Investing in biotech stocks - My experience so far

Cus

Are you worried about the chief medical officer and the chief scientific officer selling their shares very recently? In fact the chief scientific officer has sold all of the shares he had?

BrockStoker

Are you worried about the chief medical officer and the chief scientific officer selling their shares very recently? In fact the chief scientific officer has sold all of the shares he had?

No, not really.

It's normal for employees to take profits from time to time. In the case of the chief scientific officer, well he has left Arrowhead, and I'm not sure if he was forced to sell because of that (?), or perhaps there is "bad blood" between him and Arrowhead so he did not want to have anything to do with them any more (including holding any ARWR shares), but either way I'm not worried.

BrockStoker

Quite an interesting post by BioBoyScout (a very competent biotech analyst as far as I can tell - he has his own biotech valuation calculator which allows users to plug in various numbers to come up with a valuation for a biotech - the link is somewhere on the ARWR Yahoo Finance MB if you search backwards a few weeks) on ARWR Yahoo Finance MB regarding the "analysts dilemma":

The Analyst's Dilemma. This message is on a topic that is bit controversial for a number of various reasons, but I believe it's a good topic to bring up now that Arrowhead is looking to advance into a more mature mid-stage biotech (or a young late-stage biotech - however you want to look at it).

A couple big problems for Analysts in currently valuing Arrowhead going forward are that Arrowhead's: 1) pipeline growth is incredibly fast (pretty much unprecedented in biotech); and 2) peak sales revenues for its drugs are incredibly large, particularly due to the massive HBV market (again, unprecedented in biotech).

Now add to that:
1) advancement of 2 potentially huge CV drugs advancing to phase 2;
2) advancement of ARO-AAT into phase 3;
3) advancement of ENaC and HSD into phase 2; and finally
4) possible advancement of the HBV drug into phase 3 by end of 2021.

With the advancement of these drugs into phase 2 and phase 3, the risk applied to the each drug's valuation tends to get greatly reduced, additionally, the discount rate applied in valuing the company is ALSO reduced, and this results in a much, much higher valuation.

What exactly does that mean? By my calculations, it's an increase in valuation by about $40-$70/share by mid 2021, and an increase of around another $40-$70+/share by advancing the HBV drug into phase 3.

As you can see, a valuation dilemma starts to happen. Arrowhead "can" quickly become valued as a $20+ billion company without having a single drug in the commercial stage - and what Analyst wants to give a $20B valuation to a biotech that is not yet commercial? Analysts may want to temper valuations leading up to this point because there still have not been any drug sales. But the dilemma comes when valuations are tempered because once a drug or two go commercial, valuations will have to eventually catch up to where they logically should be, and this would result in a larger move than what is typically expected. This is no doubt brand new territory for any biotech, and for the analysts that attempt to properly value the company, hence the dilemma.

BrockStoker

Here is a link to the Piper Jaffray Annual Virtual Healthcare Conference, which you have to register to watch:

https://pipersandler.zoom.us/rec/play/GMTk7wLGHK_0qDtjJ9-sUnkn8TDXCfNXcOjlvGo6zFe2eARV5hw0Euv3plFC1d2R7GAnLdTmqrBIJ2c.xT520Ofvazkbw5F0

Anyone interested in Arrowhead should watch this. In it our CEO talks about the pipeline, what is coming up over the next few months, and his ambitions to grow ARWR to $100Bn company.

Particularly of note, is just how low the bar is for some of our indications to get to market. This is important if you consider that just a single commercialised indication would value ARWR at at least today's current market capitalization, implying that even if all else fails (extremely unlikely!) an investment today in ARWR is about as safe as it can get with an individual company.

It's also worth noting just how good (no.... GREAT) our CEO is. Unlike many biotech CEOs he has a deep understanding of the science, and is as comfortable in a lab as he is steering a multi-billion dollar behemoth through treacherous waters. His vision for the future of ARWR is the driving force behind it, and I doubt it would be possible to find a better CEO than he is. He is irreplaceable, and if he was to leave ARWR I would likely take much of my investment (if not all) in ARWR, and move it elsewhere. That said, with him in the driving seat, I see no reason why ARWR could not be worth $100Bn in just a few years, and probably significantly more than that in a decade!

BrockStoker

Just a quick update (as I'm going away for a few days tomorrow and still rushing about trying to get ready), since my portfolio has reached a significant milestone today - my initial £40K investment is now worth over £80K, at least on paper

dan20rhino

Hi Brockstoker
Hope all is well at your end.
Arrowhead has certainly served you well hasnt it.
Out of interest what platform are you using to monitor your holding as per your screen shot above?

Bleg

Out of interest what platform are you using to monitor your holding as per your screen shot above?

Looks like yahoo finance

BrockStoker

Bleg said:

Out of interest what platform are you using to monitor your holding as per your screen shot above?

Looks like yahoo finance

Yes, Yahoo Finance.

