The Early Edge: UBS, Blackstone, Rio Tinto, Novavax, and MGI Pharma

Today's headlines include another subprime loss for UBS (UBS), rumors of a Rio Tinto (RTP) buyout bid from Blackstone Group (BX), a blue-chip collaboration for Novavax (NVAX), and MGI Pharma's (MOGN) M&A agreement with Esai Co. Here's what you need to know about today's stocks on the move.

UBS

Swiss bank UBS (UBS: sentiment, chart, options) has taken the financial spotlight this morning after announcing an additional $10 billion in subprime-related write-downs that will help push the investment bank to a fourth-quarter earnings loss. The banker, which already swallowed a write-down worth $4.2 billion in the third quarter, said it could also record a loss for fiscal year 2007. Previously, UBS projected it would swing to a profit in the fourth quarter. UBS also announced investments from the Government of Singapore Investment Corp., as well as an unidentified investor from the Middle East (some reports suggest the Abu Dhabi Investment Authority as a potential supporter). Meanwhile, Fitch Ratings piled on to lower the long-term issuer default ratings for UBS AG and UBS Limited to "AA" from "AA+."

A small-scale rally in UBS shares last week met its demise in the form of the stock's 10-week moving average, which has loomed overhead since late October. The equity could find additional resistance at the 50 level if it slips below this round-number region in today's trading – the 50 strike is home to peak call open interest of 3,237 contracts in the December series. As the shares' 10-day moving average climbs through the 49 region, we could see support from this trendline put to the acid test.

Blackstone Group & Rio Tinto

Rio Tinto (RTP: sentiment, chart, options) has previously rebuffed a buyout bid from rival BHP Billiton (BHP), but what will come of a rival bid from private-equity firm Blackstone Group (BX: sentiment, chart, options)? According to the London Telegraph, the firm is reported to be assembling a consortium to challenge the Rio Tinto takeover bid laid out by BHP Billiton. The paper reports that Blackstone has already appointed lawyers, and plans to break up the company and sell off its various business units. A Chinese sovereign wealth fund is reported to be among the members of the consortium – China Investment Corp., which earlier this year invested $3 billion in Blackstone Group – but a spokesman for the fund denied knowledge of such a bid to Dow Jones.

Meanwhile, U.K. newspaper The Guardian reports that Rio Tinto is writing to the U.K.'s Takeover Panel to request a formal deadline for BHP to extend its acquisition offer. Representatives for Rio Tinto have thus far remained silent on the reports.

RTP shares have vaulted steadily higher since August, though some momentum seems to have been drained from the stock's rally around the 460 and 470 levels. Despite the multiple suitors courting the firm, option traders have rushed to the bears' camp – the stock's Schaeffer's put/call open interest ratio of 1.64 ranks higher than 82% of other such readings taken during the past year.

Novavax

Novavax (NVAX: sentiment, chart, options) reported that it's agreed to develop and market a pandemic influenza vaccine manufacturing program, for use in select international countries, in cooperation with General Electric's (GE: sentiment, chart, options) GE Healthcare unit. The new pact will draw on GE's bioprocess and design technology, along with Novavax's virus-like particle and manufacturing platform. The goal of the new collaborative is to produce a recombinant vaccine within 12 weeks of a new pandemic strain being identified, without having to use eggs or a live influenza virus.

The shares of Novavax are up more than 13% ahead of the opening bell as investors react to the news. We could be seeing the effects of a short-squeeze rally this morning; as of the latest reporting period, more than 5% of the stock's available float had been sold short. At NVAX's average daily volume, it would take nearly 6 trading days for all these bearish bets to be eliminated.

MGI Pharma

Shares of MGI Pharma (MOGN: sentiment, chart, options) have spiked 20% in early-morning activity after the biotech firm said it's agreed to be acquired by Japanese health-care firm Eisai Co. for $3.9 billion, or $41 per share in cash. The deal represents a premium of just over 23% to MGI's closing price at 33.45 last Friday. The terms of the buyout have received approval from the boards of both companies, with the acquisition carrying a $129 million breakup fee.

Bear Stearns downgraded MOGN from "outperform" to "peer perform" in the wake of the news, noting that the acquisition price is in line with the broker's expectations and that few, if any, rival bidders are expected to emerge. Today's spike higher in MGI shares extends a long-term rally that started back in August 2006. Option traders were bullishly aligned toward the stock ahead of the announcement – MOGN first reported it was exploring strategic alternatives in late November. As a result, the stock's Schaeffer's put/call open interest ratio sank to an annual low of 0.43. On the other hand, it would take upwards of 5 trading days for all the shorted MGI shares to be repurchased, suggesting we could see that pent-up buying pressure unwind over the course of the next several sessions.

For more commentary on today's market-moving news from me and my colleagues Andrea, Jocelynn, Mark, Joseph and Beth, please visit our Schaeffer's Daily Market Blog section throughout the trading day.