Investing in biotech stocks - My experience so far

BrockStoker · 11 April 2020 at 6:10PM

For those wondering why I'm so excited about Arrowhead's RNAi technology, here is a video that explains why RNAi is so significant:

https://www.youtube.com/watch?v=Vh3-NHdjnyQ

Interesting to note that there are less than a handful of biotechs using RNAi tech, and Arrowhead appears to be leaps and bounds ahead of the others. Alnylam and Dicerna (the main competition) announced the other day that they are joining forces to take on Arrowhead, something I view as very bullish for Arrowhead since the competition are having to "gang up" to stand a chance of competing.

Also interesting to note that Arrowhead announced yesterday that they are starting trials for a Cystic Fibrosis treatment - a bold move since the Cystic Fibrosis space is currently dominated by Vertex. If successful, Arrowhead could put a sizable dent in Vertex's revenue stream, and I believe this is just the tip of the iceberg.

BrockStoker · 18 April 2020 at 3:45PM

Another excellent week:

S&S ISA total gain: +21.85% (18.95% gain over the last week)

SIPP total gain: +34.62% (15.6% gain over the last week)

Total Gain on 40K invested (both portfolios) is currently 11K

While Arrowhead has been steadily marching up in value (currently +44.5% total gain) the real stars this week have been Biocryst and Moderna, both gaining significantly due to excitement over their covid-19 focused programs. Moderna spent the whole week climbing, finishing the week with a gain of 15.39% on Friday, and up 154.97% in total for me. Biocryst, which I hold in both portfolios (1000 shares in the S&S ISA + a further 400 in the SIPP) was up 29.73% on Friday alone, and is up 85.2% total in my S&S ISA and 76.8% in my SIPP.

Friday was a great day for biotech mainly due to promising very early results being leaked from Gilead's covid-19 anti-viral trial. The news pushed up Biocryst/Moderna, but also buoyed the markets in general, and I am expecting more of the same to come as further results from the various covid-19 treatments come in, as long as they are positive of course, but I'm reasonably confident in Biocrysts/Modernas offerings at least and have high hopes that both will be effective.

Either way, Friday was the first time the SIPP closed with all stocks in the green for both the day and in total. The S&S ISA still has 5 out of 16 stocks still in the red, Clovis being the largest looser at around -20% (0.88K) currently, followed by Aimmune Therapeutics @ ~-50% (0.34K). Total accumulated loses from stocks in the red are about 1.6K currently. So I obviously did not pick as well as I could have, although I still have faith in the stocks that are currently in the red - but I'm learning lessons including to be more patient and wait for the right price before diving headlong into a particular stock.

Looking forward to the week ahead - just like Biocryst/Moderna, I received news (thank you Yahoo Finance! - a great way to track stocks, and receive news/alerts relating to them) that options traders are betting on big moves in Agenus and I think there was one other stock, but can't be sure since the deluge in news relating to Gilead/Moderna has pushed all the older news off my timeline. Options traders were right about Biocryst/Moderna, so I'm paying close attention to these warnings.

atush · 18 April 2020 at 4:09PM

I must admit i was expecting with the pandemic you would be having good news in this sector. Keep us up to date.
I worked at NIH under Dr Tony Fauci so worked with RNA viruses.

BrockStoker · 19 April 2020 at 12:00AM

Thanks for dropping in atush.

The NIH/Dr Fauci recently awarded Morderna $483 million (not sure if I mentioned that before, but also another reason the SP has gone up) so they appear to have a great deal of faith in the vaccine/Moderna. It was also announced that for the vaccine trial, the study has been extended to include a further 55-71 cohort of elderly healthy adults, strongly suggesting that early data from the 18-55 cohort showed at least some signs of being effective/safe.

I think this especially will be an interesting stock/story to follow over the next few weeks/months - I only wish I'd bought more than 60 shares! I had planned to, but never got around to it.

I must admit there were times when I was wondering what I'd got myself into, while my first portfolio was dropping like a rock in value, but on the flip side, I couldn't wait to have a second chance to pick up a second basket of promising stocks at very reasonable prices. The real bonus with the second chance was that I was able to look at what I could have done better the last time, and implement the tweaks.

