Investing in biotech stocks - My experience so far

itwasntme001

Good to see you doing well with your positions Brockstoker!  I am not going to pretend i understand anything about the biotech sector so I have just held two trusts in the sector - biotech growth trust and worldwide healthcare trust.  Both have done very well recently with the former up about 80% and later up about 40% (since inception).  Just wondering if you think a lot of this move is largely speculation based with almost no fundamental earnings drivers?  Both trusts have been underperforming the rest of my portfolio for a number of years so it feels tempting to take profit on the whole lot and reinvest in something else, especially given I feel the moves have been much more about speculation.

Would be interested in your thoughts!

BrockStoker

Appreciate the comment itwasntme.

Yes, BIOG and WWH have both done well recently. I have held WWH since 5th May 2015, and I used to hold BIOG, but started switching over to Polar Capital Biotechnology (my first buy was 4th Nov 2016) when I saw BIOG was under performing (and I preferred that PCB held more small/mid-cap stocks than BIOG at that stage in the cycle - a slip up that BIOG later corrected after having to apologize for the funds under-performance!). That turned out to be quite a good move although BIOG has certainly gone a long way to catching up in the last few months to say the least.

Prior to last year's 4th quarter the main headwind for biotech/healthcare had been a mixture of politics and drug pricing concerns. That may rear it's ugly head again in the future, but for the moment most people realize that healthcare and medicine are crucial to us, and I believe the sector will continue to grow. I think the growth we've both seen in the last few weeks is mostly just the sector catching up from being beaten down, and there is still plenty more to come. If you still have a long investing horizon I'd suggest just leaving it to grow, for at least a while longer before taking any profits.

This is just the start of a new cycle in biotech, and this phase could easily continue for a year or two, perhaps more. The last time biotech rallied like this BIOG went up by well over 400%. This time will be different, in a good way I think - we already have some very strong tail-winds. Biotech has become much sleeker and focused since then - which should result in better outcomes (and profits) for all. So, if you can, leave them alone for as long as you can to do their thing. Both are good funds in sectors that have very bright futures. There is still a ton of cash on the sidelines waiting to be invested by investors who decided to hold cash during the crisis, and healthcare/biotech is looking like a very good place to invest.

While I agree that there are speculative bubbles in some covid-19 biotech stocks, I believe the sector as a whole is not in a bubble, although I think we might see some pull backs when some individual stock bubbles burst. The thing to remember is that (as I have learned with my foray into individual biotech stocks) Wall St. is not very good at seeing the potential many of these smaller biotech stocks have, until it "hits them in the face" so to speak - at which point it's "buy, buy, buy!". And that will see the sector go much higher in the future I think - there are lots (a new wave) of up and coming biotechs right now that will drive this growth.

Of course I can't predict what the future holds, and could be wrong on some of it (perhaps all of it), but if things continue on their current course, I can't think of much if anything apart from what I mentioned at the start of my post that could knock biotech off course. It's the unknowns we can't predict that will no doubt cause problems in the future, so you'll ultimately have to make your own judgement when to take profits, but I'm happy to let my biotech/healthcare funds continue to grow for a few years more at least before I take profits. It is harder than most realize to work out the best time to take profits (and that applies to other sectors, not just biotech) in my experience - certainly harder than buying - my advise would be, if you think now is the time, it's probably too early, and you should wait longer. Nine out of ten times doing nothing is the best course of action *if* you are confident in your fund manager.

BrockStoker

While I don't subscribe to "chart reading" (as mentioned in last half of this article) to predict future moves, I think this is a reasonable assessment of the sector (and it's prospects), albeit a little old now: https://www.barrons.com/articles/the-health-care-bull-market-is-still-young-51587981615?siteid=yhoof2&yptr=yahoo
Also, if you are so inclined, this is a good site to follow the sector and individual stocks: https://seekingalpha.com/stock-ideas/healthcare
I don't necessarily trust every analyst/article I read, but it all goes towards building up a bigger picture of what is going on.

BrockStoker

As of Friday's (US) market close:

S&S ISA total gain: +31.44% (2.64% loss over the last week)

SIPP total gain: +33.72% (9.51% loss over the last week)

Total Gain on £40K invested (both portfolios) is currently ~13.7K (3.5K loss over the last week)

So another down week, mostly due to Clovis, Arrowhead, and 1Life all dropping in value. Moderna also took a hit, but has started to recover. Star of the week was Agenus, which was up around 30% on Friday thanks to very encouraging early results from it's next generation multifunctional Fc-engineered next generation anti-CTLA-4 antibody AGEN1181:

https://finance.yahoo.com/news/asco-presentation-agenus-agen1181-dr-120000085.html

Hopefully next week will be a better week.

thenewcomer

just came across this post. with you started investing in biotech in 2018 and now covid, how much paper gain have you earned?

BrockStoker

just came across this post. with you started investing in biotech in 2018 and now covid, how much paper gain have you earned?

See my previous post/update - quote:

Total Gain on £40K invested (both portfolios) is currently ~13.7K

I was up over 50% (20K) at one point (less than a month back), but biotech stocks can be very volatile, especially smaller speculative stocks, and that is most of them (in my portfolios). It is of course a (relatively) long term venture, so these ups and downs are essentially noise, and it's still early days.

thenewcomer

BrockStoker said:

just came across this post. with you started investing in biotech in 2018 and now covid, how much paper gain have you earned?

