Getting short

Hi all,

Do any of my readers (such as they are) have interest in articles on companies that I think are good shorts? I think it's an important strategy for any investor to successfully hedge, and I think there are some prime targets in the biotech space (as always) that might be nice for me to add to my model portfolio. Let me know in the comments...

Best!

JVS

This is not a trade analysis or recommendation.

ECYT November puts position update

The model portfolio ECYT November puts expired worthless, so I moved them over to the closed position tab, for a cool 100% gain in a month and a half. Typically, I wouldn't "bet" such an enormous position size (i.e. 10 times a normal option size), because if it goes south you're looking at easily 100% losses in a short time frame, but ECYT was trading just about as low as I thought it possibly could.

I am considering reentering ECYT puts if the price per share declines a little more...as is the premium for selling out of the money puts is a bit too low for the risk for my taste.

Good Investing!

JVS

This is a trade analysis, not a trade recommendation.

Exiting model portfolio IBB puts...

...I'll take the average of the bid/ask spread for the November 22 275 puts, which is (according to TDA) trading at 22.30. They were entered in the model portfolio at 10.50, which is a gain of 112% in 16 days, which comes out to an annualized gain of ... 2555%!!! If only every trade I did in real life was that good! :)

Happy Investing,

JVS

This is not a trade recommendation or analysis, but a modification to this website's tracking portfolio.

Quick clarification on position sizing

For posterity: When I talk about a "100% position", I will typically be referring to stocks, whereas a 10% position (or thereabouts) will be options; the reasoning is that by nature options are typically much more risky. For instance, if a typical 100% position for me would be purchasing $1000 worth of a stock, then purchasing a 10% position of options would be $100 of options. However, if it's a "100% position" for options, I would be purchasing $1000. So, my 100% ECYT put position is very risky, and could go very poorly; I feel confident in its prospects though, which is why I made the very risky bet of a 100% options position on it.

JVS

This is not a trade analysis, or recommendation, but an explanation of this blog's model portfolio.

Ariad's AP26113 receives breakthrough designation...

Disclosure: I'm long ARIA as a substantial portion of my portfolio.

...which, in my opinion, means little. What was more important was the safety and efficacy demonstrated by AP26113 in the recently reported Phase II trial. If true, 113 should be able to make it swiftly through the approval process if the Phase II data continue to be positive, or perhaps after a limited phase III. People continue to be negative on 113 doing well in competition with the other major ALK inhibitors already approved (like crizotinib); the beauty of 113 is that it seems to have efficacy in various resistant mutants as well, which are a sizeable portion of non-small cell lung carcinomas. However, this is getting way ahead of where we are now; we still need to wait for more data to see if 113 is really effective, and safe. I'm still bullish on ARIA, and considering adding more to both the model portfolio and my real life portfolio.

Happy investing!

JVS


This is not a trade analysis or recommendation, but a comment on recent relevant news.

Endocyte gets 5 seconds of air time

I was driving home from work the other day (perhaps Wednesday?), and happened to flip on CNBC to catch the call-in segment of Jim Cramer's show. A viewer called in, and said something to the effect of "I like Endocyte, they have a lot of cash on hand and a seemingly strong pipeline, what do you think?" Cramer's answer was essentially "I don't like the company, I like some speculations in my portfolio, but this isn't one of them." Again, I'm paraphrasing here as it was a few days ago and I don't remember the exact words, but do people really base investment decisions on a 3-second answer from a cable television program? I guess they do, else there wouldn't be commercials on buying gold from Fox News, or the ones popular where I am about buying an oil well if you're an accredited investor. I've certainly made dumb investment decisions, particularly from not researching enough, or acting rashly, or any hundred number of reasons, particularly as a relatively young/new investor, but man...might as well use a Ouija board as create an investment thesis on a 10-second sound bite.

What a volatile, interesting week it's been!

Well, it's been a crazy ride this week, what with the pure, good-ole-fashioned breakout by ARIA, the plunge + reversal of GALT (and the wild penny stock promo/bad science controversies brought on by some social media), and finally the enlightening conference call by ECYT. I've been keeping up with these events (just barely), but haven't had time to sit down and write my reaction; I wish I would have, as my predictions for GALT were essentially correct that I didn't blog out for the record (about the penny stock/bad science, but not the phase I trial results). I have a huge project at work right now, but I'll have some time this weekend to get some thoughts down. Fun week though!

