zzlangerhans (99.79)

GBMB update

May 11, 2010 – Comments (19) | RELATED TICKERS: RIGL , ITMN

Sorry no news for a while. I've been busy installing a seatbelt on the chair at my computer desk. It's simply not safe checking my portfolio without one these days. Next up is an airbag for my monitor.

The GBMB portfolio has been having some wild days of late, so I'm going to catch up on recent transactions, current holdings, and a couple of new candidates.

Current holdings:

BDSI 5000 shares bought at 3.95, current price 3.25

DSCO 10000 shares bought at 0.55, current price 0.48

MYGN 2000 shares bought at 18, current price 17.93

Recent sales:

MIPI 5000 shares sold at 3.8 (bought at 1.9)

MYGN 1000 shares sold at 25.3 (bought at 22.3)

Status:

Total value of current holdings = $56910

Unrealized losses = $4340

Realized gains = $12500

And what's going on with the players?

FOLD - this stub just keeps dropping. Market cap is 66M today, cash 81M, debt 4M. The only game left in town is phase III trials of Amigal in Fabry's, with data from the first trial expected in mid 2011 and a second trial to begin in Europe later this year. With a cap well below cash and a phase III trial in progress, this stock is undervalued, period. I attempted a buy of 5000 shares today with a limit of 2.9 but TDAmeritrade only allowed me to get 1218 shares. I'll likely try again below 3 if I get the chance.

RGEN - yet another chart that looks ugly as Hell if you own the stock, but beautiful to a GBMB'er who hasn't bought in yet. The financial picture here is all about steady state - no expected change in revenues, and a virtually non-existent cash burn projected in fiscal 2011 that the company claims will leave them with about 58M a year from now. The only thing different about Repligen is the low low stock price, which hasn't seen 3 since early 2007. The phase II study of uridine in bipolar disorder will provide topline results later in the year, and anticipation of this event will likely propel the share price upward. Last but not least, BravoBevo has been in with a green thumb since mid-April. I entered a limit order for 5000 shares below 3.25 today and so far 3300 has been filled.

BDSI - it's hard to maintain faith in BioDelivery Sciences. The royalties from Onsolis were rather negligible at $10000 in the last quarterly statement, although another data point is still needed to determine if there is any ramping effect going on. I was briefly up in the stock before European debt issues smacked the share price back down. If it climbs back over 4 again I may give up on this one and seek stronger candidates for the time being. 

MYGN - hammered hard on an earnings miss and downward guidance. I was more lucky than good to be out of the stock at that moment, but the numbers didn't seem far out of line to me. I bought in hard with 2000 shares when I saw Ultralong coming on board and I feel pretty good about the investment. The company lowered guidance, again not dramatically, and the price drop seems like an excessive reaction. And now that the company is actually providing their own guidance, they will likely stop missing expectations and be rewarded for meeting them. Like Ultralong, I'm not foreseeing substantial decline in revenues due to broad economic factors or patent issues.

DSCO - I'm still excited about this relatively small investment, and I regret being too busy to pick up another 10000 shares at 0.45 on Friday when i had the chance. I would definitely double down on Discovery at that level to make it a $10000 investment. I really liked the company's update here a couple of weeks ago. With a possible FDA communication in May on Surfaxin as well as phase II data for Surfaxin in acute respiratory failure in June, Discovery is primed for recovery.  

MIPI - out of the GBMB game for the present. Back down below the prior threshold, but now a potential bankruptcy candidate for the world to see. On May 18 bond holders will determine whether the company will be allowed to restructure its debt or forced to declare bankruptcy. I do biotech and I'm not a debt/bankruptcy specialist. I'm not touching this at any price until this issue is resolved.

GHDX - a horrible looking chart over the last two months, with more than 20% of cap lost in a bull market. But I went over the last earnings statement and didn't see anything bad, with a steady increase in Oncotype DX revenues and strong guidance. I'm not seeing any potential negative catalysts either. I'm well below the buy threshold of 17 but I already have a $36000 investment in molecular diagnostics (see MYGN) and Genomic Health is a little more risky with all revenue based on a single assay. I'm revising my GBMB threshold to 15.

More on the other GBMB players next time ... this post is becoming overlong. I'm going to add a couple of new stocks to the GBMB watchlist.

InterMune (ITMN) - market cap 590M, share price 10.65. Cash 166M, debt 126M, burn 30-35M. I've already laid out my thesis for recovery in my oupterform pitch. This stock is virtually certain to recover to at least 20 at some point in the next two years after they initiate a new phase III trial of pirfenidone. Dendreon is not a bad model for share price performance. The only question is if and when InterMune will dilute, which is likely to be necessary prior to topline phase III data. The hepatitis C drug ITMN-191 also has the potential to spark a rally in the share price. GBMB buy under 10. 

Rigel Pharmaceuticals (RIGL) - market cap 378M, share price 7.27. Cash 110M, debt 2M, quarterly burn 25M. Rigel traded in the 20's for most of 2008 on the strength of positive phase II data for oral syk kinase inhibitor R788 in rheumatoid arthritis. In October of 2008 the share price declined precipitously after the company belatedly reported some flaws in that phase II data as well as some side effects of hypertension and elevated liver enzymes. The March 2009 low was about 4.4, but rebounded over 14 during the summer only to decline again after mixed results of the phase IIb TASKi trials of R788. The low after this decline was about 6 in 10/09. Despite having partnered R788 to AstraZeneca for 100M upfront and over 1B in incentives, the stock has remained weak and was hit badly by Greece malaise. Investors seem to feel the deal was excessively backloaded. However, the company will book the 100M by September and expects to end 2010 with 170M in cash. At some point later in the year the company will initiate a phase III trial of R788 in RA, an event which will likely propel the share price upward again. I am not aware of any potential negative catalysts to drive the share price significantly downward, other than severe generalized market pain which is of course always a possibility. In CAPS world Vanamonde, Tenmiles, and Portefeuille are believers (and in the red) with Vanamonde throwing in his lot after the AZ deal. GBMB buy under 7.