Investing in biotech stocks - My experience so far

BrockStoker

Coachman,

You're putting me on the spot here. Not an easy decision!

While I'm not currently interested in investing in BP stocks, I have been keeping an eye on them, and posed the question to myself "if I were to invest in BP, where would it be?" a couple of months back. The one stock that stood out for me was AZN. Out of all BP I think they have the most solid pipeline that is likely to give them the edge in years to come.

Of course there is no guarantee that they will come out on top, but if I wanted to park my money for the next decade or so in BP stocks, AZN would be at the top of my list.

Putting myself into your shoes makes things more tricky. Instinct would be to take some profits, but often the instinctive reaction is not the best course of action. AZN has gone up a lot, but I think it's likely to go up much more.

I would say, if you don't hold any other pharma/biotech, the conservative approach would be to take some profits and put them into a fund (BIOG or the like), but I don't think you'd be taking a huge risk leaving it all in AZN. If your other investments are a bit borderline (ie. you're not going to be living in the lap of luxury) then I would say take some profits and put in a fund, but if you are doing fine (and not counting on the money in your stocks), then I would be inclined to let it roll. Worst case, I think AZN would have very little downside at this point in time if you wanted to keep it there for another 5-10 years.

Hope my post helps, and good luck with whatever you decide.

coachman12

BrockStoker said:

Coachman,

You're putting me on the spot here. Not an easy decision!

While I'm not currently interested in investing in BP stocks, I have been keeping an eye on them, and posed the question to myself "if I were to invest in BP, where would it be?" a couple of months back. The one stock that stood out for me was AZN. Out of all BP I think they have the most solid pipeline that is likely to give them the edge in years to come.

Of course there is no guarantee that they will come out on top, but if I wanted to park my money for the next decade or so in BP stocks, AZN would be at the top of my list.

Putting myself into your shoes makes things more tricky. Instinct would be to take some profits, but often the instinctive reaction is not the best course of action. AZN has gone up a lot, but I think it's likely to go up much more.

I would say, if you don't hold any other pharma/biotech, the conservative approach would be to take some profits and put them into a fund (BIOG or the like), but I don't think you'd be taking a huge risk leaving it all in AZN. If your other investments are a bit borderline (ie. you're not going to be living in the lap of luxury) then I would say take some profits and put in a fund, but if you are doing fine (and not counting on the money in your stocks), then I would be inclined to let it roll. Worst case, I think AZN would have very little downside at this point in time if you wanted to keep it there for another 5-10 years.

Hope my post helps, and good luck with whatever you decide.

Thank you so much for replying, Brock. Although I have portfolio advisers, I decided that on this particular issue I wanted your advice----having read your thread on MSE over the months.
I'm sorry----I didn't mean to "put you on the spot". My apologies----with hindsight I should perhaps have asked you via PM but it just didn't occur to me.
To cover a few matters arising from your most thoughtful and considered post : because I believe in as much of a "balance" as possible as between the sectors in my portfolio, I have shares in 2 other Biotech companies : Cipla and Alexion ( which I have held for 5 years or more) + Teva ( blush, blush---which I ditched rather than wait and hope : I had medium/bad but not fatal losses simply because my holdings were not as substantial as the others in the same sector).
As to your musing on whether to take profits if portfolio is in any way vulnerable or, on the other hand, sticking with current AZN stock if portfolio doing well, I am in the latter category. My portfolio is well balanced and very much sector-based----virtually all notable sectors are covered.
Yes, your post has helped me a lot and I will be making my decision very soon , with a strong inclination to let AZN "ride" in accordance with your view. I am also influenced by the fact that corporate investors now hold more than 80% of shares and I am therefore a dying breed 
I would like to thank you very much as I believe you know more about Biotech sector than any advisers I have access to. May your MSE BioTech thread continue in perpetuity. 

BrockStoker

coachman12 said:

BrockStoker said:

Coachman,

You're putting me on the spot here. Not an easy decision!