JVS

Exiting our IBB puts today

Forgot to post this last night (before IBB went up today), but I'm exiting my Jan 2016 puts, selling them for 35.8 (mid-point between bid and ask as displayed by Yahoo). I'll book a gain of 22% on the 10% position, or a 2.2% gain in 3 weeks, for an annualized gain of 38%.

After some further reading, I think that a lot of the large-cap companies in IBB are more fairly valued than the small cap ones, so puts on the entire IBB may not be a smart hedge; I'm considering purchasing puts for my GALT position just to protect it a bit, as it has run up a TON with no material change in its prospects.

JVS



This is not a trade recommendation.

An interesting post for some of the biotech speculators out there

I'm not the biggest fan of Adam Feuerstein of The Street, but he did have an interesting post here of 14 big catalysts coming up in 2014. I'm not one to wildly speculate (read: gamble) on the outcomes of clinical trials, but I know some of the people that read this blog might be, so if you're interested, click on through!

JVS

This is not a trade analysis, or recommendation, or a recommendation to engage in any speculation etc.

Value, or an EPIC Failure? : Ariad in focus

Disclaimer: I am long $ARIA.

Their name/symbol is pretty cool,
you can read about it here.

I want to start here by addressing the fact that I'm doing the one thing that I hate to do: following the herd. Ariad Pharmaceuticals (ARIA) is a play that is beloved by small-time, retail investors, and seems to be institutionally uningestable; it currently has a short float of nearly a quarter of all shares, and has recently been on a strong negative rip after some set-backs. Typically, I'm of the opinion that the people smarter than me that devote all of their time to understanding biotechs probably know more than I do, and have more tools than I do. So, this is definitely not a play that makes me comfortable; sometimes, though, the market is wrong, and I'm a believer that this is one of those times. Additionally, this is a classic story of people not understanding where the upside of Ariad exists, and there's a lot of really crappy (and I mean REALLY truly awful) understanding of various cancers and cancer therapeutics on sites like Seeking Alpha and Motley Fool, who tend to dominate the discussion on this topic. Other than those two sites, most of the discussion on Ariad comes from looney message board posters, who claim that Iclusig is better than Gleevec (it's not) or that Gleevec should be pulled from the market (lol). But I'm getting ahead of myself here; let's start from the beginning.

Where have I been? Is Janet Yellen insane? What's coming down the pipeline?

So, I haven't posted in awhile...why not? Well, simply put, I've been doing some looking at a few different plays in biotech that have good value. I think I have an intriguing one, but rather than a play that requires my scientific expertise, it is more of one that requires my more-lacking business experience; so, I want to make sure I have everything squared away in my estimation of a company's potential revenue before I put my take out there. Rest assured, I am alive, and still planning to continue this blog. Just trying to make sure I deliver some good content, which sometimes takes some time.

How I would have had to do research ...
if I lived in the age of dinosaurs.

If you want something entertaining, check out Janet Yellen's comments on biotechs being overvalued. I heartily agree, hence my adding the IBB puts to the model portfolio. Whether she should be making these comments is another matter entirely.

Happy investing, and I hope to have something a little more ... salient ... as I pull on a certain thread in the hopes that I unravel a great investment opportunity (that's a fun little tangential hint as to the company I'm currently researching).

JVS

As predicted, IBB drags down GALT

Well, I never thought my prediction last week about the high-flying biotech sector dragging down Galectin Therapeutics ($GALT) would be so immediately prescient, but after a day when $IBB (a sample biotech sector ETF) was down about 2.5%, GALT was dragged down 6.4%! That's a pretty substantial decline for one day. I only wish I had taken GALT out of my model portfolio like I speculated about. Oh well, I guess it's a little more incentive to follow my intuition in the future!

Unfortunately, the sorts of stocks that
we're trying to make value plays on.

