Investing in biotech stocks - My experience so far

BrockStoker

BristolB said:

BrockStoker said:

ISA transfer from AJB to ii initiated. Still nothing heard from i-WEB so I guess they're not forcing investors to sell, which is a relief as I'd have to initiate transfers for two further ISAs.

In my case in specie transfer is probably not possible as my AJB sipp is crystallised funds and ii is uncrystalised funds. Managed to sell and buy around 60% of my holdings so far without incurring any charges at all (incl fx). For remaining 40% out of market now so hope Amyris takes dive before upcoming q3.

I find ii platform much better than AJB for US shares as you can use limit orders verses quotes by market makers with poor spreads.

Hope you get a nice reentry point. I would not be surprised to see a dip in the near future unless there's meaningful news.

Have to say I was not impressed with AJB in terms of US share dealing either. At least with i-WEB you can easily work out the price you pay for shares in USD. Also with you on the limit orders. It's not something I considered when I opened my AJB ISA earlier this year, but immediately started to miss them once I started buying on AJB. Glad to hear AJB lets you make limit orders!

BrockStoker

I think this is an appropriate time to talk about Amyris. Amyris has been a roller coaster ride, currently priced for bankruptcy, and heavily shorted. However, that may be changing now, with the filing of an 8K that effectively clears the way for a molecule deal which Wall Street apparently thought would never happen. This piece on Seeking Alpha is well worth a read.

Of course, WS/investors are concerned because management has been way too optimistic in what they have promised in the last year or two, and obviously Amyris has not achieved expectations, and has been punished for that. However, this does not mean they are not on track, just a little behind schedule, which IMHO is no reason to throw the baby out with the bath water.

So now, with the way paved for the molecule deal, there are signs that this week will be an interesting one for AMRS.

BrockStoker

Just to expand a little on what I said above, I see Amyris's situation right now as this:

Amyris management has a plan and vision for the future. The events of the past 1-2 years however has thrown a slight spanner in the works. We are all aware of the supply chain issues that have been affecting everyone, not just Amyris. Management is doing all it reasonably can to mitigate these issues, but they have been slow to melt away, and have affected bottom lines.

Under these circumstances, and with WS/investors being impatient, they would rather see Amyris conserving cash instead of sticking to the plan. WS/investors are skeptical that Amyris's business model is working (it is!), so all they see in the future is bankruptcy.

With the new Barra Bonita plant coming on line, efficiency of scale is really starting to kick in, and their brands are also doing very well (JVN was only just recognized as the fastest growing hair care brand of 2022 for example). Selling the rights to individual molecules is also very lucrative, and will bring in big bucks, but WS is discounting this, even though John Melo has a track record of closing very favourable deals for AMRS.

Add to all that that Amyris has significant backers/hard-hitting investors who would not be interested if this was a lost cause, and we saw them jump in and BUY MORE during the recent share price lows - so we know that they are willing to sink in more capital when required. John Doeer in particular - google him - he was also in to Enphase (ENPH) and look where that has gone in the last 1-2 years.

Also, if you add up the various assets AMRS has, including giving the molecules VERY conservative valuations ($20M each), then AMRS should have a share price of well above $30 - it's intrinsic value. A company that is doing well is priced well above it's intrinsic value alone, so this is a very low-ball figure, potentially!

Now, going back to the vision that Melo/Management have: I ask, why, given all the above, should management bend to the whims of the (short-termist) market? Melos vision is a long term vision, and he has previously stated that he is focused on the long term, and growing AMRS to it's full potential. I can understand his optimism, and why he may have gotten a bit ahead of himself - it's something I am prone to as well - so it does not bother me too much. If anything I am grateful because it creates a buying opportunity.

So this is a battle of wills - Melo vs the market. As a long term investor I'm siding with Melo, and couldn't give a crap what WS thinks! AMRS is still a screaming buy as far as I'm concerned, and perhaps we will see some confirmation of that when the market opens tomorrow.

BrockStoker

While I'm here, and have a little time, here's a quick general update on my own situation:

I am still deep in the red in terms of my individual stock portfolio, thanks mostly to AMRS, but also due to the much more speculative stocks I decided to buy and hold (EVFM, SRNE, ORTX, NDRA, and SYRS). ARWR has held up comparatively well. While I am deep in the red now, if AMRS starts to gain traction, I have enough AMRS that the situation could quickly reverse.

The stock portfolio is in sharp contrast to my portfolio of funds which has performed very well, mainly thanks to a large initial investment in the Polar Capital Biotechnology fund, which I heavily over weighted in my portfolio. The fund has been soft-closed for one or two years now if memory serves, and has easily out performed it's peers over longer periods. This is what my portfolio has done over the last 5 years:

This is exactly how I had hoped things would play out, with biotech/healthcare buffering my portfolio at a time when others are stressed. No need for bonds (purposely avoided due to multiple red-flags in recent years) or to do much else apart from wait for the biotech cycle to continue to the next stage. Healthcare/biotech has long been seen as a refuge during times when overall markets are stressed. Of course, a portfolio of speculative biotechs (much like my own portfolio of individual stocks) would have been a disaster in a time like this where any company which is not making profits is getting hammered, much like BIOG has been!

