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Recs

25

On capitulation.

April 15, 2014 – Comments (19) | RELATED TICKERS: TKMR , ALNY , ARWR

It's been an interesting ride the last four months. I thought watching my portfolio going up 600K in three months was wild, but it was nothing compared to seeing it drop 500K in less than a month. After watching my net worth drop more than 50K today for about the ninth time in two weeks, I decided that I had no choice but to mitigate risk and liquidated most of the RNAi and speculative IPO positions in my portfolio. If biopharma continues to bleed, I will liquidate more positions and go to all cash if I think I have to. Alll trades are reported in my twitter account with the #zzporte hashtag.  [more]

Recs

26

Why I'm buying biopharma crap.

June 20, 2013 – Comments (6) | RELATED TICKERS: CMXI , MSTX , PTN

Lately it seems that most of the stocks in my database have become overpriced relative to historical valuations. Some might consider these prices justified based on the merits of the individual companies or macro economic factors affecting the biopharma sector. They may be correct, but I have to consider at least the possibility of a developing bubble and limit my exposure. This leaves me a few options regarding my remaining cash reserves.

1. Keep it in cash and stay on the sidelines. Very wise for a retirement strategy but the whole point of my biopharma concentration is to get wealthy before retirement. Cash isn't going to get me there.

2. Short stocks. I've started doing this with mixed results so far. Being deep under water on Acadia has negated my gains on the other five stocks I've shorted.

3. Diversify into cheap spec stocks that have a good chance of going to zero but can also become multibaggers. I've always hated this strategy because it attracts the lowest common denominator of traders who have zero objectivity, do minimal DD, and believe everything management says. In a word, suckers. On the other hand, there are ways for a trader with experience in the sector to optimize his chances of picking a winner rather than going to zero.

No matter how bloated valuations get in the biopharma sectors, there will always be sub-dollar stocks that are existing under the radar. With that in mind, I've recently taken significant positions in Palatin, Mast, and Cytomedix. What I look for in these companies is cash and catalysts. Reverse splits, dilution, and stagnation are death for this strategy. In general, the best time to buy is on a stiff decline after a financing with a defined catalyst within a year's time.

In the case of Cytomedix, a nasty dilutive financing drove the stock down from the 0.70 range to the 0.50 range but the company had 7M in cash as of the end of Q1 and commitments for another 18M which should prevent another sharp decline before the end of the year. Meanwhile, the first interim analysis in the RECOVER-Stroke trial will take place in the near future and barring any nasty surprises may draw some stem cell hypers back to the stock. Topline data is expected in H1 2014.

Keep in mind that I believe the late stage trials in progress for all the companies I have mentioned will fail. Because the stocks trade in the pennies and at low volumes, someone will have to draw attention to the upcoming catalysts to create a run. That person won't be me. I might bet on hype and manipulation, but I won't have any hand in creating it.  [more]

Recs

10

No longer updating Portefeuille collaboration trades in CAPS

May 02, 2013 – Comments (5)

Just a quick note to say that all these trades will continue to be posted on Twitter with the hashtag #zzporte, but the duplication of work required to post them on CAPS for the few eyeballs here is pointless. I haven't decided about my proprietary trades but many of them (like the recent Transition Therapeutics trade that netted me 11K) can't be posted here because the stocks are unratable on CAPS. So for those of you who haven't made the move to Twitter yet, it's time to man or woman up and get your butt over there.  [more]

Recs

11

The Dynavax story

November 21, 2012 – Comments (0) | RELATED TICKERS: DVAX

I initially entered this as a pitch then realized that like my Sarepta pitch, it really belonged in the blog.  [more]

Recs

25

Sarepta and eteplirsen

September 13, 2012 – Comments (18) | RELATED TICKERS: SRPT

I've decided to put my pitch for Sarepta in a blog because I felt like getting a little more in depth for the biggest story in biopharma in 2012 (new obesity drug approvals? Puh-lease). Choosing a direction on Sarepta is very tough. For accuracy and points purposes, it's wise to avoid tossups because on average they'll score 0 and give 50% accuracy. On the other hand, I have to rate the stock in order to enter my thoughts into my CAPS diary. Given that it seems I'll never break a score of 4000, might as well go for it.

Sarepta is all over the news because they may be on the verge of an antisense RNA therapy for Duchenne muscular dystrophy. Muscular dystrophies are caused by mutations in the protein dystrophin, which stabilizes the myocyte (muscle cell) membrane. Absence of normal dystrophin leads to increased oxidative stress on the myocyte and eventually results in the death of the myocyte and its replacement with fatty and connective tissue. Dystrophin is also found in the brain, which is believed to be the reason that muscular dystrophies have a strong association with neurobehavioral disorders.

