Investing in biotech stocks - My experience so far

BrockStoker

moneyfoolish said:

BrockStoker said:

So quite an interesting update from Arrowhead. Two new pulmonary indications (ARO-RAGE and ARO-MUC5AC - Going after CF and other mucus related conditions in a big way - more trouble for VRTX) added to the FAST growing pipeline. Redefining how fast a company the size of Arrowhead can expand it's pipeline. Also nice to hear that they are also pushing for four, or perhaps five NEW programs in the clinic by EOY 2022. Of course all the market will be focused on will be the loss of ENaC, so expect the share price to fall, again I think. ENaC2 will be better of course, albeit delayed. Hopefully will be able to add more shares under sleepy street's nose.

Also still hoping to add more EVFM at some point. They may be down, but they are a long way from being a lost cause IMHO. Still a very risky stock of course, but significantly de-risked relative to a few weeks back.

 Not only the market is focused on ENaC, BS, but a lot of the more optimistic Arrowhead followers on Discord. Probably the most pessimism I've seen from a normally very optimistic group. Most were pretty unhappy at the low share price bar for the CEO and the negative ENaC view has caused even more concern.

MF, I think you have to keep in mind that while there are some very keen ARWR investors out there, there is a culture of short-termism that permeates retail investors today. So it's easy for a significant proportion of bullish ARWR investors to be disheartened by what is essentially short term noise to a long term investor.

Any slight delay is going to reflect badly on the stock because the market is so short-term focused. As a long term investor, I'm focused on where they will be in 5-10 years, and the outlook on that time scale has barely changed. They have added new indications ($$$ further down the line), and are on track. That is my main take away on the situation at this point.

Indeed, the recent updates have not really altered analyst price targets (if you discount Mani Fubar's IMHO ridiculous PT, then they have actually edged up slightly thanks to GS upping their target by $5 to $90 in the last 24 hrs). I doubt any of this will matter if/when we get the right good data. The ARO-HiF2a data read out in two weeks time could potentially be a big SP catalyst, and we have a catalyst rich year ahead in general, so I'm optimistic that this year will start to turn heads.

BrockStoker

Clive_Woody said:

BrockStoker said:

Clive_Woody said:

BrockStoker said:

Right at the start of this now almost epic thread (for me at least!) @Clive_Woody suggested that identifying BP companies early is not easy.

I think it would be fair to say I proved Clive wrong right off the bat with Moderna (MRNA) which was actually the first stock I had intended to buy back in late 2019 (but when my money came through it had just gone up so I ended up buying SPCE instead, and had to wait a few days more before buying MRNA!) and I had wanted to buy more, but after a few attempts where I set the limit price a bit too low to trigger the buy, I gave up to just watch it climb, then sold it too early (live and learn). I bought 60 shares for $18.38 average, and a total investment of £855.24. I sold it for £2895.62 on 260620, a gain of around 230%. While I didn't hold on quite long enough, many now class MRNA as BP.

Perhaps that was beginners luck, but I'd also argue that CRSP is a very strong candidate, and showing early signs of greatness, although it is early days and there are some question marks (version#2,if it exists, might be the winner) over it's tech. Back on page 3 of this thread I posted a screenshot of my portfolio which held 19 stocks (a few of which I decided to sell after holding for a few weeks) back then including MRNA, CRSP, BCRX, and a few others which also did well for me. It was actually not a bad portfolio, and I still expect many of the stocks in it to do well (I may even buy one or two back at some point), but at this point in time I believe the hand I currently hold is just as strong, if not stronger.

All of that said, I want to remind everyone once again, not to risk anything they can not afford to loose. I'm mostly going on my instinct when it comes to sniffing out the kind of tech that should do well, and it might not necessarily always be the case that it does, so don't assume you are guaranteed to make big profits in a short space of time, though that is one *possibility* with stocks like these.

A broken clock is right twice a day. Congratulations on getting in early with Moderna, many other companies had looked at mRNA constructs as therapies, but Moderna’s timing with Covid was fortuitous. I was on a call with some Moderna folk just last week, very interesting company. 

For every Moderna there is 101 biotechs who go nowhere, that’s the nature of drug development. 

Clive, thanks.

IMHO the clock analogy is not a great one. A broken clock has no option BUT to be right twice a day. I could have quite easily been wrong every day of every year

Yes, it was an amazing stroke of luck for Moderna that covid came along when it did - I think there was a little more to it than just timing(or luck), but the timing certainly made the rise of Moderna possible (I think it would have happened anyway - covid just catalyzed it earlier on than everyone was expecting). Few could have foreseen that! I certainly did not.

