Investing in biotech stocks - My experience so far

Voyager2002

doe808 said:

Any UK domiciled funds with significant holdings in ARWR?

Unlikely: I think that ARWR is just too small and volatile for their taste. I was disappointed to find that the iShares Healthcare Innovation ETF does not hold Arrowhead either.

adindas

moneyfoolish said:

BrockStoker said:

moneyfoolish said:

BrockStoker said:

More of the same. Down nearly 10% on great news. I'm not going to let it phase me one bit. The real money, as was always the case, is in approvals (Edit: or rather approvals and what follows as well as milestones). Was it "Gooseman" on discord who said biotechs will always be volatile till the money starts to roll in? He's spot-on IMHO.

I do think we will get analyst upgrades which should help the share price, and wouldn't be surprised to see institutions buying this dip.

Regarding discord, seems fine to me although I have to admit I have yet to have a proper look around.

The problem now is that even many of the positive posters are talking in years before they see a P3 completion and see that as the only way the share price will rise significantly. Previously, many had marked the announcements this week as the time of a significant jump forward.

Well I think best case for p3 completion was always going to be late 2022/early 2023, so it's not really a huge deal if you're holding for 5-10 years. Most programs are still on track, and there might well be more BTDs declared which the market should like. Of course it's still a bit disappointing that we had no jump forward with the recent data, but sooner or later that will come.

All that said, yesterday was certainly a significant turn of events which took everyone by surprise, and now there is one less RNAi player to distract from Arrowhead - not a bad thing, and hopefully it'll become clearer to the market just how much Arrowhead has to offer compared to the dregs that are left.

You surely must be disappointed in the ARWR situation, BS, as you forecast a price of $200 by the end of this year in a post in April?  

IMO, for a stock with high volatility like this, after you see the green day, it is important to set up a stop loss for a fraction or all of them. If the stop loss is ever triggered, you might still re-enter them at a lower price in the later date. This will keep your price average lower. You might miss to re-enter at a lower price as they the stock might have a price break out, making a sharp move. But if it ever happens, just look for another opportunity in the market. If you just want to stick to the same stock, you could also wait until another pull back/dip due to bad news, fail drug test, fail authority approval, market correction, missing the earning expectation, etc.

The difference of investing in individual stock a few decades ago with today is that, this information could easily be found in real time, free of charge.

Also, it is good to buy in a smaller chunk rather than in one go, as this will allow you to keep DCA if keep dropping. 

That is my personal opinion and experience not necessarily will work for other people. I have done that a few times with ARWR and I have made £100+. But I only own 2-3 shares at a time.

BrockStoker

Voyager2002 said:

Time to buy Amyris?
https://markets.ft.com/data/announce/detail?dockey=600-202112230700PR_NEWS_USPRX____SF16161-1

or
https://www.prnewswire.com/news-releases/amyris-and-minerva-foods-complete-joint-venture-and-license-agreements-to-scale-low-carbon-protein-production-platform-301450267.html

The thought had crossed my mind! Below $6 is a screaming bargain IMHO, and it shouldn't really have gotten that low considering how many irons it has in the fire (and how hot they are starting to get). Multiple revenue streams already established, and establishing more at a rate of knots.. Too many to name. AMRS will soon be making big bucks. I'm almost tempted to buy outside of my ISA at this level.

The latest deal with Minerva possibly adds another potentially very lucrative string to Amyris's bow, and also diversifies into another sector. I'm also liking what I'm hearing about how they are doing with the CBG - from the recent SA article:

"Amyris is fermenting CBG in 200,000-liter reactors and is targeting production costs of 500 USD/kg. There are currently no other companies with this type of scale or cost-structure, which positions Amyris to capitalize on the growth of the cannabinoid market. Amyris recently completed its third and largest CBG production campaign to-date. The campaign delivered five times the volume of the previous campaign and exceeded fermentation and purification targets by more than 20%. Amyris is currently scaling production in anticipation of demand for Terasana products.

Amyris recently launched its Terasana brand, which offers skincare products containing cannabinoids. The initial focus is on treating acne, but there is also potential to offer pain relief and treat Psoriasis, Eczema, swollen joints, and sunburn. The acne treatment is an example of one of the advantages of Amyris' approach to the synthetic biology market. By developing their own portfolio of ingredients and consumer brands, Amyris can offer products across a broad range of markets and combine ingredients to make products with unique properties.

Acne is currently treated using a process similar to a chemical peel, which is harsh on the skin. Salicyclic acid benzoyl peroxide is often used to treat acne and while effective, also dry out and irritate the skin."

