Monday, March 30, 2015

My March Biotech Trades - ARQL, RIGL, KBIO, MNKD, ZIOP, BIND

March was a pretty active month of trades as I adjusted my portfolio due to concerns with the overheated biotech industry.  Truth be told, I'm a bit concerned about biotech valuations and think a correction could be on the horizon.  Yes, patent protection is expiring on a number of blockbusters in the coming years but we've known and been talking about that for 10 years now.  Yes, innovation is improving but competition in similar new technology is heating up too.  Yes, some large pharmaceutical companies are paying excessive premiums to acquire biotechs but the smart, disciplined companies have recognized the valuations and sit patient on the sidelines.  The good news is that biotech catalysts and trial results will still move a stock...up or down.  I'm clearing my portfolio of my higher risk investments while shorting positions in companies that defy common sense in valuation logic.

Arqule (ARQL) - I sold 18,000 in ARQL naked $2.50 October puts at $.50 which would basically put me in the position at $2.00 if stays at the current trading range around $2.30.  I see no reason for this stock to drop by October as the next catalyst is Phase 3 HCC results in it's lead compound in the 4th quarter of the year  I really like the stock and think this was a good hedge play in the event the overall biotech market drops in the coming months.

Rigel (RIGL) - I took the same approach as ARQL.  Sold 12,000 in RIGL naked $2.50 September puts at $.10.  No clinical results are expected until 2016 and can't see the stock dropping from it's current trading range of around $3.35....unless the biotech market drops.

Kalobios (KBIO) - I sold all of my remaining shared for $.93.  Good thing as they are currently trading under $.50.  Based on the tone of the companies recent presentations and quarterly report, I get the feeling that they plan to spend every last penny of their remaining cash on their yet-to-be proven technology and compounds.  What they should be doing is pursuing a reverse merger with a private company that actually has a platform with a chance of success.  Bad management!  Which is why I'm out!

Mannkind (MNKD) - Sold 5,000 naked $7.00 January 16 calls.  This stock has to be one of the most overpriced pieces of junk in the history of biotech with a $2 billion market cap.  I think there's a place for inhaled insulin but the companies balance sheet is a cluster.  As a reminder, I'm a CPA and I've been the CFO of a number of companies so balance sheets are my thing....and these guys have a mess on their hands.

Ziopharm (ZIOP) - Short sold 4,900 ZIOP shares at $13.00.  This stock is making it's own run for most overpriced biotech with a market cap in excess of $1.3 billion and just one (yes one) drug in phase 2 trials.  They are literally 5 years away from getting anything to the market and a $1.3 billion market cap?  Huh?  Oh wait, they can use the words CAR-T in their press releases which is the trendy, cool thing in biotech right now so that explains it.

Bind (BIND) - I bought 2,000 shares in Bind.  I like it.  A number of quality partnerships, inexpensive $100 million market cap, Phase 2 results coming out in the 2nd quarter on trials in lung and prostate cancer, and they expect a partnership to take a compound into phase 1 around the middle of the year.  That's what we call a deal!

I also bought and sold positions in AEZS and ARRY during the quarter but still hold positions of both stocks.

I hope everyone has a great April and take my advice - be patient and pick qualify stocks in the event of a correction!

Sunday, March 15, 2015

Biotech Investing: Upcoming trade catalyst Immunomedics (IMMU)

Immunomedics (IMMU) is a good stock to consider going into the 2nd quarter.  Results from a Phase 3 trial of Epratuzumab in Lupus with partner UCB is expected during the quarter.  Lupus is a very hard condition to treat highlighted by only one recently approved drug in that last 58 years, Benlysta. Benlysta is marketed by Glaxo and is considered only marginal in the treatment of lupus which opens the door for another new, effective treatment.

Terms of the agreement with UCB provide over $400 million in regulatory and specified product sales milestones as well as product royalties ranging from mid-teen to mid-twenty percentage of aggregate annual net sales during the product royalty term.  If the trial results are positive, it's going to be very lucrative for Immunomedics.

The company also has a product in phase 3 trials for pancreatic cancer which is another difficult to treat condition.  They expect the trial to fully enroll in this year with results in 2016.

