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.