Most dystrophin mutations result in the loss of entire segments (exons) of the dystrophin gene. Certain mutations result in a single lost segment and a milder form of muscular dystrophy (Becker muscular dystrophy) because the remaining segments assemble forming a partially functional protein. Other mutations result in a downstream shift in the RNA reading frame which prevents formation of a functional dystrophin, and the resulting muscular dystrophy is much more severe (Duchenne muscular dystrophy).

Sarepta's approach to Duchenne muscular dystrophy (DMD) involves the intravenous administration of an antisense RNA segment that masks the mutated exon so that it is skipped during RNA translation. The resulting dystrophin is therefore partially functional, similar to the dystrophin protein in Becker muscular dystrophy. While this is not an ideal solution, patients with Becker muscular dystrophy are still able to walk into their 40's and 50's while patients with DMD are wheelchair-dependent by age 12 and have an average life expectancy of 25.

Like cystic fibrosis, DMD is a heterogeneous disorder in that it describes the end result of many different mutations. Because the dystrophin gene is located on the X chromosome and only one functional copy is necessary for normal muscle function, DMD is almost exclusively a disease of males. 1 in 3500 males worldwide is born with DMD. Mutations in different exons require different antisense oligonucleotides to effect the exon skipping required to generate a functional dystrophin. Sarepta's antisense oligonucleotide eteplirsen is directed against exon 51, but another oligo (AVI-5038) is in early development for mutations in exon 50. Sarepta estimates that 85% of DMD patients are treatable with exon-skipping drugs.

The current excitement over Sarepta is due to results of a randomized, double-blind phase II trial of eteplirsen in DMD. This trial enrolled twelve children ages 7-13, with four children in each of three groups (placebo, 30mg eteplirsen, 50mg eteplirsen). Subjects were required to be able to complete a distance between 200m and 400m in a six minute walk test prior to initiation of treatment. Each child received weekly infusions of the study drug for 24 weeks. The primary efficacy endpoint of the trial was percentage of dystrophin-positive muscle fibers in a biopsy, and secondary endpoints were six-minute walk distance and degree of lymphocyte infiltration in biopsy tissue.

The subjects in the 50mg cohort were biopsied at 12 weeks and no significant increase in dystrophin-positive fibers was noted. However, in April 2012 Sarepta reported that the biopsies of the 30mg cohort after 24 weeks had an average of 22.5% dystrophin-positive fibers. The street reacted negatively to the 24 week data because despite the positive histologic findings, no difference between groups was noted on the six minute walk test. While this appears to have been interpreted as a lack of clinical effect, in fact none of the groups showed diminished performance after 24 weeks indicating that this time period may have been too small to observe any deterioration.

The shocking news that has caused Sarepta's share price to as much as quadruple from recent lows was the announcement that a clinical benefit of 69.4 meters was observed in the 50mg eteplirsen group 36 weeks after initiation of treatment. The fact that was often lost in media reports was that this benefit was actually relative, in that the 6 minute walk distance actually declined by 8.7 meters in the eteplirsen group and 78 meters in the placebo group. It is also notable that after 24 weeks the study converted into an open-label extension in which the placebo subjects began receiving eteplirsen.

Sarepta's rising share price has been partially driven by media reports about two children who received eteplirsen in the phase II trial. A troubling aspect of these reports are claims that these children actually had functional improvement from when they started therapy. These claims are not consistent with the data released that show an average functional decline in eteplirsen patients, just not as severe as the decline seen in placebo patients. This indicates that either the two children who were the subject of media reports functionally improved while the other children in the eteplirsen group signifcantly declined, or that these cases (and possibly others) were subject to placebo effect and media exaggeration. As the groups were unblinded at 24 weeks, placebo effect at 36 and 48 weeks cannot be discounted.

A significant difficulty in interpretation of the six minute walk test results is the fact that this test was only recently applied to assessment of progression of DMD, and almost all that work comes from one research group at UC Davis. The first publications on six minute walk in DMD seem to have appeared around 2010, and the first attempt to develop normative data for the test was only published earlier this year http://currents.plos.org/md/article/percent-predicted-6-minute-walk-3vct9230jm3zg-1/ . This study indicates that six-minute walk distance may actually improve over a year's time in younger children with DMD due to the background of normal growth and development. There is a high degree of heterogeneity depending on age and prior treatment.

48 week data from the trial will likely be released in mid-October, and if they are consistent with or superior to the 36 week data the share price will undoubtedly gap upward again. At that point, significant public pressure will be generated for accelerated approval of Sarepta based on phase II data. I've green thumbed Sarepta on a pullback because I think that there's a high likelihood of strong 48 week data. However, I believe the small number of children in the trial, the lack of an observed clinical effect until the groups were unblinded, and the lack of standardization of the six minute walk test as an assessment of DMD progression will cause the FDA to require a phase III trial with more patients and a longer duration of blinding.   [more]

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