I hear what you are saying with the 101 that go nowhere. I believe that paradigm is set to shift at least for some of the up and coming companies like Arrowhead with new modalities however. Moderna is a good example of what the new disruptive tech can do. If you compare the pipelines of ARWR and MRNA, ARWR really does not seem too far behind.

Personally I got the creeps slightly with Moderna, which is why I sold, but looking back on it, perhaps that's just the way Big Pharma is - cold, clinical, and they act like there are multiple skeletons in the closet (very secretive). Live and learn.

Agree, my reference to a broken clock was overly optimistic probability modelling for picking a successful biotech to back, many more elements of luck involved on top of public information that is available.

A significant part of my day job involves consulting with pharma and biotech on strategy, so success and failure rates are highly visible. I've been in the industry for well over 20 years and there's always something new and shiny that everyone gets excited about...which is no bad thing.

With the right funding, development strategy and a decent pinch of luck they move medicine forward and the industry follows. Vertex was a great example - I worked for a top 5 pharma company back then who looked at VTX as an acquisition but decided against it (big mistake) - they went on to develop first in class CF medicines and grew very rapidly and continue to do so. I also know of competition  who also were looking at similar disease modifying therapies for CF that invested millions and went nowhere. That is the nature of drug development.

I do get what you're saying Clive. The impression I get, in general, from the industry/sector, is that, as you say, there have been so many "new and shiny" things come along that had so much promise, but in the end turned out to be a let down. "Wolf" has been cried so many times, I think, at least certain sections of the industry/sector are perhaps jaded. Perhaps I'm wrong, but from within the industry, it may not always be as easy to "see the wood from the trees".

I can see why RNAi might be seen as just another "small incremental advance, possibly", by the industry, at least till it proves itself - of course I'd argue that RNAi tech has certain properties that set it apart from everything else in some major ways. I do believe that will become more apparent over time, but there are signs that it's already starting - Novartis CEO has been raving about siRNA therapeutics recently for example - he was on CBNC the other day, and I don't have a link for that, but I posted this (two vids) a few weeks back. Nevertheless it's good to see things from all perspectives, and I appreciate your contributions/insights as an insider.

It has been interesting to watch the VRTX saga play out recently. I have to admit, although Vertex is competition for Arrowhead, I do hope it does OK, not least because it's in my Polar Capital Biotechnology fund, but there is obviously some great talent there. I did think their reliance on CF revenues was too high, and when they took a dive a year or so back, that might have been them done. So it was a nice surprise to see that they had a few more tricks up their sleeve, and have made a very nice recovery by all accounts so far.

BrockStoker

Despite the low ratings for In The Rough Research on SA I'd encourage anyone with an interest in Amyris to check out their most recently published article on Amyris: Amyris: Surviving the perfect storm

It seems a fairly thorough overview of what has been going on with Amyris and the synthetic biology space in recent months.

wadsworth101

BrockStoker

It would be interesting, given all your posts about ARWR, what your current balance stands at in terms of overall credit/debit for ARWR ?

BrockStoker

wadsworth101 said:

BrockStoker

It would be interesting, given all your posts about ARWR, what your current balance stands at in terms of overall credit/debit for ARWR ?

I had to crunch some numbers (I hold ARWR in 3 separate portfolios, and at one stage had to sell some ARWR in one, so I could buy back in another due to an over-funding error) so was not aware exactly where I stood with ARWR currently. Here's what I got:

1975 shares cost £67136.38 in total.

Yahoo values them @ £79650.15 after today's close, so £12513.77 gain.

I did manage to buy as low as $21.18 (in March 2020) hence why (along with other buys in the 20's-30's) I'm in the green on ARWR overall, but the 400 Shares bought in 2021 (~$65 average per share) are currently showing a loss of around £3K (-15%).

Of course, weather I'm in the green or red says nothing about the future prospects of a particular company, especially only a couple of years into what I see as a 10+ year investment. That and it's the nature of these types of investment to be volatile. The market has yet to warm to ARWR. If and when that happens, it will be fairly obvious I think.

If you're contemplating buying, there is data due on the 14th, so you might want to dip your toe in now (I would never recommend going all in in your first buy of a stock, especially if you are not experienced with stocks). The share price could go either way of course, but over the long term, at these prices it's a buy IMHO. Please do your own DD, and don't invest what you might need at some point in the future.

That said, I believe ARWR will do very well over coming years, and if an investor is prepared to hold through periods when their investment could potentially drop by 40-50% for significant periods of time, they are likely to do well also, especially if they hold back some cash for when the share price does drop - noting goes up continuously, but stocks like ARWR, AMRS, and even EVFM have *some* degree of safety IMHO at these levels after the pummeling they have all taken. I suspect those investing in the most beaten down of these three (EVFM and AMRS) will actually see the largest gains in the short term, but anything is possible!

tom9980

j.p said:

FT: Biotechs face cash crunch after stock market 'bloodbath'
https://www.ft.com/content/c90d17c6-6196-4c8a-88c2-e2cef9a692f2

ARWR have $650m in cash and short/medium term investments + milestone payments that should fund 3 years and the new manufacturing facility.

