Investing in biotech stocks - My experience so far

adindas

BrockStoker said:

adindas said:

BrockStoker said:

@adindas Albert posted this on the AMRS YHMB not long ago:

AMRS Short - Jan 3 - Jan 19, 2022

Date
Volume
Short Volume
% of Vol Shorted

Jan 19
1,315,224
702,045
53.38%

Jan 18
1,879,133
893,612
47.55%

Jan 14
1,802,499
775,560
43.03%

Jan 13
3,350,511
1,661,233
49.58%

Jan 12
4,740,775
2,838,614
59.88%

Jan 11
1,491,427
769,267
51.58%

Jan 10
1,714,540
768,234
44.81%

Jan 07
1,331,213
656,245
49.30%

Jan 06
1,931,926
725,160
37.54%

Jan 05
2,674,176
976,405
36.51%

Jan 04
2,944,987
1,004,962
34.12%

Jan 03
3,689,092
1,486,741
40.30%

I'm not entirely sure what to make of the numbers, but it seems like quite a full on attack by the shorts to me.

Indeed, the shortsellers keep attacking the stock. The data above suggests that they keep adding their short position. You could observe that the percentage keep increasing, they keep adding their short position day by day. Also the availability of the stock to borrow is becoming less day by day. The shortsellers intention here is to put pressure on price to bring the price further down.

When a shortseller “shorts” a stock, they are selling a specific number of securities that they currently do not own in hopes that the price of the asset will eventually fall. When an investor borrows the shares from a broker in order to sell them, they will eventually be required to return them. If the investor was able to sell the shares at a high price point and then repurchase them for a significantly lower price, they will be able to realize a profitable gain after returning the shares to the original broker.

So the short sellers are making money when the stock price falling. So the more price drops the more money they will make when they finally close their position.

But for AMRS, it seems they are not very successful to bring the price further down as I just checked it the price action since the last few days, it literally stays flat despite the short seller’s attack. But this also explains why the price stays low (e.g still under the short sellers pressure).

Like I mentioned before the possibility of short squeeze to happen does not just depends on the short Volume / Short interest. There are other factors such as Days to cover (DTC), Utilization (U), and Cost to Borrow (CTB). Unfortunately, the above is not sufficient to draw a good conclusion about the possibility for the short squeeze to happen. Ortex / Fintel produce produce analysis as well as score. Unfortunately those data are only availbale to paid subscribers.

I do wonder how well the shorts research before shorting. It seems to me that it's not that much. I mean, look at the potential catalysts Amyrs could announce at any time now (completion of factory is probably the big one, but there are others potentially), which could send the price up. I guess while the market conditions are the way they are, shorts feel like they have free reign. Never the less it feels like the shorts are making a huge mistake here, but perhaps I'm being naive.

The short sellers definitely, do meticulous research before deciding a big scale of shorting the stock as there are a lof of money involved. Keep in mind you could only do a big scale of short if you are whales and have a lot of resources.

They will normally attack the penny stock (lower than $5 say) with relatively small market cap and low float as they just need relatively small amount of money to move the price to the direction they want to. AMRS meet some of these criteria. For that reason, you often read in the literature, try to avoid buying penny stock as it is vulnerable to price manipulation.

Regarding your question keep in mind they might open the short position before the news about of catalysts is coming. When there is catalyst and the price move up dramatically much higher than when they originally open their position, that is when they get screwed, it will trigger the margin call. They will be forced to buy back all of the position they opened at much higher price.

So in case of AMRS when the catalyst such as successful drug test, authority approval come to light and the FOMO buyers start jumping pushing the price up much higher than the original price when they open their position, The AMRS short sellers will get screwed.

Keep in mind short selling is not illegal, pump and dumb is. Some retail traders are also doing short selling such as doing short in various modes: “put” in option trading, doing short with leverage in CFD, buying "Inverse" ETFs, etc

BrockStoker

Voyager2002 said:

This is truly an irrational and unpredictable segment of the market! I have just read the two following (and apparently contradictory) news items that appeared as alerts on my FT portfolio page:
1.