While I'm not currently interested in investing in BP stocks, I have been keeping an eye on them, and posed the question to myself "if I were to invest in BP, where would it be?" a couple of months back. The one stock that stood out for me was AZN. Out of all BP I think they have the most solid pipeline that is likely to give them the edge in years to come.

Of course there is no guarantee that they will come out on top, but if I wanted to park my money for the next decade or so in BP stocks, AZN would be at the top of my list.

Putting myself into your shoes makes things more tricky. Instinct would be to take some profits, but often the instinctive reaction is not the best course of action. AZN has gone up a lot, but I think it's likely to go up much more.

I would say, if you don't hold any other pharma/biotech, the conservative approach would be to take some profits and put them into a fund (BIOG or the like), but I don't think you'd be taking a huge risk leaving it all in AZN. If your other investments are a bit borderline (ie. you're not going to be living in the lap of luxury) then I would say take some profits and put in a fund, but if you are doing fine (and not counting on the money in your stocks), then I would be inclined to let it roll. Worst case, I think AZN would have very little downside at this point in time if you wanted to keep it there for another 5-10 years.

Hope my post helps, and good luck with whatever you decide.

Thank you so much for replying, Brock. Although I have portfolio advisers, I decided that on this particular issue I wanted your advice----having read your thread on MSE over the months.
I'm sorry----I didn't mean to "put you on the spot". My apologies----with hindsight I should perhaps have asked you via PM but it just didn't occur to me.
To cover a few matters arising from your most thoughtful and considered post : because I believe in as much of a "balance" as possible as between the sectors in my portfolio, I have shares in 2 other Biotech companies : Cipla and Alexion ( which I have held for 5 years or more) + Teva ( blush, blush---which I ditched rather than wait and hope : I had medium/bad but not fatal losses simply because my holdings were not as substantial as the others in the same sector).
As to your musing on whether to take profits if portfolio is in any way vulnerable or, on the other hand, sticking with current AZN stock if portfolio doing well, I am in the latter category. My portfolio is well balanced and very much sector-based----virtually all notable sectors are covered.
Yes, your post has helped me a lot and I will be making my decision very soon , with a strong inclination to let AZN "ride" in accordance with your view. I am also influenced by the fact that corporate investors now hold more than 80% of shares and I am therefore a dying breed 
I would like to thank you very much as I believe you know more about Biotech sector than any advisers I have access to. May your MSE BioTech thread continue in perpetuity. 

My pleasure Coachman. I was half kidding about putting me on the spot

I've never heard of Cipla, but Alexion is one I quite like. I used to like it more, but I think times are likely to get more complex for many companies like the "Alexions" and "Regenerons" due to new tech and companies like Arrowhead. I'll explain further after I've posted this. It may be time to reassess the risk/reward profile of many biotech stocks that rely on older/small molecule tech. Big pharma like AZN simply buys up the new tech in order to keep up, so should be immune to this particular threat

However, as they say, a rising tide floats all boats (if they are not leaking!), and the healthcare/biotech/pharma sector can rally for sustained periods. AZN seems well positioned to take full advantage if this is the case. Of course if the markets decide to reverse course you'll probably see some profit taking initially, but healthcare/biotech/pharma is a resilient sector to be invested in in these times, so strong stocks should bounce back as they did earlier on in the year.

BrockStoker

As hinted in my post above to Coachman, something is afoot!

Specifically, Arrowhead (again!). Just a little while ago Vertex said it was discontinuing a phase 2 trial due to safety issues and "pharmacokinetic data":

https://finance.yahoo.com/news/vertex-provides-clinical-programs-targeting-203000654.html

Arrowhead's data on the other hand has been pretty well flawless.

The result (after hours trading tonight): Vertex just shed over 7BN market cap (about 10%) and Arrowhead was up over 18% at one point (currently up around 15%).

This is probably just the start!

I also bought another 200 shares last week at an average price of $46.92 taking the total count to over 1.1K, although they are in another portfolio. Multiple catalysts approaching in the next few weeks/months with topline-data hinted at/expected. Analysts have been upgrading price targets left right and center. The way things are shaping up has me very excited I must admit!

