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GBMB update

Recs

13

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.

19 Comments – Post Your Own

#1) On May 11, 2010 at 3:03 PM, caterpillar10 wrote:

don't forget a convenient pouch somewhere to store a few handy barf-bags while you're at it:) 

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#2) On May 11, 2010 at 3:06 PM, portefeuille (99.66) wrote:

someone should really have find out what the "odds" are for PBTH. as I consider it your discovery (and as you, as usual, are probably the only one qualified to do so), I suggest you do it ...

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#3) On May 11, 2010 at 3:09 PM, portefeuille (99.66) wrote:

PROLOR Biotech (PBTH).



enlarge

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#4) On May 11, 2010 at 3:19 PM, YodaBuffett (< 20) wrote:

What is a GBMB?

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#5) On May 11, 2010 at 3:33 PM, geneticbiscuit (98.49) wrote:

I agree that a seatbelt would be nice.  I've considered locking my windows from the outside to prevent a PC sized object from being hurled out.

someone should really have find out what the "odds" are for PBTH

Considering that they only have the cash for another quarter or so and that they have only one Phase I candidate (possibly going on Phase II), they desparately need either a partnering agreement or a buyout otherwise they're headed towards dilution (or bankruptcy...).  I certainly wouldn't touch this one for a while.

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#6) On May 11, 2010 at 3:36 PM, geneticbiscuit (98.49) wrote:

Oops...don't know how I missed the initial offering from April, but that gives them some more wiggle room - ~25million.  Still, going forward they will be increasing burn in Phase II and beyond, so they'll need an infusion of cash within a year or two.

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#7) On May 11, 2010 at 3:47 PM, portefeuille (99.66) wrote:

I have even written a (more or less useless post) on PBTH here.

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#8) On May 11, 2010 at 3:48 PM, portefeuille (99.66) wrote:

useless post)

useless) post

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#9) On May 11, 2010 at 4:31 PM, Option1307 (30.12) wrote:

What is a GBMB?

See here.

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#10) On May 11, 2010 at 10:20 PM, dcsilver (61.22) wrote:

Disappointed in the loss in faith in BDSI.  Any more thoughts as to why you think they are headed south? The royalties from Onsolis aside, after the recent round of dilution they have enough money to go for  a year.  Good news on any front should drive this stock over 5. 

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#11) On May 12, 2010 at 12:06 AM, zzlangerhans (99.85) wrote:

I'm going to add another GBMB stock to the list. I noticed Savient hasn't recovered much from the Euro shake up last week and is trading at its lowest price since the strongly positive FDA advisory panel vote in June 2009. The new PDUFA is September 14 and the company has repeatedly stated that the Complete Response letter was purely related to manufacturing issues rather than concerns about efficacy or side effects. Now anything can happen with the FDA, so no GBMB'er would actually hold Savient through the PDUFA. But I see Savient going back up to at least 16 prior to September 14. If the stub is back below 12 tomorrow, I'm going to buy in.

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#12) On May 14, 2010 at 12:06 PM, expatriot08 (29.13) wrote:

BDSI- I was under the impression that sales were not expected to be much. Just proving the platform and next drug is suppose to be the big seller.?? 

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#13) On May 14, 2010 at 7:36 PM, zzlangerhans (99.85) wrote:

I have no faith whatsoever in BDSI, or any other stock I own. If I'm holding a stock a month after I bought it, it means I shouldn't have bought it. BDSI is way down, ergo I made a mistake. The only question is whether it is a mistake to hold it at the current price. I almost never sell at a loss, mainly for psychological reasons. The volatility in biotech will almost always carry the share price back over the buy price eventually, and I never run out of cash if I need to buy something else. Watching a stock run back up after I sold at a loss is even worse than watching it run up after I failed to buy it in the first place. Is Onsolis a failure? Is the delivery platform a failure? At this point I really don't know. I just know faith won't do me any good in these situations. But I'm going to hang in there.

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#14) On May 15, 2010 at 9:25 PM, djshagggyd (72.54) wrote:

Whether you call yourself an investor or a speculator... (or even if you say "eph labels entirely!"). You can't go wrong with the type of research and due diligence displayed here in your blog. Great work! And thanks for sharing!

~djshagggyd 

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#15) On May 19, 2010 at 2:59 PM, mhy729 (30.47) wrote:

Update on Discovery Labs (DSCO):

http://www.discoverylabs.com/2010pr/051910-PR.pdf

DSCO is now up ~5% following heavy trading earlier in the day.  Your thoughts?

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#16) On May 20, 2010 at 5:04 AM, expatriot08 (29.13) wrote:

Just a little bit of positive spin for you on BDSI- Mark Sirgo CEO made some purchases this week. Nothing huge but looking at his past purchases his timing has been pretty good. 

cheers 

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#17) On May 20, 2010 at 7:26 AM, zzlangerhans (99.85) wrote:

Frankly, it seems like Discovery is making a press release about nothing here in order to keep their name in the news. I really can't comprehend the nature of their in vitro studies, but it seems like the real task for them is to switch their validation testing over from a fetal rabbit to a fetal lamb model. So they "revalidated" their fetal rabbit model. I have no idea what that means. According to Discovery's conception of what the FDA wants, the real test is the evaluation of Surfaxin in the fetal lamb model. And of course Discovery has been wrong about what the FDA wants four times and counting. All that seems important here is that they have 24M, they seem financially viable for a year, and they seem to be on schedule to resubmit the Surfaxin NDA in Q1 2011 before they need to finance again. I would be very surprised if they are not over 1 after resubmission - ergo a 100% gain from present levels. I'm willing to double down at these prices and will likely do so below 0.5.

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#18) On May 21, 2010 at 6:49 PM, zzlangerhans (99.85) wrote:

I bought another 15000 shares of DSCO today at 0.47 for a total of 25000 and a cost basis of 0.502/share.

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#19) On May 21, 2010 at 9:29 PM, mhy729 (30.47) wrote:

Good luck to you zzlangerhans.  And thanks for your postings.  I would say you have the best CAPS blog on all matters biotech.

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