I think today was a good example, however, of where the markets are in (and out) of touch with a rational valuation: mid/large cap stocks seem to be fairly valued, or at least people believe them to be fairly valued, while small caps and especially tech seem a little "momentum-y" for the moment. While the Dow Jones was only down 0.26%, the Russell 2000 was down 1.7%, and biotechs were down another percent more, with some of the smaller biotech stocks being even more volatile (like GALT). After the minor correction to IBB earlier in the year, the momentum play was back on; I'm of the belief, though, that the valuation of the biotech sector is a little out of whack from the huge amount of people jumping into it as a momentum play in the pursuit for yield in a market that many continue to view as lacking good value. My general outlook on stocks is a continual grind higher for the next year or two; I do think valuations for some of the crazy momentum stocks (like Tesla, or the biotech sector) are overdo for a correction...the only question is when. Thus, to shield ourselves a bit from this volatility, I'm adding here puts for IBB into my model portfolio. Due to the speculative, all-or-none nature of puts, this will only be a 10% position, so that if I'm wrong and IBB continues its meteoric rise, we don't lose a huge amount of our pretend money.

Thus, I am adding to our model portfolio near-the-money Jan 2016 260 puts on IBB, a 10% position. I will choose the mid-point between bid/ask as our purchase price, as determined by Yahoo's IBB Options quote page, so our position will be bought for 29.35 (I'm showing a bid of 28, and an ask of 30.70).

JVS



This is a trade analysis, not recommendation!

I will admit...

...that the meteoric rise in $IBB (the biotech sector ETF) has me a little nervous, particularly in our position in Galectin Therapeutics ($GALT) which has doubled in price largely due to the momentum of IBB and Intercept Pharmaceuticals (ICPT, the successful competitor of $GALT) dragging GALT up without any material change in the likelihood of success of GALT's GR-MD-02. I'm actually thinking about removing GALT from the model portfolio, but still following it in this blog, because I'm getting nervous of just how far it has ran (and the fact that in my model portfolio, our official open date was just a few days ago, the mid-teens, rather than a few months ago when GALT was below $10 price per share). Something I will ponder over the weekend.

Endocyte, the SMDC, and the future of clinical oncology...

...or the future of arthritis treatment and cardiovascular disease prevention?

Part Three: The Future, The Bull, and the Arthritic Arithmetic

I disclaim: I am long shares of ECYT. 


As a reminder, you can find parts one and two of this series here and here, respectively. We left our story in Part 2 with Endocyte in a bind: a failed Phase III clinical trial on their lead compound, the loss of a $1 billion partnership with a world-leader in drug development, and a plunging price per share. However, I outlined what I believe are a few potential pluses of the stock at this level: the limited downside of the stock due to the value of Endocyte's SMDC technology, and the potential for success in the company's other clinical trials. Today, I want to talk about the company's most immature preclinical product, which I believe holds greater potential upside than its cancer applications: anti-inflammation.

A macrophage, being all inflammatory.
You know how they get. Source.

Endocyte, the SMDC, and the future of clinical oncology...

...or the future of arthritis treatment and cardiovascular disease prevention?

Part Two: The Company's Position


As a reminder, I am long shares of ECYT. 

Endocyte, the SMDC, and the future of clinical oncology...

...or the future of arthritis treatment and cardiovascular disease prevention?

Part One: The Premise

I'd like to take the time to disclaim here that I'm long Endocyte ($ECYT). I'm also ridiculously, unhealthily bullish about the prospects of this company in the next decade or two. Just so we get that out of the way: I'm going to try and make this the most fair and even-keeled assessment that I can, but be aware of my stance toward this company. Now that that's out of the way, onto the show!

The Keeping of the Record

In order for this to be the most maximal learning experience, I'm going to be adding a 'model portfolio' of what I would do if I was only going to invest in pharmaceutical companies based on the information that I've presented here, just so that I have something to keep myself intellectually honest about my efforts.

Me, after my stunningly prescient biotech stock picks. (lol)

This 'model portfolio' is definitely, DEFINITELY not an exhortation to follow any of the trades/investment theses presented during my time on this blog, it's just a way for me to keep track of myself. Hopefully it'll teach me about biotech investing, without me having to actually risk a substantial amount of capital to learn the same lesson. Of course, nothing is the same as when you get to "the real deal", but I think it can still be a good developmental tool for myself. I'll also post it on here once I find a way to permalink it to the front page, so that other people can watch my progress/success/failure as it happens!