In other news I also bought 1K of Orchard Theraputics shares as I think they are very good value currently, and the company ticks a lot of boxes for me, but they are held in another portfolio so (like the 200 ARWR shares mentioned above) will not contribute to the performance of my main portfolio of mostly biotech stocks. Still quite a risky bet, but I think downside is fairly limited, and there are upcoming catalysts that could have very significant upside.

As of today the portfolio is a few % short of 50% total profit, but I have a strong feeling that that is about to change!

Gadfium

BrockStoker said:

 and Arrowhead was up over 18% at one point (currently up around 15%).

This is probably just the start!

Are we looking at different Arrowheads? They're down 7% in the last week. How many times are they going to explode upwards? I think I've counted about 6 times in the last few months

bowlhead99

Gadfium said:

BrockStoker said:

 and Arrowhead was up over 18% at one point (currently up around 15%).

This is probably just the start!

Are we looking at different Arrowheads? They're down 7% in the last week. How many times are they going to explode upwards? I think I've counted about 6 times in the last few months

The market close price was about $44.5 but in after-hours trading they ended at $49. That's lower than last Thursday's opening price of $51 but not lower than last Wednesday/ Thursday's closes of $48.  It's still lower than mid July's $51, but a nice gain if you bought at $33 in between.... The July price of $51 was itself still lower than the start of the year $63, or the end of last November $73, but a good gain if you bought at $20 in between... 

I'm sure there will be plenty more opportunities to buy them under the current price and the blips up and down on newsflow of them or their competitors are probably not of much interest to most. The real winners are the people who paid $3 three years ago, as people like BrockStoker and I have paid them about ten times that amount for our shares. But touting the exciting upwards blips from a rollercoaster of biotech holdings are what this thread is all about. You're right of course that being excited by 'up 15% in a day!' to recover some of the fall from a week ago is just as sad as 'up 45% in a day!' was in mid September as it temporarily recovered some of the large fall from mid July

Gadfium

bowlhead99 said:

The market close price was about $44.5 but in after-hours trading they ended at $49.

That'd be a $4.5 changes which is a 10% increase in intraday prices, not the 15% claimed, much less the breathless 18%

bowlhead99

Gadfium said:

bowlhead99 said:

The market close price was about $44.5 but in after-hours trading they ended at $49.

That'd be a $4.5 changes which is a 10% increase in intraday prices, not the 15% claimed, much less the breathless 18%

As an example at 5pm US time (after hours) they had gone up to $51.25 which was indeed a little over15% above the market close price. I don't know what the highest point reached was as I don't have a full data feed. 

Eventually by 8pm (1am UK time, a while after he had written his post) they settled at a little over $49. This morning they are $48 in the pre-market.

BrockStoker

bowlhead99 said:

Gadfium said:

bowlhead99 said:

The market close price was about $44.5 but in after-hours trading they ended at $49.

That'd be a $4.5 changes which is a 10% increase in intraday prices, not the 15% claimed, much less the breathless 18%

As an example at 5pm US time (after hours) they had gone up to $51.25 which was indeed a little over15% above the market close price. I don't know what the highest point reached was as I don't have a full data feed. 

Eventually by 8pm (1am UK time, a while after he had written his post) they settled at a little over $49. This morning they are $48 in the pre-market.

Yes, these blips are all basically recoveries. Investing in clinical or pre-clinical stage biotech stocks is very different to investing in many other stocks. There is a lot of downward pressure from shorts, and many believe stocks like Arrowhead are heavily manipulated - not sure how true this is, but there is certainly lots of pressure from shorts. The result is that stocks like Arrowhead spike up on good news, but quickly drift back down again when there is no news. However, good news is staring to mount up, and the share price is making higher lows/higher highs that are more likely to stick.

Wall Street seems to have real trouble understanding what is really going on "under the hood", but I think they are getting dragged along by the analysts who have a better understanding. I strongly believe we are witnessing the "birth" of a big pharma, but WS obviously is still not convinced.

