Sunday, April 5, 2015

Biotech Investing Trade Updates - NKTR and VVUS

I made a few purchases the first week of April.

Vivus (VVUS) - I purchased 10,000 shares at $2.30 to bring my total position to 19,500 shares.  The stock has been hammered over the last few weeks (and the last few years since the unsuccessful launch of it's obesity pill Qsymia).  I'm betting (and I mean betting) on a few events which could bring upside to this battered stock.  The just cut their sales staff by 1/3 and I feel like they are leaning down to trim their cash burn and attract potential acquirers.  Let's be real, they don't have the financial resources to compete against the other two obesity products being marketed by Takeda and Eisai.  Their board would have to be complete idiots if they aren't actively pursuing a sale of the company or partnership.  Also, the company is on the hook for $200 million to fund a cardiovascular study required by the FDA as a condition of approving Qsymia....and they can't afford to do it.  Qsymia would be a solid product for one of the many large pharmaceutical companies looking for ways to expand their product offerings with continued pressure from patent expirations.  Also, they have an erectile dysfunction drug, Stendra, which recently gained approval with the only label that says it can be taken 15 minutes before sex.  Who wants to wait 30 minutes for Viagra to work when you are about to get your groove on if you only have to wait 15 minutes with Stendra?  Sounds like a pretty great competitive advantage.  This drug is currently partnered with Endo in the US and Menarini in Europe.  Both of these assets have to fetch a buyer which is what I'm banking on....and it needs to happen soon.

Nektar (NKTR) - I purchased 2,000 shares of Nektar for under $11.00 which is my first position in the biotech.  The stock is near a 52 week low due to recent negative results for one of it's lead compounds in breast cancer.  I think this provides an opportunity to get into a company with a robust pipeline, strong partnerships, and....wait for it.....revenues!  The company had over $200 million of revenues in 2014 and I would expect continued growth in 2015 as new products are launched or have the potential for approval.  Movantik for the treatment of opioid induced constipation was launched by partner AstraZeneca last week which triggered a $100 million milestone payment and will start bringing in royalties.  They have a number of compounds in phase 3 and 2 trials which are highlighted in the companies pipeline.  With a market cap under $1.5 billion, plenty of cash on hand, and a number of quality partners....seems like a good deal which is hard to find in the current world of drastically overpriced biotechs.

Do your own research and hope everyone has a great trading week!

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