Now it seems the market has realized the value of biotech/healthcare even (or "especially") in times of crisis, and companies appear to be trading mostly on fundamentals (apart from some covid-19 stocks perhaps), so I'm looking forward to whatever comes next, with all the catalysts many stocks have in the near term, and the deep pipelines/coupled with truly disruptive tech that is only just beginning to come of age/be noticed in many cases. We are certainly living in interesting times!

kinger101 · 19 April 2020 at 9:37AM

Be careful on loading up on too many companies developing vaccines or treatments for covid. You'll back the winner if you bet in every horse in a race, but it won't be profitable.

Healthcare/Pharma generally does well in a recession, largely because demand doesn't drop much compared to say discretionary goods.

BrockStoker · 19 April 2020 at 3:22PM

Thanks for the reminder kinger. I would not chase covid-19 profits as I mentioned earlier in the thread, but I think it's worth mentioning again in case anyone else was contemplating doing so. The covid-19 plays I hold were bought well before covid-19 had an impact on their share prices. I bought them because because of their pipelines/tech so whatever becomes of their covid-19 projects they will still have other sources of cash to fall back on should the covid-19 side of things fall flat.

Having said that, I think the covid-19 plays I hold are all very solid plays. Moderna for example is confident that it's vaccine tech will work and make them money since their platform can be scaled up easily whilst keeping costs low compared to traditional vaccine manufacturing. Biocryst's broad spectrum anti-viral is already approved for use in humans and has been shown to be effective against other corona viruses, so I think there is a significantly higher chance that it'll work, and a very low chance that it won't.

Personally I wouldn't buy either stock at the price they are at now since I don't want to average up my price per share, but I still think both will grow leaps and bounds over the next few weeks/months/years.

The other big covid-19 play I hold is a company called Verastem (edit: getting my stocks mixed up - I meant to say Cerus! Now I'm not sure why Verastem has gone up. Will have to research!) which has developed an advanced system for collecting blood products and removing anything that should not be there (viruses etc). They are leaps and bounds ahead of the competition in this space, and given the pandemic, which has highlighted the need for corona virus free blood products, this is another company that should do very well from all this. It is also currently trialing blood products taken from covid-19 patients that have recovered - so a blood transfusion that contains covid-19 antibodies, which can pass on immunity to the recipient. The share price has steadily climbed over recent weeks - up by 194.5% on that one currently, and I can't see it slowing down any time soon!

Those are the main covid-19 plays I hold, but some other stocks I hold also have indirect roles to play. For example 10X Genomics is a company that makes high end tech which can analyze the genetics of individual cells within a sample of tissue with astounding detail/precision. It's currently being used to study how the virus spreads in tissue, and what goes on in the cells that surround infected cells. The unprecedented detail of what is going on inside cells (which genes are being activated in which particular cells), coupled with what is going on in surrounding cells (giving an all important context), would not have been possible just a few years ago. It's a very interesting company with extremely disruptive tech that is worth a look (it's still under the radar for most), and it has a constantly growing list of papers/discoveries made by researchers using TXG's technology on it's website:

https://www.10xgenomics.com/

Regarding the defensive properties of the sector during a recession - I was aware that this was the case, but I did wonder, when everything was falling like a stone, if someone had bothered to tell that to Mr market! I still find is shocking how easily (and in so many cases) the baby was being thrown out with the bath water, even though I was hoping for/counting on this so I could pick up cheap stocks.

kinger101 · 19 April 2020 at 8:14PM

I've used some of 10X genomics products. For genome assembly. I won't be another Illumina, but it does have some interesting and useful technologies.

BrockStoker · 19 April 2020 at 8:59PM

I guess in some ways their products are a bit more niche than Illumina's, but at the same time I think there is still plenty of growth left in them, albeit likely less than Illumina managed to achieve, so I will continue to hold, at least for the time being. There does not seem to be much competition in this space apart from Oxford Nanopore, and I think TXG has the better features (but perhaps a researcher might have another point of view?) and the right management to keep the business growing, so I think it's a good bet.