Sign up for a free email account, and you can use their portfolio tracker, although there are premium features you need to pay to access, but I'm not bothered about them personally.

Another good day for ARWR, taking my portfolio back to 80K (after closing below 80K the previous day), and beyond> Nearly 5.3K profit added from ARWR alone.

It seems the recent modification of their trial for Clear Cell Renal Cell Carcinoma (ARO-HIF2) including extending the trial length and adding new patients is suggesting the therapy is working. These patients have a life expectancy of only months, and given that the trial started 18th Aug, and none have died, that again suggests that HIF2 is working. There has never before been a trial of an RNAi therapy for cancer, and if as I and others suspect, ARWR can cure cancer, the market reaction could be massive. We will know for sure as actual data starts to be announced over the next few months, but if the thesis is correct, well, it's hard to overstate just how massive this is for oncology (and ARWR!), especially given that it's likely to work for other types of cancer too! I'm not sure what the oncology market is worth, but $100's of Bn. I guess?!

Once again, as more positive data is released, RNAi and ARWR's platform become more and more validated. Their Cardiovascular therapies and CF therapies are also already producing spectacular data, and those, especially the CV market are also massive.

Stay tuned!

PS. BCRX also popped after the FDA approved it's HAE therapy, and there was also great news for another compound that's in early trials. Of course, I sold most of my shares to buy more ARWR just a week or two ago. I'm thinking it was a good idea now, but BCRX could also go up fast. I may as well hold on to the token 400 shares I have left, at least for the moment.

My other remaining stock, Virgin Galactic is also testing all time highs prior to a crucial test flight which could even be under way now - I'm not sure, but certainly soon if not now.

So I really can't complain about how my stocks are looking at the moment!

BrockStoker

Hope everyone had a good Christmas.

2020 has been kind to almost all my portfolios, especially the individual stocks. Here's a screenshot from 23 Dec. after the "Santa rally", although it has since given back some of those gains, finishing the year valued @ £82.6K:

Since then I also decided to sell my holdings in SPCE and BCRX, and buy back EVFM (3100 shares @ $2.47 average). I figure I've had a good ride with these two stocks, and although I'm sure they will both go much further, in time, EVFM I think is likely to turn a corner soon, and could explode when it does. So I don't want to miss out if/when it does. I'm also happy to own @ $2.47 as I was averaging $3.25 (with 1700 shares) previously.

If there are any Arrowhead fans reading this, there is a good write up of "How Arrowhead protects it's intellectual property" on SA which is worth checking out before it disappears behind a paywall:

https://seekingalpha.com/article/4396733-how-arrowhead-protects-intellectual-property

Happy New Year!

BrockStoker

From:

https://forums.moneysavingexpert.com/discussion/6228534/turn-100k-into-1-million/p5

Apodemus said:

I would bet on a buy-out by AMGN or JNJ, so that they can bring it all in-house.  While this might not be a bad thing per se, it might place limits on your potential upside, which could be well short of your 10x target...although I'm sure you would be happy to compromise at 5x!

I'd probably be a little disappointed, but what can you do?

As it happens, there was a recently published note by Baird that I just heard about which has "a list of potential deals occurring in 2021 (around 20-25 companies listed). One of the potential deals is Amgen acquiring Arrowhead."

Once again, most experienced Arrowhead investors think it won't happen, and I believe they are correct.

Also today, GS upped it's price target for ARWR to $94 (today's close was at $74.83):

https://twitter.com/ozzy_jozzy/status/1346103924051341312

There is some interesting commentary at the link above, which suggests GS has cottoned on to the loophole which I have been suggesting existed - basically that RNAi (and possibly other cutting edge therapies) can't be valued using the same models which they use for old/small molecule tech. With RNAi there is inherently a much higher chance of success than with traditional medicines (and crucially) now that RNAi tech has been shown to be safe/effective.

Here's a screenshot I think I posted a few months back. If not, I think it deserves posting again

Keep in mind that although ARWR and ALNY use the same tech, they each have their own platforms, but ARWR's platform is better, and I'd expect even greater POS from ARWR if they published their own data.

Further data (even phase I/II) just adds to growing pile of evidence, and yet many still do not see the shock waves that are coming (even GS is still pussyfooting around/being cautious, which I suppose you can't really blame them for, as this is new territory for everyone involved).

Granted, something can still potentially go wrong in a phase III clinical trial, but all the phase I/II data that has been published could not be much better, which suggests more of the same to come.

There are also some interestingly suggestive patterns of insider trading which YHFMB poster "Bug" very observantly noted:

1) Chris did not sell shares as he typically does at year end.
2) CFO sells regularly, but didn't sell. Not even at all time highs.
3) Douglas Given gifted shares which he has done before but not often.
4) Chris gifted shares I have never seen him do that.
5) During mid year on the dip the CFO "Averaged in" to all of his option strikes.

All of this just makes me want to buy more ARWR!