I'm going to hold Immunomedics through the lupus results and continue to hold if the results are positive with the additional pancreatic readout in 2016.

Hope everyone has a great trading week and best of luck!

Thursday, March 5, 2015

Biotech Investing: Targacept (TRGT) Announces Merger

I just wrote last month about my position in Targacept and the possibility of a merger.  It was just announced 15 minutes ago that they will merge with privately held Catalyst Biosciences.  Catalyst currently has a partnership with Pfizer for its lead compound, PF-05280602.  Targacept will own 35% of the newly formed company and received a cash distribution.

Targacept and Catalyst Biosciences Enter Definitive Merger Agreement Creating a Protease-Based Hemostasis and Anti-Complement Company

Merger combines Catalyst’s protease therapeutics pipeline and the financial resources of both companies
Creates a well-funded company to develop important new treatment options for patients with bleeding disorders and complement-mediated diseases

Wednesday, March 4, 2015

Biotech Investing: Clinical Updates from Threshold (THLD) and Arqule (ARQL)

Both Threshold (THLD) and Arqule (ARQL) reported earnings in the last day and both provided updated guidance on the time of top line pivotal trial results of their pancreatic and liver cancer, respectively.

Threshold now expects results from its phase 3 pancreatic cancer trial in the first quarter of 2016.  Prior guidance was "sometime" in 2016 so now we are look at the front end of the year providing a closer trading catalyst.  The trial is being conducted by its partner Merck.

Arqule now expects results from its phase 3 liver cancer trail in the fourth quarter of 2015.  Previous guidance was the first quarter of 2016 but recruitment has been better than expected.

I have 6,000 shares of Threshold and don't plan to sell until we get closer to the pancreatic readout.  I may actually add to my position via selling naked puts.

I just sold my shares in Arqule earlier this week after it made a strong run these past few weeks after presentations at investor conferences.  I plan to get back in when/if it goes back below $1.70 per share.

Do your own research and good luck!

Biotech Investing: Hope you read and took action on my KaloBios (KBIO) on February 2nd!

I reported my position in KaloBios (KBIO) back on February 2nd when the shares were trading at $.39.  It seemed like such a good bargain that I picked up 60,000 shares.  Their book value was over $1 per share, the CEO "retired", and they still had a compound in phase 2 trials with results expected in the second quarter.  I don't know what the ultimate outcome will be but I sold my shares today at approximately $.92.  Not a bad hull for months work!

Keep looking for those bargains, do your research, and good luck!  

Monday, March 2, 2015

Biotech Investing: Merrimack (MACK) gets a shout out in Cramer's Lightning Round

Jim Cramer gave a positive vote of confidence during tonight's lightning round on Mad Money.  I've written a number of articles expressing my strong opinion (and large holding) of Merrimack.  It has a great pipeline and MM-398 should get approved for hard-to-treat pancreatic cancer later this year.

I currently hold 11,300 shares of Merrimack and no plans to buy our sell in the near future.

Merrimack Pharmaceuticals: "We like them! That was one of our spec pharma picks. We still continue to like it. I think it's in real good shape. You have a good one in Merrimack, we still like it."

Biotech Investing: Reader question on Provectus (PVCT)

I hope everyone had a great weekend!  I received the following question from EJ over the weekend regarding PVCT.

Looks like PVCT finally gonna start Phase3 trial for melanoma drug. Phase2 results were amazing. Any thoughts on this one?

EJ, I wouldn't touch this one.  The company only had less than $18 million in cash at the end of the 3rd quarter and a robust, quality Phase 3 trial will cost approximately $100 million so there's definitely going to be shareholder dilution in the near future.  Also, no partner for a small biotech is a red flag.  Their market cap is $162 million and I just feel there are much better companies out there at a lower market cap with more promising products.

I like and own CPXX, OGXI, ONTX, and TNXP.  All have drugs either in Phase 3 trials (ahead of PVCT) or drugs getting ready to enter Phase 3 trials.  And they all have market caps less than $100 million and more cash on hand that PVCT.  You may want to check them out if you are looking for other high risk, good value investing opportunities.

Thank you for the question and good luck!