The CBG could be very lucrative, at least for a while/till someone else manages to figure out a better/cheaper way of making it. That could take years, and even when that happens, since Amyris owns many brands that will/are using it, it will still carry on bring in good money.

BrockStoker

Since biotech funds were recently brought up, I think it's worth mentioning that the recent performance of funds in this sector has been interesting to say the least!

The fund I'm eluding to in particular is the Biotech Growth Trust (BIOG). During 2015-early 2019 the fund significantly under performed it's benchmark and the fund manager was forced to apologize to investors. I can't remember exactly why it under performed (possibly by backing too much mid-size pharma at a time when most of the action was in large pharma - I think companies like Giliad and Biogen both fell from grace around this time and may be implicated) but management decided to compensate (or perhaps "over compensate" might be a better word) by stocking up on risky smaller biotech companies. This move rectified the situation, at least briefly, when covid hit, but for the last year or so the wind has gone out of the sails of the sector, and that has left BIOG under performing it's benchmark once again.

I was invested in BIOG but sold it and moved over to Polar Capital Biotechnology instead. The chart below (click here for link to it) starts on the date of my first PCB buy, but I also bought on 27 Oct 2017, 11 Apr 2018, and 30 Jul 2018, and PCB beats BIOG in pure performance terms in every case/buy.

For someone looking to invest in a biotech fund today, there's no easy answer since Polar Capital Biotechnology is currently soft-closed. Those who got in before it closed are very lucky! The Axa fund has always seemed a bit below-par to me, but is quite consistent so might be suitable for some. For those looking for a "quick" punt, BIOG looks like a good bet to spring back from it's current low. I might have been tempted but the flip-flopping management continually having to play catch-up does not inspire confidence. I don't think I've heard of a higher stock turnover than the 96.1% figure they posted in their most recent fact sheet!

moneyfoolish

Biotechs have been a disaster as far as I'm concerned. I bought Arrowhead, Amyris, Avacta and Polar Capital Biotech within my ISA last February and the first 3 have been a complete disaster whilst the last is only showing a relatively small 5% loss. My original £20,000 ISA in February is now worth just less than £11,500. Luckily, I took some losses in October and bought HSBC Global Balanced Strategy Fund which is comfortably my largest holding left (approx £5000) and is up over 6% in a couple of months. I've only got about £3,500 left in the 3 small biotechs and will just leave it there in the hope that one of them just might become a big winner but, at least, I have learned a lesson! My advice to anybody would be that buying any small biotech is pretty much like gambling and you have a lot more chance of losing everything than making a lot of money. Every one of the 3 biotechs I bought has reviews saying it is going to be the greatest thing since sliced bread and all have price forecasts by brokers miles higher than the prices I paid initially. However, when I look at forums for other small biotechs they ALL think their particular company is going to be a world beater. It all seems similar to the USA Gold Rush where every prospector thought he was going to strike it rich! Luckily, I only put in an amount of money I could afford to lose but goodness knows how some of the people can sleep at night with the amounts of money they have invested (or say they have invested) in these companies!

Voyager2002

moneyfoolish said:

Biotechs have been a disaster as far as I'm concerned. I bought Arrowhead, Amyris, Avacta and Polar Capital Biotech within my ISA last February and the first 3 have been a complete disaster whilst the last is only showing a relatively small 5% loss. My original £20,000 ISA in February is now worth just less than £11,500. Luckily, I took some losses in October and bought HSBC Global Balanced Strategy Fund which is comfortably my largest holding left (approx £5000) and is up over 6% in a couple of months. I've only got about £3,500 left in the 3 small biotechs and will just leave it there in the hope that one of them just might become a big winner but, at least, I have learned a lesson! My advice to anybody would be that buying any small biotech is pretty much like gambling and you have a lot more chance of losing everything than making a lot of money. Every one of the 3 biotechs I bought has reviews saying it is going to be the greatest thing since sliced bread and all have price forecasts by brokers miles higher than the prices I paid initially. However, when I look at forums for other small biotechs they ALL think their particular company is going to be a world beater. It all seems similar to the USA Gold Rush where every prospector thought he was going to strike it rich! Luckily, I only put in an amount of money I could afford to lose but goodness knows how some of the people can sleep at night with the amounts of money they have invested (or say they have invested) in these companies!

My story is similar, except that I have been using the price falls to increase my holdings. Remember that none of these companies are making money (yet): some or most will fail or be taken over for a fraction of their current valuation, some will produce great products and eventually become extremely valuable on the basis of substantial revenue streams. The price changes you mention simply reflect feelings of optimism or pessimism in the market rather than any change in most of these companies and their outlook for the future.