My point here, which I've made before, but I think it's worth stressing again, is: I'm not relying my portfolio of individual stocks. They are too risky! Instead, my safety net is the funds, where biotech is an important component.

The world needs certain things to survive and thrive, and health is a major issue (there are others as well) in an increasingly crowded world where disease can spread more easily, and where people are giving themselves problems (obesity, lack of exercise, etc, etc). The bottom line is that people will pay whatever they can in order to be alive and well, and since current treatments are lacking in many cases, there is much money to be made in improving existing therapies/drugs. Investing in biotech/healthcare is a no-brainier for the foreseeable future, with funds being the preferred way to profit from an ongoing trend.

Stocks are great, if you can get your head around them and spot the pit falls, but still much riskier than investing in good/well managed funds and indexes.

Richard1212

Thrugelmir said:

Biotech generally sits at the outer edge of risk profiles. Not adverse to investing in early stage companies. However I do like to understand the business model etc. Anything which requires an open ended R&D spend with no confirmed output isn't my personal choice of investment.

Good luck.

I thoroughly agree with the above. I have dabbled with only a few biotechs (including Arrowhead) but not many. And the reason is that they are worse than picking the winner of the 3 o'clock at Kempton. Luckily I lost only a moderate amount on the over-hyped Arrowhead, but I am not risking anymore on a sector that is just a minefield for people who should be members of Gamblers' Anonymous. 

With 9 sectors heavily invested in ( an average of 6 or 7 companies per sector, including huge gains in Amazon , BAE Systems, Shell ---and AZ : a "real" pharmaceutical company which I do not class as biotech), why do I need the hassle of a rogue sector such as biotechs ? Blimey, I'm not even sure of the safety of the mRNA that is floating in my body courtesy of Moderna and Pfizer vaccines ( they make a great many people so ill that elderly patients are vomiting so much after a jab that they are losing the pills that keep them alive !). RNAi's effects are more uncertain and the markets know so.

My portfolio manager has always said that buying biotechs was for the foolhardy but I just had to find  out for myself. He was right (as you'd expect with his experience and team of researchers, including sub-contracted pharma analysts) ....and I was wrong ( and I was wrong because I was led by a sense of adventure and greed which was wholly misplaced). Arrowhead has been a disaster , both in terms of its RNAi ,and in its once lauded platform, and in its lack of a drug after 10 years ; and the markets have told us what they think about a failing company.

BrockStoker

Richard,

I completely agree, investing in biotech is a mine field, and it's certainly not for everyone.

That said, I do think that there is a place for it, but perhaps only for certain individuals, and while the sector in general has been cruel to investors since the start of 2020, especially for the more speculative biotechs or biotechs like Arrowhead that have no approved drugs, when things do go well for a biotech, the rewards can be as large as the potential losses.

In regards to Arrowhead not having anything after 10 years, this is not quite true. While they don't have anything approved yet, they do have a formidable pipeline, with 2 or perhaps 3 drugs starting phase 3 within the next year, and one of those due to be announced in days. Those who bought ARWR shares 10 years ago have also done very well, it should also be pointed out. I've always thought of it as a long term investment (although it would have been nice if the share price exploded early, but there's never any guarantee of that).

I should also point out that the shares I bought early on are in the green (I bought as low as $21.18) since the rally in the last week or two, although I'm still overall in the red. But it is early days, and I think ARWR shares are looking very undervalued right now.

The problem with biotech stocks in general is that they can be all or nothing, especially so in the short term. Right now many stocks are still out of favor, but sentiment can turn fast, and, if your company does survive, it can grow large quickly. It's definitely not for everyone though, and you might be better served with other investments. Perhaps stick with large pharma stocks - I would go with 3 or 4 of the better known names if you are not keen on funds - they all have a good chance of performing well in the long term due to very diverse pipelines/revenue streams.

I hope you mange to find what is right for you.

As for myself, I am still very keen on Arrowhead's future prospects, and want to add more if I get the chance. I took a risk and bought more AMRS in recent days/weeks as I think that will bounce back, and if it does, I'll buy more ARWR with the proceeds providing it's still quite cheap. The timing for that to work is a long shot, but either way I don't think AMRS is as big a risk as the market thinks it is right now. Note that the above is not a recommendation to buy either/any stock - it's only my opinion and my speculation could be wrong! It can easily go wrong, as my ~£12K bet on EVFM proved (currently looking at a 99.8% loss)! That said, AMRS is not EVFM, and unlikely to see a loss from here - certainly on that scale!