SORRENTO THERAPEUTICS ANNOUNCES COVISHIELD (STI-9167), A BROAD-SPECTRUM NEUTRALIZING ANTIBODY, POTENTLY NEUTRALIZES OMICRON AND OMICRON (+R346K) VARIANTS OF SARS-COV-2

https://markets.ft.com/data/announce/detail?dockey=600-202201200900PR_NEWS_USPRX____NY36493-1

2. SRNE:NAQ 

price reached a new 52-week low of 4.22 at 15:25 GMT.

It's not something I can easily get my head around either. In Sorrento's case it has deal to supply Mexico with covid tests, and should be following that up soon with other regions/countries. It's tests are more accurate and cheaper than the competition. On top of this it has what has been shown to be (so far at least) very effective covid treatment in the form of a nasal spray, which holds great promise IMHO. I forget exactly how many covid related projects, but it's something like 7 or 8 in total, plus they have a (modest) non-covid pipeline, so there is a very good chance they will be profitable some time, and they certainly are not in danger of going out of business any time soon. If that's not enough, the "jewel in the crown" is Sorrento's UNMATCHED library of monoclonal antibodies.

It's a similar story with BNGO. It's been building a "library" of research showing it's gene sequencing system, Sapphire, is more accurate, faster, and not to mention cheaper, than the competition. Sales this year surpassed expectations, and they are making good money out of consumables.

Unfortunately, the connection here is that none are profitable yet. However, they are close enough (they basically just need to "dot some Is and cross some ts") that it seems ridiculous that they are basically in the same bin as biotechs that have a single drug in the pipeline.

That said, what an opportunity this is for those who have the dry powder, and have already identified good stocks! It's a similar situation to 2020, but perhaps even better since the fundamentals in many stocks have improved. As usual, I'm hoping this carries on for another 6 weeks!

BrockStoker

adindas said:

BrockStoker said:

adindas said:

BrockStoker said:

@adindas Albert posted this on the AMRS YHMB not long ago:

AMRS Short - Jan 3 - Jan 19, 2022

Date
Volume
Short Volume
% of Vol Shorted

Jan 19
1,315,224
702,045
53.38%

Jan 18
1,879,133
893,612
47.55%

Jan 14
1,802,499
775,560
43.03%

Jan 13
3,350,511
1,661,233
49.58%

Jan 12
4,740,775
2,838,614
59.88%

Jan 11
1,491,427
769,267
51.58%

Jan 10
1,714,540
768,234
44.81%

Jan 07
1,331,213
656,245
49.30%

Jan 06
1,931,926
725,160
37.54%

Jan 05
2,674,176
976,405
36.51%

Jan 04
2,944,987
1,004,962
34.12%

Jan 03
3,689,092
1,486,741
40.30%

I'm not entirely sure what to make of the numbers, but it seems like quite a full on attack by the shorts to me.

Indeed, the shortsellers keep attacking the stock. The data above suggests that they keep adding their short position. You could observe that the percentage keep increasing, they keep adding their short position day by day. Also the availability of the stock to borrow is becoming less day by day. The shortsellers intention here is to put pressure on price to bring the price further down.

When a shortseller “shorts” a stock, they are selling a specific number of securities that they currently do not own in hopes that the price of the asset will eventually fall. When an investor borrows the shares from a broker in order to sell them, they will eventually be required to return them. If the investor was able to sell the shares at a high price point and then repurchase them for a significantly lower price, they will be able to realize a profitable gain after returning the shares to the original broker.

So the short sellers are making money when the stock price falling. So the more price drops the more money they will make when they finally close their position.

But for AMRS, it seems they are not very successful to bring the price further down as I just checked it the price action since the last few days, it literally stays flat despite the short seller’s attack. But this also explains why the price stays low (e.g still under the short sellers pressure).