The mantra 'invest only what you can afford to lose' applies with particular force in this context. Certainly with many of these investments there will be a time to cut your losses and get out with whatever is left, but the current market price of their shares should not be the trigger for this.

BrockStoker

Voyager has the right idea. It's important not to conflate stock/stock price and company. My charts and portfolios look a mess right now too, but it's only on paper, and does not reflect the progress the companies have been making.

Much of the recent damage to biotech share prices is simply another round of indiscriminate selling, with the most risky companies out there being hit the hardest, and the companies we are discussing here are companies with zero revenue/earnings in the eyes of the market which falls into that category. It's a classic buying opportunity for those who have identified companies they have confidence in. As Voyager says, now would be the worst time to sell, or at least not far off it IMHO.

From Barrons:

The selloff has left more than 70 companies with more cash than their combined equity and debt, observes Baird analyst Brian Skorney, the most he has ever seen. “With the excitement of someone catching a falling knife, our view is turning optimistic on biotech outperformance going forward,” he writes. “Acknowledging structural risks remain, we think the sector is now well into oversold territory and believe we will see strong relative performance in 2022.”

BrockStoker

Just to address a couple more points..

Every investor is going to think they are invested in the best thing since sliced bread - why would you invest money otherwise? So yeah, the boards of all kinds of stocks are going to be full of people extolling the virtues of what they own. That is why it's so important to understand what you own, and what sets it apart from the others. In particular, ARWR and AMRS have many good things going for them, and are both on the verge of becoming profitable in a big way.

If you look at other stocks (at least the ones I watch) there are people saying similar, but dig deeper and many of these stocks have obvious flaws or disadvantages. The nearest competition to Arrowhead for example is Alnylam, and their future looks no where near as bright. While RNAi is not going to have everything to itself, there's not much out there capable of competing with RNAi's modality - we've all seen what's happened to CRSP since it became clear that there are serious question marks over the tech, and this was really the only other competing tech that could have taken on RNAi in a meaningful way.

So while there may be many people out there saying their company/tech/drug is best, it's just not RNAi - but it probably takes lot's of effort/resources to develop new candidates for the pipeline (not the case for Arrowhead), then have to go through trials with a reduced chance of approval at the end of it all (compared to Arrowhead).

At the end of the day, many biotech investors out there are taking big risks and putting big money into very risky biotechs with small pipelines. it's a recipe for disaster for those investors if they have not done their DD.

Some will still do well despite the disadvantages. Look what some of the stocks have done that I was very keen on when I started this thread - eg. BCRX(bought as low as $1.84  and up to around $4.50), MRNA ($18.38 average), TXG(around $60 average), CRSP($48.60 average), ISRG($523.47 average - translates to about $165 after stock split I think) and of course AMRS (bought as low as just under $3)/ARWR(first bought in low $20s) - out of about 17 stocks, these (excepting ISRG which has still done well) were all (or would have been up, if I had kept my original portfolio) up between perhaps 300 - 1000% (not exactly sure - I'd have to check). Others did not do well (worst looser was/is CLVS - excepting EVFM, ORTX, BNGO, and SRNE which are paper losses right now, and not part of my first portfolio. They were always more risky stocks anyway in my eyes), but not one has completely failed, and overall I'd be up quite nicely if I'd hung on to the old portfolio, but I opted to take small (significant profits) and put that into the smaller portfolio I know have. That is a risky strategy for sure (especially if you don't know what you are doing), but I'm confident that it's the right thing to do, and have faith in my "eye" for spotting potential winners.

The catch is, you never quite know when something is going to shoot up in value, so patience is required in many (though not always) cases. There is certainly money to be made if you can navigate all the pit falls, and potentially big money if you have a good strategy, but there will always be many others that blindly believe their company is the best out there - keep in mind though, the "secret" of RNAi/Arrowhead's advantage has yet to become public knowledge. Everyone thought/thinks Alnylam is still the muts nuts (hence it's well, or almost over inflated share price compared to Arrowhead), but it's plain to see just how terrible it looks when you actually directly compare it with Arrowhead.

Ultimately all I can do is flag up companies I think are of interest, and I know it's never going to be easy for some to tell the difference between all the other noise out there, but I think you can have some faith in my ability due to a better than 1 in 3 hit rate (considering that back then the other 2 of 3 were long shots anyway, and in theory at least, I've removed those "2".. hopefully anyway!). I's up to you and others to do your DD and try to pick holes in my suggestions. So far at least, ARWR has been scrutinized for nearly two years by myself and others here as well as on the YH MB forum, and I have yet to hear a convincing argument that ARWR is a bad investment for the long term. That doesn't make it a certainty in itself by any means of course, but it brings us back to "listen to the arguments, and make up your own mind".