Gin_and_Milk

Completely agree with the comments about the volatility of biotech shares.  I'm invested in tissue regenix (before the dilution of shares).  My average price is approx 0.52p, however those who invested many moons ago paid as much as 33p for a share.  Whilst I can't see it ever getting that high again, it is worth remembering that biotech in general is a relatively new market and smaller companies aren't fully 'up and running' yet.

adindas

A lot of people are moaning about losing 90%, 95% in biotech. But what about making 10X+ (In a day ?), I remember there are already few evidences posted it in this thread. This is not a scam, this is not a P&D, neither triggered by the short squeeze.

With bio tech stock, it is not uncommon major price movement 2x, 10x could happen in one day, if there is a major catalysts such as successful drug test, authority approval come to light. But this is not to suggest people to invest in the biotech stock especially those who do not prepare time to research it. It is is extremely volatile stocks.

Also keep in mind, in this sector, there are a lot of scammers, and P&D out there where people could easily understand the reason behind that. In majority of cases the Bio stocks are micro-caps, have small floats to trade, so the price manipulators (or Scammers) will just need a small capital to set up the scam and/or to move the price to the direction they want.

But even they are genuine remember the company might not be lucky enough to have enough cash around to sustain their research program to a fruitful result before they go bankrupt. Biotech sector is definitely not a cup of tea of every investor those who do not want to spend time to research, to read the balance sheet, financial statement. To some extend, understand technical analysis, analysing price volume movement, short squeeze scenario.

BrockStoker

Gin_and_Milk said:

Completely agree with the comments about the volatility of biotech shares.  I'm invested in tissue regenix (before the dilution of shares).  My average price is approx 0.52p, however those who invested many moons ago paid as much as 33p for a share.  Whilst I can't see it ever getting that high again, it is worth remembering that biotech in general is a relatively new market and smaller companies aren't fully 'up and running' yet.

I have been watching TRX.L since you mentioned it earlier in this thread. It hasn't done badly over the last year compared with many other small biotechs. Of coarse a small biotech can take many years, even decades to fully get up to speed, but when it does you should be well rewarded. Good to hear that you are in profit in the mean time.

BrockStoker

adindas said:

A lot of people are moaning about losing 90%, 95% in biotech. But what about making 10X+ (In a day ?), I remember there are already few evidences posted it in this thread. This is not a scam, this is not a P&D, neither triggered by the short squeeze.

With bio tech stock, it is not uncommon major price movement 2x, 10x could happen in one day, if there is a major catalysts such as successful drug test, authority approval come to light. But this is not to suggest people to invest in the biotech stock especially those who do not prepare time to research it. It is is extremely volatile stocks.

Also keep in mind, in this sector, there are a lot of scammers, and P&D out there where people could easily understand the reason behind that. In majority of cases the Bio stocks are micro-caps, have small floats to trade, so the price manipulators (or Scammers) will just need a small capital to set up the scam and/or to move the price to the direction they want.

But even they are genuine remember the company might not be lucky enough to have enough cash around to sustain their research program to a fruitful result before they go bankrupt. Biotech sector is definitely not a cup of tea of every investor those who do not want to spend time to research, to read the balance sheet, financial statement. To some extend, understand technical analysis, analysing price volume movement, short squeeze scenario.

Those 10x baggers (in a day) are out there (more usually 5x baggers), but it's more or less pure luck if you find one and invest at the right time to get the 10x in a day. I have noticed an uptick in the one day multi-baggers recently/in the last few weeks. One of them, KALA, was in my watch list, and I did own KALA shares briefly, early on in my journey, but sold them not long after buying. Had I held on to them I would still be down, even after the recent 2-300% day. That is because it was so beaten down over the last 1-2 years, like many stocks in the sector. In order to have profited I would have had to have bought back in the last month or two, and I'm becoming more shy of investing in speculative biotech stocks that I don't know well - that is a good way to loose money.

One thing to keep in mind is that probably over 50% of small clinical stage biotechs have had to have stock splits or reverse splits to stay in the game over the last 6 months or so.

I also noticed these stocks making big gains recently: SPRB, ARDS, and PRQR. The best of that lot may be PRQR which was tipped by BioBoyScout a few months back (before the gains) as being one to watch. I did not take the risk, and now regret it, but it looks like the tech could lead to further big gains in the future.

I should also point out once again, that if I'd held on to my original portfolio, which included MRNA, AXSM, CRSP, ONEM, TXG, and a few thousand BRCX, I'd be doing a lot better than I am now. That said, I do believe I've done the right thing focusing on just two stocks, but it's a case of just waiting now.

As for scammers, I don't think there are many, but there are plenty of badly run companies, like Clovis for example, which was all the rage about 4 years ago, but has gone down hill ever since, and filed for bankruptcy a few weeks back. Despite this it may be able to survive in another form.I held it for a while, but managed to exit with out too large of a loss.

But investors have been weary for a few years now about fraudulent biotech, and that now appears to be abating.