Like I mentioned before the possibility of short squeeze to happen does not just depends on the short Volume / Short interest. There are other factors such as Days to cover (DTC), Utilization (U), and Cost to Borrow (CTB). Unfortunately, the above is not sufficient to draw a good conclusion about the possibility for the short squeeze to happen. Ortex / Fintel produce produce analysis as well as score. Unfortunately those data are only availbale to paid subscribers.

I do wonder how well the shorts research before shorting. It seems to me that it's not that much. I mean, look at the potential catalysts Amyrs could announce at any time now (completion of factory is probably the big one, but there are others potentially), which could send the price up. I guess while the market conditions are the way they are, shorts feel like they have free reign. Never the less it feels like the shorts are making a huge mistake here, but perhaps I'm being naive.

The short sellers definitely, do meticulous research before deciding a big scale of shorting the stock as there are a lof of money involved. Keep in mind you could only do a big scale of short if you are whales and have a lot of resources.

They will normally attack the penny stock (lower than $5 say) with relatively small market cap and low float as they just need relatively small amount of money to move the price to the direction they want to. AMRS meet some of these criteria. For that reason, you often read in the literature, try to avoid buying penny stock as it is vulnerable to price manipulation.

Regarding your question keep in mind they might open the short position before the news about of catalysts is coming. When there is catalyst and the price move up dramatically much higher than when they originally open their position, that is when they get screwed, it will trigger the margin call. They will be forced to buy back all of the position they opened at much higher price.

So in case of AMRS when the catalyst such as successful drug test, authority approval come to light and the FOMO buyers start jumping pushing the price up much higher than the original price when they open their position, The AMRS short sellers will get screwed.

Keep in mind short selling is not illegal, pump and dumb is. Some retail traders are also doing short selling such as doing short in various modes: “put” in option trading, doing short with leverage in CFD, buying "Inverse" ETFs, etc

I do get the impression there's a significant proportion of people out there shorting without knowing what they are doing - at least it's increased since redit/gamestop became a thing and everybody and their dog were jumping into stocks.

Either way, over the long term I think shorts matter little, and even help in other ways besides providing opportunities for longs, as long as they make the mistake of investing in a strong/strengthening company.

BrockStoker

Good news for Arrowhead that ARO-ENaC is back on track after the pause. Once again it's madness that the market has not acknowledged that fact (after having taking it down a peg or two when the pause occurred), although the news has yet to be officially released. If anyone ever wanted proof of how inefficient the market actually is, this is surely it.

It was BioBoyScout who found the news, and he also added a little about what he thinks about the current state of the biotech sector - I've heard a few analysts say this/similar now:

"BTW, any suggestions out there that the stock is dropping because of something the company did or didn't do are just unfounded, which is why I ignore and mute the noise. I currently see bargain basement prices in hundreds of biotech stocks out there and eventually those shares will get gobbled up and you can probably do great in over 90% of biotech. If we're not at the bottom yet, I can't imagine the sideline cash will wait much longer before taking advantage of the massive discount opportunities that are out there."

I'd definitely be buying more at these prices if I could fund my ISA today, although I'd hold some cash back just in case prices dropped further. That said, I couldn't wait and bought another 2K AMRS the other day - could have gotten a better price if I'd waited, but I'm happy to have another 2K under $4.90, and with any luck I can bring it down further, if prices stick around these levels for another 6 weeks or so!

For anyone out there who might be interested in biotech companies that are better established/less risky than the majority discussed here, stocks like ISRG and HZNP look like excellent buys at current prices. There are all kinds of possibilities for someone wanting to put together a biotech portfolio at the moment!

BrockStoker

If any RNAi investors out there missed it (was previously posted on the ARWR YHMB), this article is an interesting read that outlines the field in general/differences between various modalities, and where we are today - Arrowhead gets more than one mention: A Therapeutic Dose of RNA?
Also, slightly OT, but still science related, and with implications for biotech/medicine in the future, this article talks about how machine learning/AI is changing how science actually works, but especially this link, which is linked in the previous link I posted looks at AI and proteins specifically and is worth a read. This is our future competition, so worth keeping an eye on, although there's no immediate threat.