Happy Investing!

JVS




This (and the eventual model portfolio) is not a trade recommendation, or a financial recommendation of any kind. 

Update on Galectin Therapeutics ($GALT):

Preclinical Trial Reassuring, if Little Else

Disclaimer: the author is no longer long shares or options of $GALT, but is considering entering a small position the next month.

Monday, Galectin Therapeutics announced the results of a small preclinical study. You can read about the results from their investor relations website. You can also click here to see my previous take on Galectin Therapeutics. There are definitely some large positives in their brief press release, along with a few questions I'm left with. Hit the jump for my take on what the preclinical trial means.

I'm Baaaaaack

Hey everyone, sorry for the complete (literal) dearth of posts in the last 3 months; med school finals and summer lab rotations started to get way too busy, and interfered with my first love: investing!

So, I'm really going to try hard to make this at least a biweekly (if not weekly) blogging foray. Tomorrow or Monday I'm going to post my thoughts on a biotech position that I'm currently in, one that I wish I had waited to enter until this week. Hopefully I can illuminate why in the upcoming post. I truly think it's a robust opportunity, for a company that I am expecting to hold for AT LEAST 5-10 years. Let's discuss.

Galectin Therapeutics: Some more thoughts

Disclaimer: I'm long $GALT with a small position, and considering adding a bit more due to recent downswing in prices in $IBB.

So, I finally have some time to sit down and give some more analysis on $GALT, whose Phase I trial I wrote a snap-reaction to earlier in the week here. Give that a read, and then come back here.


       VS .     


One of the funny things that I've been reading about that seems to be a prevailing opinion from retail investors  is that GALT, with a successful Phase II (or even Phase I) trial of GR-MD-02, deserves a market cap valuation identical to ICPT's ~ $6B. This is ludicrous for a few reasons.

What am I long?

Quick one for today. Someone asked earlier "What are you long/short?"

I'm currently not short any biotech stocks, although I'm considering one that I'll write on sometime this week.

Currently long:

Ariad Pharmaceuticals ($ARIA) -- sometime to come
Galectin Therapeutics ($GALT) -- detailed yesterday


I'm thinking I'll write some on ARIA sometime in the next few days (as my schedule allows); I hope to have something a little more substantive than what I put out for GALT. Both of these seem to have some underappreciated value. We'll see.

I'm also really interested in getting some short ideas in biotech out there; I'll detail why in a few days.

Happy investing!

JVS


EDIT: I had previously written that I was long SNTA, which is no longer true; I'm not even sure if it was at the time I wrote this note, because this period was shortly after I had begun to clean my portfolio of a lot of my biotech names that I was long. :-) This was due to a lot of factors, but mostly my massive overexposure to biotech names that I really had no rationale to invest in. I quickly realized that SNTA was also one of those, because I realized I didn't really know enough about the company to make a rational case for why I was invested. As such, I will not be writing anything on SNTA. -- update from 6-28-14

Galectin Therapeutics ($GALT) Introductory analysis

*Disclaimer: I am long $GALT with a small position.

Company position: Galectin Therapeutics ($GALT) is a pharmaceutical developer of drugs targeting liver fibrosis and non-alcoholic steatotic hepatitis (NASH), diseases associated with the metabolic syndrome. GALT's main competitor in drugs directly targeting liver fibrosis is ICPT, a small pharma company that recently achieved a wildly successful Phase II clinical trial targeting the farnesoid X receptor; the study was halted early due to the overwhelmingly positive data. ICPT spiked from around $71 per share to around $370 per share, and now holds a market cap of ~ $6B. 

Pipeline: For GALT, the company will be made or broken on the back of its lead compound, GR-MD-02, an inhibitor of galectin-3 proteins, which have been demonstrated to be important in the pathology of fibrosis. 

Recent activity: Today, GALT gave a conference call on the completion of a Phase I trial of GR-MD-02 for the treatment of liver fibrosis in 6 obese individuals. This trial presented some interesting results, which I highlight here, along with the basis of my investment thesis: