GOOD and BAD Biotechs: One year later (part II)
This is the second installment of my report card on my blogs about BAD biotechs one year ago that can be found here.
Cadence Pharmaceuticals (CADX), BAD at 6 – the main driver for the stock remains approval of Acetavance intravenous acetaminophen. The share price jumped just two weeks after my original criticism on news that Study 304 had positive results, and remained strong despite the predictable failure of their antibiotic goo project. The pick was unsuccessful in terms of my one year horizon, but since the Acetavance PDUFA was delayed until February 12 I’ll alow myself an extension. For now the pick gets a C, but depending on what happens next month it could be revised anywhere from an A to an F.
NPS Pharmaceuticals (NPSP), BAD at 6.1 – NPS has managed to maintain a fairly steady financial state, although their future appears to depend completely on the outcome of their STEPS phase III trial of Gattex in short bowel syndrome. Based on prior performance I remain pessimistic, but at least the company has the cash to make it through topline data easily. In the meantime, the share price has gradually sunk through a raging bull market to the current levels near 3, which I feel is a much more appropriate valuation. After my negative comments on NPS, pumper troll esymoni informed me “You know nothing about NPSP and the pipeline of drugs. It is a shame people like you can spout BS and make it seem like gospel when you have no idea of what you are talking about.” Well, religions have to get started somehow. Esymoni never bothered to rate NPS himself – his only green thumb was reserved for Blockbuster, a similarly misunderstood and maligned company with a glowing future. NPS hasn’t proved themselves as an UGLY company (although they will if STEPS fails), so I’ll only give myself a B on the pick.
Idenix Pharmaceuticals (IDIX), BAD at 6 – Idenix has become an extremely important stock in the evolution of my thinking about baby biotechs. I originally red thumbed the stock in early 2008 at 2.5, and watched my score deficit climb towards 300 as the share price tipped the scales at 9 based on what appeared to me to be very preliminary data for the anti-retroviral IDX899. Then in February when the company farmed IDX899 to Glaxo for what appeared to be reasonable compensation and royalties, the share price plunged and never truly recovered. Once the share price was back below 2.5, I realized that the share price was lower than my original red thumb yet the company overall appeared to be in a much improved position. Ironically, I ended up buying thousands of shares around 2.5 (I’m down) and then green thumbing the company in the AllStarPortfolio at the low of 1.84 (I’m up). So I was definitely correct in my opinion of Idenix at 6 (grade A, thank you) but I’ve realized that a good investor should have a buy threshold for every company he follows, no matter how weak they may appear.
Synta Pharmaceuticals (SNTA), BAD at 4.4 – as predicted, the negative phase III data for elesclomol in melanoma caused Synta’s stock price to fall off a cliff. Once again, the share price is higher than it was a year ago but don’t expect that to be sustained for long. Synta is truly the biotech of the living dead in its ability to reanimate its stock price in the face of all common sense to the contrary. My BAD thesis for Synta was validated by the drop below 1.5 after the phase III failure, grade B.
Dendreon Corporation (DNDN), BAD at 4.5 – oops. I really shouldn’t have included Dendreon in my list of BAD biotechs since they really fell more into the FLYER category. But I had a feeling the make-up trial would fail and I wanted to make a statement. Clearly, events turned out otherwise. F.
Next I’ll discuss the success of my GOOD biotechs, and hopefully manage to do so in one post. Once I’ve completed my report card I’ll discuss my new strategy for speculating in baby biotechs.