Shorting the news again

I am back to paying full attention to this portfolio after a hiatus of a few weeks. I have been >80% in cash recently which has meant that I missed a lot of the recent gains. However, if I don;t have capacity to pay full attention I prefer to be out of the market.

Today I took a position in VVUS puts. On Friday news was announced of the approval of VVUS’ ED drug, Avanafil/Stendra. In the past I have written of my research into shorting news of approvals and so this morning I entered a put position at the open. Given that so much of the focus on VVUS has been and will be on Qnexa, I don’t expect a huge return from this trade. However it also seems like a reaonably safe trade as the approval is unlikely to cause any significant gains and the news may drive some holders to liquidate early.

I committed 4% of NAV to purchasing puts and got in at an average price of $130 per contract. I probably will not hold beyond tomorrow.

 

PGNX approaches decision point

PGNX has a PDUFA date at the end of the week for its drug, Relistor. Today I closed 50% of my position at $10.72. I purchased the shares on Feb. 14th for $9.60 so I have seen a 12% return. I was late entering on this one. PGNX was at $5.20 on Nov. 28th when I started this record.

Delayed update

It has been a few days since I updated the site. I have had a few extracurricular activities and some travel that have kept me away. I did, however, made some significant changes to the portfolio on Monday morning. I was primed to do so by the poor jobs numbers on Friday morning and by the apparently increasing pessimism coming out of the EU. It has been awhile since we have had a European debt crisis & I think that the markets will probably react badly. In addition, consensus seems to be that the upcoming quarterly earnings will be disappointing. So I was wary after the weekend and dumped positions on a hint of weakness.

SPPI: On Monday morning I closed my position in Spectrum. After the big hit on the Friday before Good Friday. I closed at $10.61, very soon after the open. This is disappointing. SPPI is a position I have held for >2 years. It was a great performer during 2011 but 2012 has been less than stellar. It peaked at $16 during January and just failed to break through that level. I closed up based on my initial purchase but based on the November ’11 indexing of the portfolio I was down 19%.

PLX: Also closed this position on Monday. I spoke with a friend who once worked in a specialty biotech firm that dealt with inborn errors of metabolism. He was skeptical about PLX (knew the company quite well) and felt fairly sure that a CRL would be forthcoming. I had been in the position since mid-February and was up 14% so I was happy to close on Monday.

HZNP: This opened below my stop loss on Monday so I was out very quickly after the open. I had previously sold 50% of my position at $4.28. I exited the rest at $3.92. This gives me a 20% gain on the position over the 46 days I held.

XNPT: General nervousness drove me out of XNPT at $4.53. This had never really got going after my purchase on 3/23 so when it opened beneath my entry on Monday I looked for an exit. Up 2% in this one in 17 days.

PGNX: Still in this one. It just about managed to stay above my maximum pain threshold on Monday (though it came very close a couple of times). I am not giving it much room on the downside as it gets close to the PDUFA date!

So there we have it. I am down to a single holding now and am waiting to see where I should deploy cash. Not in a terrible hurry until the market feels a bit safer though. I finished Monday up 49% in the portfolio. This is down from a high of 58% last week. The drawdown is almost entirely due to SPPI – and in particular its recent phase III failure. Biotech investing success is so dependent on being aware of potentially devastating news and limiting one’s exposure appropriately.

Spectrum takes a hit

Double negatives on SPPI this morning pre-market. The company announced that they are acquiring Allos Therapeutics (ALTH) for ~$200M. ALTH has a drug on the market (Folotyn) for the treatment of lymphoma so it seems like a good fit for SPPI. One would expect the acquirer’s share price to take a hit on news of an acquisition. Compounding this is the news that SPPI’s developmental candidate, apaziquone, failed to meet its endpoints (statistically significant difference in the rate of bladder tumor recurrence at 2 years) in two trials. As a result of these two developments, the stock price is currently down 12% – the portfolio is down 3.5%.

I have held SPPI for a long time and am continuing to hold. I have managed the risk differently compared to my other positions – and this is probably a learning point. On my other, catalyst driven, positions I have a very defined point of maximum pain. I move my stops (mental) when certain gains are achieved. With SPPI I did not follow this approach. Had I done so I would have exited somewhere in the mid $14’s. I would also not have held through the announcement of trial results.

PGNX grind

PGNX has really been having trouble with the $10 area. I bought this stock on Feb 13th for $9.60 and since then its highest close has been $10.05 in late Feb. PDUFA date is in late April so it is starting to run out of time to make a move ahead of the decision. I am sure that part of the problem with the position is that I was late entering. At its current price it is 123% above its 52-week low. Volume still low so perhaps there is potential for some attention and price appreciation as the PDUFA approaches. Watching closely and tightening stops now. 

Reducing HZNP

I closed half of my HZNP position this morning for $4.28. This is a 26% gain in 39 days. While it has had a good run recently, I think/hope it should have room to appreciate some more ahead of its PDUFA date. It is approaching an area in which it might be expected to encounter some resistance and I wanted to be sure to grab some profits.