BrockStoker

Carnage today. AMRS seems to be holding up much better than my other stocks after announcing ANOTHER acquisition. Not surprisingly ARWR down on inking the GSK deal and receiving $120m, ha! SRNE down 16% after announcing it's sold millions of covid tests to Mexico!

moneyfoolish

BrockStoker said:

Carnage today. AMRS seems to be holding up much better than my other stocks after announcing ANOTHER acquisition. Not surprisingly ARWR down on inking the GSK deal and receiving $120m, ha! SRNE down 16% after announcing it's sold millions of covid tests to Mexico!

Pretty much all good news from both of them BS but won't save them if (more likely when!) Russia starts attacking Ukraine! I sold all my AMRS a couple of days ago at $4.79 but couldn't resist buying back a few today at$4.16 and sold my ARWR at $55.09 but, again, bought a few back today at $49.29. Mainly because they have both held up so well in the carnage today so I'm guessing they would have soared on a normal day. I'll buy more back when I see what happens with the Russia situation.

BrockStoker

moneyfoolish said:

BrockStoker said:

Carnage today. AMRS seems to be holding up much better than my other stocks after announcing ANOTHER acquisition. Not surprisingly ARWR down on inking the GSK deal and receiving $120m, ha! SRNE down 16% after announcing it's sold millions of covid tests to Mexico!

Pretty much all good news from both of them BS but won't save them if (more likely when!) Russia starts attacking Ukraine! I sold all my AMRS a couple of days ago at $4.79 but couldn't resist buying back a few today at$4.16 and sold my ARWR at $55.09 but, again, bought a few back today at $49.29. Mainly because they have both held up so well in the carnage today so I'm guessing they would have soared on a normal day. I'll buy more back when I see what happens with the Russia situation.

Of course the markets will panic if there's an invasion, but it's not likely to affect the fundamentals of these stocks, and their future IMHO - I can't see why it would. I'd just treat it as a buying opportunity. I think you are wise to keep back some dry powder, and also to pick up shares at these prices. It's quite possible you'll make up all your losses in a short space of time. Good luck - hope you manage to get rock-bottom prices in the days/weeks ahead!

In the mean time, it's nice to see both AMRS, and now ARWR showing significant/relative strength on a day like this.

BrockStoker

moneyfoolish said:

BrockStoker said:

Carnage today. AMRS seems to be holding up much better than my other stocks after announcing ANOTHER acquisition. Not surprisingly ARWR down on inking the GSK deal and receiving $120m, ha! SRNE down 16% after announcing it's sold millions of covid tests to Mexico!

Pretty much all good news from both of them BS but won't save them if (more likely when!) Russia starts attacking Ukraine! I sold all my AMRS a couple of days ago at $4.79 but couldn't resist buying back a few today at$4.16 and sold my ARWR at $55.09 but, again, bought a few back today at $49.29. Mainly because they have both held up so well in the carnage today so I'm guessing they would have soared on a normal day. I'll buy more back when I see what happens with the Russia situation.

Of course the markets will panic if there's an invasion, but it's not likely to affect the fundamentals of these stocks, and their future IMHO - I can't see why it would. I'd just treat it as a buying opportunity. I think you are wise to keep back some dry powder, and also to pick up shares at these prices. It's quite possible you'll make up all your losses in a short space of time. Good luck - hope you manage to get rock-bottom prices in the days/weeks ahead!

In the mean time, it's nice to see both AMRS, and now ARWR showing significant/relative strength on a day like this.

Voyager2002

BrockStoker said:

Carnage today. AMRS seems to be holding up much better than my other stocks after announcing ANOTHER acquisition. Not surprisingly ARWR down on inking the GSK deal and receiving $120m, ha! SRNE down 16% after announcing it's sold millions of covid tests to Mexico!

What happened about the deal between ARWR and GSK? The offician announcement said that it was "closing", and a visiting solicitor said that this means that the deal is being terminanted.