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First 2011 GBMB update

Recs

24

May 02, 2011 – Comments (6) | RELATED TICKERS: REGN , VICL , PYMXD.DL

The last couple of months have been very favorable for the GBMB, especially now that I have isolated the major weakness of the strategy – early selling. My first victory from correcting the strategy is Vical, where I resisted my usual inclination to sell for a $2000 profit and held out for $8700 a couple of months later. Of course, I might lose out on another $10000 but I won't cry over this one. I gave up on Myrexis with a small profit, but my cash/market cap imbalance was narrowing and the pipeline remained unimpressive. Alnylam I dumped wisely on an irrational burst on a weak quarterly PR and then bought again at a lower price. Earnings will come out again after the close today. And I put money down on a weird little OB company called PolyMedix whose price dropped way below my buy threshold on an oddly-timed dilutive financing. Their pipeline looks solid for a 50M cap but I've been fooled before (in CAPS only) by companies like Aryx and Altus. Time will tell. 

Current holdings (as of close 4/29/11):

BDSI 5000 shares bought at 3.95, current price 3.69

DSCO 6667 shares bought at DCA of 4.31, current price 1.97

RTIX 3000 shares bought at 2.95, current price 2.90

IDRA 6000 shares bought at DCA of 3.15, current price 2.6

ANDS 10000 shares bought at DCA of 1.4, current price 1.22

ALIM 2000 shares bought at 9, current price 8.9

SVNT 2000 shares bought at 9.85, current price 11.62

ALNY 2000 shares bought at 9.5, current price 10.26

BCRX 3000 shares bought at 3.4, current price 3.89

PYMX.OB 10000 shares bought at 0.66, current price 0.66

Recent sales:

MYRX 3000 shares bought at 3.85, sold at 4.3

ALNY 1000 shares bought at 10, sold at 11.28

VICL 5000 shares bought at 1.9, sold at 3.64

BIOD 5000 shares bought at 1.75, sold at 2

Status:

Total value of current GBMB holdings = $147914

Unrealized losses = $15821

Realized gains = $49572

Profit =$33751

 

I'm going to add just one new GBMB player:

Regeneron Pharmaceuticals (REGN) - market cap 4590M, share price 51.04. Cash 627M, debt 160M, burn 15-35M. I recently pitched this stock and a detailed analysis can be found on the company's page. In the two days after I pitched it, the stock rose 30% on a surprising positive result from the VELOUR cancer trial, then plunged back to the original level a day later. What prompted the reversal in fortune was scientific confirmation of the virtual equivalence of Avastin to Lucentis in treating wet macular degeneration. This has negative implications for Regeneron's lead compound VEGF Trap, which has a PDUFA of August 20 to treat that same condition. Lucentis is a much more expensive, and thus vulnerable, competitor than Avastin. Regeneron has a lot of moving parts and therefore an appropriate valuation is difficult to calculate. There are potential therapies for other ocular conditions, gout, and now cancer in late stage clinical development. Therefore I can't claim with certainty that Regeneron is undervalued. However, I do know that once the current concern resolves itself and the smoke clears, the share price will likely resume the upward trend it was previously enjoying towards the August PDUFA, which is about 70% likely to be favorable. A BLA for rilonacept for gout may also be submitted as early as mid-year providing further buoyancy to the stock. Portefeuille already took my football and is running with it, but I'd want to see the share price settle further before risking my hard-won cash. This is the GBMB after all. Potential buy under 45, but thresholds may be changed without notice in the face of high volatility.

6 Comments – Post Your Own

#1) On May 02, 2011 at 11:27 AM, lemoneater (67.80) wrote:

Good job!

You could give up your day job with what you make in trading, but I'm glad that you stick with being an ER doctor. Sometimes you have to help those who oppose themselves and that cannot be easy.

I thought gout just happened to literary characters--more's the pity!

Have a good day!

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#2) On May 02, 2011 at 1:19 PM, ikkyu2 (99.23) wrote:

Nice work, but in my opinion you are playing with fire.  Be careful.  

And make sure you realize $3K of losses every year to offset at least that much short-term capital gains!

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#3) On May 02, 2011 at 1:34 PM, zzlangerhans (99.85) wrote:

Playing with fire? I'm swallowing it.

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#4) On May 02, 2011 at 3:13 PM, TheLastYetti21 (30.08) wrote:

ZZ,

 I read your pitch on PYMX.OB. Well written; however, if you are not expecting any short term catalyst what makes it a buy at .66? After dilutive financing typically a company can drag lower for weeks on end.

What is the catalyst you see for the company and do you have any possible time frame?

Thanks in advance.

 

TheLastYetti

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#5) On May 02, 2011 at 8:29 PM, nilesgold (23.83) wrote:

Any updated thoughts on IDRA?  As I'm sure you know they recently decided to postpone a phase II trial of IMO-2125 after getting preliminary data from a 26-week nonclinical study.

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#6) On May 03, 2011 at 1:38 AM, zzlangerhans (99.85) wrote:

#4) Catalysts are only one potential driver of a trade. You might want to review my GBMB write-up of PolyMedix here. When a stock is relatively undervalued to its peers, there will be upward pressure on a stock. Even in the absence of catalysts, the share price is more likely to gravitate upward than downward. After a dilutive financing wreaked havoc on the stock, I see a market cap of 70M (once new shares are factored in) and cash of 39M (after the financing). The company has a phase II trial of PMX-60056 in progress with results espected in early 2012. Phase II is a sweet spot in drug development where it is easy for a company to report positive results by setting a low bar for success.

Here is a description of the trial:

This multi-center, open-label Phase 2 clinical study is intended to enroll up to 40 patients undergoing PCI in the United States. All patients will receive PMX-60056 by intravenous infusion, in a dose calculated to reduce the post-procedure ACT (activated clotting time) to less than 30 seconds above the baseline level. The primary endpoint of the study is to evaluate the safety and efficacy of PMX-60056 in reversing heparin in a surgical setting. Data collected from this study are intended to support further development of PMX-60056 in larger and more diverse patient populations. The study is expected to be completed by the end of this year.

Ergo, no comparison with an established agent such as protamine for safety and efficacy. This is really a glorified phase I study intended to justify a larger trial. Positive results might not affect the share price of a company with a 300M market cap, but in this thinly traded OB micro-cap I'm more optimistic.

The company also has an antibiotic in development than I'm less excited about, as I've seen a lot of disappointments come out of that area and they seem to be having troubles advancing to phase II. But it's still worth at least 20-30M in cap and the total enterprise value of the company is only about 40M.

That's my rationale - take it or leave it. I took a relatively small position here as I'm well aware I can be fooled badly. I see Anadys as a better bet at this market cap, but I already have 10000 shares.

#5) Yes, that was ugly news for Idera. I really expected the share price to take a big hit but in true baby bio style the bad news got shrugged off and the price is right back to steady state. Here's the critical paragraph:

Idera is conducting chronic 26-week nonclinical toxicology studies of IMO-2125 in rodents and non-human primates. Preliminary analysis of the histology data from the rodent study showed instances of atypical lymphocytic proliferation. The Company expects data from the non-human primate study and additional histology data from the rodent study during the second half of 2011.

IMO-2125 is the most valuable compound in the pipeline and I do not want to be holding Idera stock if it gets dropped. I haven't sold any shares but I'm looking for my exit point every day now. If I was up, I'd probably already be out but I'm down about $3000. Damn.

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