Short seller still believes Chinook's lead drug won't be approved amid Novartis deal
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Short seller Muddy Waters still doesn't expect that Chinook Therapeutics (NASDAQ:KDNY) lead drug will ever be sold despite Novartis' (NYSE:NVS) agreement to purchase the company for as much as $3.5 billion. Chinook shares skyrocketed 58% on the deal Monday.
Carson Block, the founder of Muddy Waters, released a short report on May 16 on Chinook (KDNY) that argued the company's lead candidate, atrasentan for chronic kidney disease, will never win U.S. FDA approval. The report sent Chinook shares tumbling as much as 18% that day with the stock ended up closing down 4.5%.
Block last week released a follow-up piece, again arguing that the atrasentan was unlikely to be approved. On Monday, Block said his view hadn't changed even after Novartis (NVS) agreed to buy the company for $40 a share and $4 a share in contingent value rights upon certain milestones relating to the lead product candidate, atrasentan. The price represented a 68% premium to Chinook's (KDNY) closing price on Friday.
"We are confident that the drug is inefficacious and will never be brought to market in the US." Carson Block told Bloomberg in an interview on Monday.
Block didn’t say if any changes were made to his short position in Chinook (KDNY).
Novartis (NVS) and Chinook (KDNY) didn't immediately return Seeking Alpha email request for comment.
Chinook (KDNY) short interest is 7.5%.
Law firm Fenwick is representing Chinook Therapeutics in its sale to Novartis (NVS),