The Right Direction
Issue 11 - 11/14/2022
Narcan Owner Opiant to Be Acquired by Indivior for $145 Million ($20/share).
One of the biggest addiction-drug makers is set to snatch up the owner of the country’s best selling overdose-reversal drug.
Indivior will pay an additional $8 per share contingent on Opiant’s ability to gain approvals and revenue for an overdose-reversal medication in late-stage development, for a total potential payout of about $203 million.
The deal is subject to regulatory approvals in both the U.S. and U.K.
Trading Opportunity
Based on a paper titled “Contagious Speculation and a Cure for Cancer: A Non-Event that Made Stock Prices Soar,” (with Tomer Regev, Journal of Finance, February 2001, Vol. 56, №1, pp. 387–396), and the relative valuation method, Indivior’s acquisition of a addiction-drug manufacturing company, Opiant, at a premium increases the value of all drug manufacturing companies operating in the same space. Specifically, peers working on developing similar addiction drugs.
Over the next few days, the stock prices of peer companies developing similar addictions drugs will increase significantly. Using Natural Language Processing (NLP) and Natural Language Understanding (NLU), we identify companies working on similar addiction drugs ahead of everyone else, allowing us to take advantage of informational arbitrage.
The Trade
Opiant (OPNT)
Opiant Pharmaceuticals Inc is a specialty pharmaceutical company operating in the US. It develops pharmacological treatments for substance use, addictive and eating disorders. The company has developed NARCAN, a Nasal Spray for treatment to reverse opioid overdoses.
Market Reaction
(Source: Morningstar)
Information Arbitrage
After a news break, Financial Analysts spend multiple days or even weeks studying a company’s description and news publications to pinpoint which of the company peers will be affected. Companies’ prices will soon start to react, and profits erode over this time.
Capturing information arbitrage is done using Natural Language Processing and Understanding (NLP/NLU), both are branches of artificial intelligence. Vectorspace AI’s Real-Time Thematic Basket Generator uses this technology to identify these hidden relationships in real-time. Querying for Opiant (OPNT) in the context of addiction drug manufacturers produces a basket of the correlated stocks:
Source: Vectorspace AI
Vector Score Summary
Providing near real time information, the Vector Score is determined with the use of rich text company descriptions and articles from verified global news sources, combined with patent intellectual property.
Sanofi ADS (SNY), VS: 6.6
Sanofi develops and markets drugs with a concentration in oncology, immunology, cardiovascular disease, diabetes, and vaccines. Sanofi is a healthcare company which is engaged in the research, development, manufacture and marketing of therapeutic solutions. Its business activities include operations of specialty care, Established Prescription Products and vaccines operations.
Aquestive Therapeutics (AQST), VS: 6.5
Aquestive Therapeutics Inc is a specialty pharmaceutical company engaged in developing and commercializing differentiated products to meet medical needs. Its later stage product pipeline focuses on the treatment of diseases of the Central Nervous System (CNS), and an earlier stage pipeline for the treatment of severe allergic reactions, including anaphylaxis.
About Vectorspace AI
Vectorspace AI develops scientific data engineering pipelines that leverage language models trained to detect hidden relationships between cryptos, stocks, themes, company specific events, and global events to uncover opportunities and enhance investor risk and return metrics. To view all products please visit www.vectorspace.ai and register for a complimentary trial of the Real-Time Thematic Basket Generator for stocks to get started.