The next few weeks/months should see their TRiM platform further validated, and with that the share price should start to break new ground and hopefully keep it, but obviously the real gains should come in a few years, when therapies are approved and making money.

Either way, I'm already making significant gains. Not sure exactly how much as I had to sell and re-buy some shares, but 950 shares has made me around £10K at least (not taking into account after hours/pre-market prices).

Edit to add: What I believe is most telling are the investments from large players: Takeda, Amgen, and JNJ. They would not be snapping up ARWR's assets without being sure that they work! Management has hinted that other drugs in their pipeline have garnered a great deal of interest from large/big pharma. This puts ARWR in a very strong position, where it can pick and choose what deals it makes, and only make deals that are good for ARWR.

coachman12

BrockStoker said:

As hinted in my post above to Coachman, something is afoot!

Specifically, Arrowhead (again!). Just a little while ago Vertex said it was discontinuing a phase 2 trial due to safety issues and "pharmacokinetic data":

https://finance.yahoo.com/news/vertex-provides-clinical-programs-targeting-203000654.html

Arrowhead's data on the other hand has been pretty well flawless.

The result (after hours trading tonight): Vertex just shed over 7BN market cap (about 10%) and Arrowhead was up over 18% at one point (currently up around 15%).

This is probably just the start!

I also bought another 200 shares last week at an average price of $46.92 taking the total count to over 1.1K, although they are in another portfolio. Multiple catalysts approaching in the next few weeks/months with topline-data hinted at/expected. Analysts have been upgrading price targets left right and center. The way things are shaping up has me very excited I must admit!

In other news I also bought 1K of Orchard Theraputics shares as I think they are very good value currently, and the company ticks a lot of boxes for me, but they are held in another portfolio so (like the 200 ARWR shares mentioned above) will not contribute to the performance of my main portfolio of mostly biotech stocks. Still quite a risky bet, but I think downside is fairly limited, and there are upcoming catalysts that could have very significant upside.

As of today the portfolio is a few % short of 50% total profit, but I have a strong feeling that that is about to change!

Fascinating to see that there was indeed something afoot, Holmes 
I see Vertex is currently down 20% today and Arrowhead has moved firmly into the buy zone. I am wondering whether to buy shares in the latter, as my biotech sector is not quite "in balance" with most of all the other sectors in my portfolio----such acquisition would fill the "gap" since my poor flirtation with Teva which I ditched and never replaced.
As for my original dilemma about AZN , I have talked it over with my portfolio manager ( who still feels AZN may have reached a peak and may not fare well if the joint-venture Covid vaccine trials come to nought). But I am going with the feelings that I have ----and which I needed to hear you say too before I proceeded. My 4,000 AZN shares will now continue to be held indefinitely, together with my sizeable Alexion and Cipla holdings----now likely to be joined by Arrowhead ( I just cannot decide on a number of shares to go for, as I don't want to take too much risk in a sector where , though poorly represented in overall portfolio, is doing so well.
But I think an addition would make the biotech sector of my overall sector-based portfolio a bit more "balanced".
Perhaps it is because I have never had interest in science, always having taken Arts subjects throughout school, higher and further education, that I have not become knowledgeable about biotech companies----I certainly feel well versed in all my other sectors' companies, their structure and management, plans, competition, etc etc. But now I research Vortex and protein deficiency, I am feeling a need to do some serious research on the goings-on in the biotech world. So I thank you for that spur which I needed and your encouragement, and especially your faith in AZN. Sometime , when you have a moment, you may be able to tell me your views on whether I am following a Teva  path with my holdings in Cipla ! But you are always being asked such questions on this site, I think you should start charging fees !
I would sincerely welcome your more in-depth reasons for choosing Orchard, a company which has
fallen by over 60% in the last 12 months.
I assume you have a dedicated biotech portfolio; and then you have a non-biotech portfolio.
Once again I thank you very much for taking time to answer my original question, and much more, and for your patience with a biotech dunce. Thank you, Brock; I am sure I will reach out to you again as various aspects of biotech occur to me ( I can picture you wincing  ).