/Frank, but a process that goes beyond "No Action Letters," which is the process now. 

This deal may still work out for Stevie.  I wonder if he'll press his bet.  Can you imagine what happened to the FDA Consultant who made this call? 

Tue, 02/01/2011 - 21:55 | 925995 harveywalbinger
harveywalbinger's picture

Put me in the controlled demolition 'conspiracy theory' camp. 

Tue, 02/01/2011 - 10:12 | 923427 ToNYC
ToNYC's picture

 

Indeed, Stevie had his way with that fat cow..only ripped his shorts when running and  jumping over the fence before the  bull arrives.

Tue, 02/01/2011 - 10:15 | 923435 RobotTrader
RobotTrader's picture

Just another example of how "gambling fever" has now gripped Wall St., when big guys like Cohen start making wild and irresponsible bets.

Tue, 02/01/2011 - 22:02 | 926007 harveywalbinger
harveywalbinger's picture

Yeah... A wild & irresponsible bet. 

That's Steve Cohen's style... 

 

Not! This $20 million investment probably does well to establish reasonable doubt if prosecuted.  Chump change considering the $$$ hundreds of millions/billions in profit he's made on these deals.  Smart guy that Cohen. 

Tue, 02/01/2011 - 12:08 | 923855 Zombies On Toast
Zombies On Toast's picture

I think investing in obesity drugs or Alzheimers drugs is totally foolish. This "drug" is a combination of two already existing drugs, an anti-depressant and an anti-addiction drug. Not exactly something new based on any understanding of what is really going on in obesity. Same can be said about Alzheimers, we don't understand the biology yet.

Tue, 02/01/2011 - 13:34 | 924184 lolmaster
lolmaster's picture

More importantly, who was on the other side of this generous trade by Mr Stevie, and how has Chuck Schumer benefited if at all? Also did Goldman "make markets" in any correlated short positions for SAC and if so what was their take?

Wed, 02/02/2011 - 01:53 | 926431 arelan
arelan's picture

wait, if he's right, then he's guilty of knowing too much

if he's wrong, then he's still guilty of knowing too much?

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