The No BS Report, Week 12: Living In Yawnsville With Little But Gains

Author’s note: As always, I’m happy to answer questions in the comments below, but you can get direct access to me in the Total Pharma Tracker chatroom if you want to discuss in further detail! Right now you can get a no-obligation free trial to the service for two weeks.

Welcome to another report from the No BS plan, a series keeping track of an experiment on equity investing discipline and how this might help you avoid becoming a dreaded bagholder in biotech stocks. Before we dive into week 12’s report, let me remind of the rules of the experiment, which were laid out in the original article.

First, 6 biotech stocks were chosen to receive investments of $2,000 each, broken into 4 lots:

Short-term: To be traded at a range of 5% gain and loss. That is, sell this lot when it gains 5%, and buy back in when it falls 5% from the sell price. Near-term: Same as short-term, but with a 20% gain sell target and a 10% loss buy-in. Mid-term: Same as near-term, but with a 50% gain and loss range. Held forever: To never be sold.

Note that Advaxis (NASDAQ:ADXS) was taken out of the plan due to the loss-cutting rules, but shares in the “Held forever” lot continue to be held to see what happens. But this means that we’re following only 5 stocks now.

Progenics Pharmaceuticals (PGNX) continues its slow, stable drift downward as shareholders eagerly await the July FDA decision on the company’s rare tumor drug. I still personally remain confident (let’s say 70% sure) that Azedra will see approval. And if it is approved? Well, then I expect the mid-term sell-off point to be reached with relative ease, and then the No BS plan will have to contend with the issue of a stock that has undergone a binary event.

PGNX targets Short-term: $5.41 buy-in Near-term: $5.85 buy-in Mid-term: $10.98 sell-off

Geron Corp. (GERN) has remained generally stable at this $3.85 range, after what appeared to be another run building a few weeks ago. In my experience so far, this sort of price stability has a tendency to give way to a downward movement, but of course that is a very imprecise measure. Either way the No BS plan will benefit, in this case, since we’re near enough the $2.84 buy-in point to seem reasonable. But I would not be surprised at all if these levels hold into week 13, assuming no news comes out.

GERN targets Short-term: $2.24 buy-in Near-term: $2.84 buy-in Mid-term: $5.33 sell-off

Foundation Medicine (FMI) began the week strong but quickly gave way to a near-10% loss over last week. But it’s been rather see-saw for FMI at these levels, so it seems reasonable to expect that it’ll remain at this price point or rise back up to the high 70s. I think it’s also possible we’ll see a dip back down to the “short-term” lot buy-back price of $64.69, but I’ve said that before, and here we remain!

FMI targets Short-term: $64.69 buy-in Near-term: $84.05 sell-off Mid-term: $97.28 sell-off

NovoCure Limited (NVCR) has slowed its tear, and all positions remain intact. The nearest price target is now $31.43, which will trigger the 50% gain sell-off. We’re in unprecedented territory for NVCR, price-wise, so anything could happen from here, for sure! But I also think it’s a little much to presume that it will push to these heights. Considering it’s more than quadrupled since the beginning of the year, though, a retracement might be in order.

NVCR targets Short-term: $20.52 buy-in Near-term: $22.63 buy-in Mid-term: $31.43 sell-off

Bristol-Myers Squibb (BMY) continued its generally flat trading, still quite down overall from the initial investment. The recent $0.40 per share dividend helped to assuage things a tiny bit, but certainly not much. I still remain confident that BMY is going to have a mid-year turnaround, but of course this is generally what the plan is trying to figure out!

BMY targets Short-term: $65.67 sell-off Near-term: $75.24 sell-off Mid-term: $94.05 sell-off Conclusions

So as we reach past the 3-month mark on the No BS plan, there is some favorable data to look back on to date. In all, 4 of 6 of the original stocks chosen have netted some kind of gain, with a few relatively big winners. What we have NOT observed is the high volatility that typically leads to swings 10% up or down that trigger the easy buy-ins and sell-offs. Clearly, it’s not so easy to predict and nail down what good targets there should be.

But it’s still interesting here to see how the story develops in real time, and it’s nice to see some paper gains. Moreover, it is clear that this theoretical investor taking a highly disciplined, simple approach to their biotech holdings has not become a bagholder, desperately needing a 5-fold multiple on the stock just to break even.

Disclosure: I am/we are long ADXS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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