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!

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