So, I’ve been following Aralez (ARLZ) for years. It’s my favorite drug trade. This company has a history of producing valuable drugs. Once they develop a drug, their strategy is to sell the licensing to other companies that produce and market the drugs, and pay ARLZ huge royalties with very attractive minimums, essentially make ARLZ a ”hidden” royalties company investment. This year they shook things up in two ways. One, they moved the company (formerly known as Pozen) outside the US for tax advantages, hence the new name. Two, they decided to market and sell their latest drug, a ”safe aspirin” themselves. Recently they enjoyed higher expenses than normal, due to their hirings and new business strategy.
There have been some good buying opportunities in the past, and right now might be the best one yet. This ”safe aspirin” is waiting for FDA approval on Sept 14.
Here’s the deal on the ”safe aspirin”. Aspirin, as it exists now, has side effects and one of them is bleeding in the intestinal tract. It’s a major problem for the elderly who might need daily aspirin for their heart conditions. The good news is the ”safe aspirin” made up of two components that were FDA seperately and are on the market right now. The approval ARLZ wants is for combining these two elements together. I believe this drug is the most attractive drug awaiting FDA approval. I believe it will be bigger than anyone thinks. Aspirin is huge. Everyone takes aspirin. Is there a drug more commonly consumed? And if there’s a safe version of it, I’d take the safe version, whether I had side effects or not from the original. I’d also give the safe aspirin to my kids. Why wouldn’t I?
Here’s the bad news. ARLZ has had a real problem getting FDA approval so far. Since I’ve been trading the stock, the FDA has denied approval twice, and delayed once. That’s three times investors ran up the price of the stock, just to get slapped down by the FDA. The reason the FDA hasn’t given approval before was one of the manufacturer’s of a component in the drug did’nt meet FDA guidelines for cleanliness. As ARLZ sits now, they have abandoned that supplier.
So I’m in play on ARLZ, and I’ve decided to write my first discussion on here because I want to hear from other people what they think. Also I just got a teaser ad from the Money Map Press about ARLZ. It makes me so mad that these people want you to pay them $1000 all the time just for one stock pick.
Trading strategy: I bought Aralez back when it was 3.50 (it bottomed at 3.00ish), which I’m really happy about. But I also have options strategies that can be used right now for not alot of money.
Right now you can buy the Sept 16 $7 calls for .25 and the $8 calls for .15. My first recommendation, given the fact the FDA has been very finicky about it’s approval, is to buy a bunch of Sept 16 options now and sell half, or all, on Sept 13 the day before the announcement and profit from the run up. The run up is real and went to about $9.50 the first time.
I really want to hold some of my position in ARLZ through the announcement, hoping to get a big pop.
My second idea is sell the Sept 16 $6/$5 put credit spreads.
And my third idea is to buy call options further out like December.
I own shares of ARLZ, and Sept 16 $7 calls, and Dec 16 $4 calls.
Thanks for reading.
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