See my previous post/update - quote:

Total Gain on £40K invested (both portfolios) is currently ~13.7K

I was up over 50% (20K) at one point (less than a month back), but biotech stocks can be very volatile, especially smaller speculative stocks, and that is most of them (in my portfolios). It is of course a (relatively) long term venture, so these ups and downs are essentially noise, and it's still early days.

thats approx 2% growth per month. youre doing great

BrockStoker

thats approx 2% growth per month. youre doing great

Thanks. I'm certainly not unhappy with how it's going. I think it's also worth pointing out that: both times I started (invested in) the portfolios, the sector was close to (or at) lows, so the (somewhat lucky) timing has no doubt played a part. Having said that, I wouldn't discount large growth spurts going forward, as individual stocks start to gain traction/snowball - that is my hope anyway. Only time will tell.

BrockStoker

As of Friday's (US) market close:

S&S ISA total gain: +26.14% (5.3% loss over the last week)

SIPP total gain: +33.73% (0.01% gain over the last week)

Total Gain on £40K invested (both portfolios) is currently ~11.8K (1.9K loss over the last week)

Another week of elusive gains. Lack of good/any news is the main reason - without further good news, a stock which peaks will then trend lower. Agenus was probably the best performer of the week. It's now in profit after sitting in the red for a few months now, albeit a rather modest 28% total gain at this stage.

There was also further good news for Agenus - although this did not move the stock much:

https://seekingalpha.com/article/4352128-celyads-positive-data-and-news-good-bad-and-ugly-of-biopharma

I decided to make a few changes after spotting a couple of new opportunities. For the S&S ISA I sold Innovia Inc + Exact Sciences (both made a small profit), and bought Evofem with the proceeds. Evofem has just had the nod from the FDA for their novel contraceptive gel, which I believe is about to strongly disrupt the birth control market. It's the first real contraceptive alternative to emerge for some decades, and because there are no hormones involved (it works by altering the PH to make the uterine environment hostile to sperm) which can have unpleasant side effects, it looks like a very attractive alternative. Evofem also suspects that it may also be effective against STDs and is currently in the process of initiating trials for this indication. After Evofem announced a public stock offering the price dropped to a level which I could not resist, so I now have 900 Evofem shares!

Likewise for the SIPP, I sold Intuative Surgical (just before they announced a contract with the Pentagon, grrrrr!!) + Illumina (also both in profit) so I could buy another small biotech called Amyris. Not sure if it was the best timing, as Amyris had just gone up over 100%, but I believe there are still significant gains to come. What Amyris does is GM yeast so that almost any naturally occurring compound can be produced in large quantities for little cost using a simple fermentation process. They already have (very fast growing) revenue from a few products that use the ingredients they produce, which include squaline (a very useful molecule which was previously extracted from shark livers) and a sweetener/sugar substitute that has no bad after-taste, and have plans to produce CBD. I think this little company could disrupt multiple markets in the near future, so I now have 600 shares.

So with these changes I've reduced my portfolio by 2 stocks, which is something I wanted to do to help me keep track, and I think the two new replacements will offer more (and faster) growth than the 4 stocks I sold.

Lastly, there actually was some good news, but it came yesterday (Saturday), so nothing moved because of it. The news was from Biocryst's trial of hereditary angioedema (HAE) treatments, and it's very good, with patients experiencing zero HAE attacks after long term treatment:

https://finance.yahoo.com/news/long-term-48-week-data-070010325.html

Biocryst is currently my largest position in my S&S ISA, having already grown by a more than reasonable 130% (close to £2K profit), so this good news might well make it sky-rocket, if not now, at some point later. Once again looking forward to whatever the week ahead holds!

BrockStoker

As of Friday's (US) market close:

S&S ISA total gain: +24.51% (1.63% loss over the last week)

SIPP total gain: +28.37% (5.36% loss over the last week)

Total Gain on £40K invested (both portfolios) is currently ~11K (0.8K loss over the last week)

After a mixup with the SIPP (I over contributed), meaning I will have to sell those stocks (or most of them), I actually re-bought most of the stocks in my SIPP for my S&S ISA using this years allowance (20K), so the above figures do not reflect the current reality, as I have not made any changes to my portfolios in Yahoo Finance. So I bought more Arrowhead, Biocryst,10X Genomics, and Amyris on the way down on Thursday. I'll then sell those stocks in the SIPP (leaving a couple of the others alone, depending on what profits remain after I sell), hopefully on the way up - obviously a bit of a gamble, as I don't know that anything will recover soon, and I may have to take a hit if I'm wrong.

All of this has left me with a quandary - how to track/report my progress here? I could just continue to track using the tracker as I have been, without making further changes (not reflecting reality), or I could just use my platform's quote, although I won't know what Friday's close is till the following Monday. I could also just set up a new Yahoo portfolio. and I'm leaning towards this option right now.

Anyway, all that aside, underlying stocks have continued to post good news. Moderna continues to edge up on a steady drip of positive data from it's vaccine candidate, and was the only thing in the green for me last Thursday apart from Reata which actually was the NASDAQ Biotechnology Index's best performing stock on the day after announcing a financing deal:

https://finance.yahoo.com/m/f83f36c3-63f0-3649-b9d7-4253decb9e19/moderna's-stock-gains-on.html?siteid=yhoof2&yptr=yahoo

https://finance.yahoo.com/news/moderna-covid-19-vaccine-clears-174350365.html

https://finance.yahoo.com/news/reata-pharmaceuticals-inc-blackstone-life-113010260.html

Also getting some good news was CRISPR who posted encouraging long term data for their drug CTX001 in transfusion-dependent beta thalassemia (TDT) and severe sickle cell disease (SCD):

https://finance.yahoo.com/news/crispr-therapeutics-vertex-announce-clinical-063023164.html

And last but not least, Omeros also posted what look to be excellent data in their trial testing their candidate narsoplimab in hematopoietic stem cell transplant-associated thrombotic microangiopathy:

https://finance.yahoo.com/news/omeros-narsoplimab-pivotal-trial-data-123000961.html

The next week or two should be interesting!