Of course you did – everyone did. Small-cap drug developer Intercept Pharmaceuticals (ICPT) climbed 540% in two days. Not only that, but the stock gapped up by 200 points on day one, almost another 200 points on day two.
Intercept announced on Thursday morning that a trial of its experimental treatment for nonalcoholic steatohepatitis, called OCA (obeticholic acid), was being stopped early due to efficacy. NASH is a compelling indication and market opportunity, as outlined by TheStreet’s biotech columnist Adam Feuerstein on Thursday after the results were announced.
This is what makes biotech such a great segment to trade – high volatility and make-or-break events. That’s also what makes it such a hairy place to trade. And why we do what we do – big returns.
A week into 2014 and biotech is already outperforming broader indices, although much of that has to do with next week’s J.P. Morgan Healthcare Conference in San Francisco (and ICPT’s performance).
If you missed it, we’re hosting a cocktail reception on Tuesday evening.
Although this week makes for a poor reference given that most small-cap companies in the space rallied, below we’ve highlighted and updated some of the trades that we’ve been tracking. You can stay abreast on a daily basis at Propthink.com.
Tekmira (TKMR) continues to recast itself as a pipeline, product-focused company. We’ve been suggesting as much since last Spring, and news this week corroborated the thesis – we continue to see value in owning TKMR. On Friday, Franklin Resources filed a 10.6% stake in the Canadian company. TKMR closed the week higher by 25%.
Zogenix (ZGNX) announced that its co-promotion of SUMAVEL DosePro (sumatriptan injection) with Mallinckrodt (MNK) will end five months early. The stock closed the week up 25% as a result. PropThink recommended that investors buy ZGNX shortly after the FDA approved the company’s hydrocodone product, Zohydro ER, and after a secondary offering in early November. Here’s our latest update, and an explanation of why investors are excited about Zogenix severing the co-promote with Mallinckrodt.
Sarepta Therapeutics (SRPT) remains a lightning-rod equity. Mr. King outlined on Thursday how he recommends being involved to capture upside this year if FDA walks back some previous guidance. SRPT is quite attractive from a risk/reward standpoint over the next few months, and options allow us to sleep a little easier.
On Friday morning, to much fanfare, Retrophin (RTRX) uplisted to the NASDAQ (from the OTCBB) and priced a secondary offering at the market. Here’s a snippet of what we sent to PropThink Premium members in the pre-market:
With 18.4M shares outstanding before this offering, RTRX was a $156M company at $8.50. Including newly minted stock, the company will have 23.8M shares outstanding. At $9.50, it’s a $226M company. These figures won’t be reflected on common financial websites for at least a few weeks, made complicated by the uplisting.
We think going long RTRX makes sense, despite the stock already being up.
Martin Shkrelli, Retrophin’s CEO, is out on Twitter this morning suggesting that the company “. . . sacrificed buying in this deal to get some new investors in. I have some dry powder.” Shkrelli is suggesting that there are still investors who want into the stock but were unable to get placed in this deal. Our sources confirmed this and indicated that the deal was highly oversubscribed.
We should have pulled the trigger a few weeks back when we first learned that there was an uplisting pending. Nevertheless, we think it’s not too late. RTRX is tackling orphan indications, has a competent CEO, and now has cash in the bank. . .
We’re kicking ourselves for not recommending a long position late last year, but so it goes. Our buy is still well into the green from a pre-market entrance around $10.00. RTRX closed the week at $11.49.
It’s been an exciting first seven days of trading this year. We’re off to JPM next week for some diligence and idea-generation but will be back on the East Coast and in full swing in no time.