EVFM on the other hand are running out of cash and drastically need to dilute or finally sign foreign partnerships for a cash injection.

Moe_The_Bartender

EVFM seems to have other problems.

https://www.marketscreener.com/quote/stock/EVOFEM-BIOSCIENCES-INC-40267487/news/EVOFEM-BIOSCIENCES-INC-Notice-of-Delisting-or-Failure-to-Satisfy-a-Continued-Listing-Rule-or-Sta-36262672/

tom9980

Moe_The_Bartender said:

EVFM seems to have other problems.

https://www.marketscreener.com/quote/stock/EVOFEM-BIOSCIENCES-INC-40267487/news/EVOFEM-BIOSCIENCES-INC-Notice-of-Delisting-or-Failure-to-Satisfy-a-Continued-Listing-Rule-or-Sta-36262672/

Nope not a problem at all they can apply for a 180 day extension twice! They can also reverse split to get over $1. I get the feeling they want a dilution first or some unknown to us catalysts exist to get it over $1 such as partnerships. I don't own any EVFM shares for the record.

BrockStoker

BrockStoker said:

wadsworth101 said:

BrockStoker

It would be interesting, given all your posts about ARWR, what your current balance stands at in terms of overall credit/debit for ARWR ?

I had to crunch some numbers (I hold ARWR in 3 separate portfolios, and at one stage had to sell some ARWR in one, so I could buy back in another due to an over-funding error) so was not aware exactly where I stood with ARWR currently. Here's what I got:

1975 shares cost £67136.38 in total.

Yahoo values them @ £79650.15 after today's close, so £12513.77 gain.

I did manage to buy as low as $21.18 (in March 2020) hence why (along with other buys in the 20's-30's) I'm in the green on ARWR overall, but the 400 Shares bought in 2021 (~$65 average per share) are currently showing a loss of around £3K (-15%).

Of course, weather I'm in the green or red says nothing about the future prospects of a particular company, especially only a couple of years into what I see as a 10+ year investment. That and it's the nature of these types of investment to be volatile. The market has yet to warm to ARWR. If and when that happens, it will be fairly obvious I think.

If you're contemplating buying, there is data due on the 14th, so you might want to dip your toe in now (I would never recommend going all in in your first buy of a stock, especially if you are not experienced with stocks). The share price could go either way of course, but over the long term, at these prices it's a buy IMHO. Please do your own DD, and don't invest what you might need at some point in the future.

That said, I believe ARWR will do very well over coming years, and if an investor is prepared to hold through periods when their investment could potentially drop by 40-50% for significant periods of time, they are likely to do well also, especially if they hold back some cash for when the share price does drop - noting goes up continuously, but stocks like ARWR, AMRS, and even EVFM have *some* degree of safety IMHO at these levels after the pummeling they have all taken. I suspect those investing in the most beaten down of these three (EVFM and AMRS) will actually see the largest gains in the short term, but anything is possible!

Apologies. I went over my sums again as something didn't look right, and realized I'd missed out one ARWR buy of 200 shares.

So the numbers are actually:

Total cost: £75199.49

Actual gain: £4450.73

BrockStoker

tom9980 said:

j.p said:

FT: Biotechs face cash crunch after stock market 'bloodbath'
https://www.ft.com/content/c90d17c6-6196-4c8a-88c2-e2cef9a692f2

ARWR have $650m in cash and short/medium term investments + milestone payments that should fund 3 years and the new manufacturing facility.

EVFM on the other hand are running out of cash and drastically need to dilute or finally sign foreign partnerships for a cash injection.

Yes, agreed in the case of ARWR. Also likely to partner another indication or two in the next 12 months, bringing in further milestones. With their business model they could (if they wanted) just keep partnering indications, and that could in theory keep the cash flowing in indefinitely.

I think EVFM is doing better many suspect. This news was a game-changer and has changed the whole dynamic of their business model. They had to take drastic steps in order to build a customer base at the expense of revenue to begin with, but that is no longer the case! That said, I would not be surprised to see a bit more dilution.

The other big stock for me/this thread, AMRS is also now in a similar position to ARWR, with enough revenue coming in that it should be able to say it's making a profit in it's next earnings. It's brands are growing quickly, and so are profit margins with the recently announced start of operations at it's brand new manufacturing facility.

As suggested though, other biotechs that don't have established revenue stream are likely to suffer. I'm glad not to be invested in too many of those!