I think MF, there are definitely lessons to be learned here. If you invest in small companies, and especially small-mid size biotechs, you can expect to see red at some point - they are volatile, and that is the nature of biotech investing. The market is a harsh unforgiving, and frustratingly ignorant place that can still punish you even if you invest in a good company! I firmly believe it is "just" a matter of sitting tight with your chosen stocks, and being able to ride the roller coaster, but if you can't stomach it then perhaps it's not for you. I do get the impression you did rush into it a little, and that is something I'm also guilty of/have to work hard to reign in. Next time (if there is one), try to keep some dry powder back to take advantage of the gifts that the markets keep giving us - it's really that simple - in theory at least - actually doing so takes some discipline. That way you can average down your cost per share. Doing this has helped keep me in the green and my ride a bit smoother, albeit less so in the last few months.

I'd encourage you to stick with it as you've endured it thus far, and perhaps just for the moment observe your stocks of interest to see what they do.

As for me, I have my eye on AMRS at under $5, but I honestly can't see it waiting for me till April at these lows. I'd kill to have my ISA allowance for the next tax year right now! I still think EVFM has big potential, albeit more of a punt, but it's really AMRS I want more of at these prices. I do think I could make larger gains in the short term with AMRS than with ARWR (I could well be proved wrong!) so given no or little change in the current share prices/fundamentals by April I hope to buy some more AMRS and possible EVFM/BNGO (though in smaller quantities) with the aim to sell some if AMRS (or even EVFM/BNGO though I think BNGO is less likely in the short term) share price should shoot back up to $20 and beyond (which I think it will). That way I'll be able to buy a more meaningful amount of ARWR with the proceeds, hopefully.. It probably won't work out like that, and it is a bit of a gamble, but not in the sense that I'll be stuck with too much of a very risky company - I still don't think you can go wrong with either ARWR or AMRS, and especially with AMRS at this price which provides a bit of a safety net from large loss.

BrockStoker

Well that was an interesting day on the markets!

Arrowhead now a "late stage" biotech after initiating it's first phase 3 trial. Share price down, but a major step closer to the prize!

Evofem pops around 30% intraday on news that health insurance providers will cover the costs of Phexi for those who want it. Super heavy volume too. Sales of Phexi going up 70% Q on Q.

And to top it off Amyris finishes the day up almost 11%. I guess the fire sale is over! They're going to start work building their 3rd production facility since the products due to be produced at the 1st and the nearly complete 2nd production facility are already sold/spoken for! This is on top of their brands also selling very well. I have to admit I ordered some Biossance for mrs Brock to try - got it a few days back but she has yet to try it. According to Melo 1 in 3 people in the USA are now using AMRS products.

The portfolios are down overall today, and it looks like I missed a great buying opportunity, but an excellent day nevertheless.

adindas

moneyfoolish said:

Biotechs have been a disaster as far as I'm concerned. I bought Arrowhead, Amyris, Avacta and Polar Capital Biotech within my ISA last February and the first 3 have been a complete disaster whilst the last is only showing a relatively small 5% loss. My original £20,000 ISA in February is now worth just less than £11,500.  Luckily, I only put in an amount of money I could afford to lose but goodness knows how some of the people can sleep at night with the amounts of money they have invested (or say they have invested) in these companies!

Voyager2002 said:

My story is similar, except that I have been using the price falls to increase my holdings. Remember that none of these companies are making money (yet): some or most will fail or be taken over for a fraction of their current valuation, some will produce great products and eventually become extremely valuable on the basis of substantial revenue streams. The price changes you mention simply reflect feelings of optimism or pessimism in the market rather than any change in most of these companies and their outlook for the future.

The mantra 'invest only what you can afford to lose' applies with particular force in this context. Certainly with many of these investments there will be a time to cut your losses and get out with whatever is left, but the current market price of their shares should not be the trigger for this.

Not only biotech stock but most of high growth stock were been beaten down since March 2021. Good that you only invest the money you could effort to lose.

Biotech stock are very volatile but once their trial is successful it could 3-10X your money in less than one month. Good that you only invest the money you could effort to lose.

My strategy is like I mention before, only buy during the dip, not at the peak, buy in a smal chunk, you could double it down when it keep falling, set a stop loss and get in and out.

I did invest / trade Arrowhead a few times and manage to make a small profit. But I have done my own DDs, ARWR is a good stock when you are patient and do not need the money urgently, I believe it will turn green at some times in the future. If you just invest a few hundreds you might be able to sustain the loss longer without the need to sell it at loss. 

Keep in mind since March 2021 not only biotech stocks but most of high growth stocks were been beaten down. This the result from two platforms I am using.