Gambler's Biotech thread - Page 22

Yeah, nobody questions that.

What is not proven, however, is, are those shares being sold on the initial 30% price spike or not.

g

No, it is not 60M$ for 4M shares, it is either or... trust me, they cannot force KB to buy shares at 15$ per share... a quick scan of the CEFF (60M and 4$ per share) would give pumpers ammo to say 'hey CYCC is worth 15$ per share) but it is not true. Similar to how NBIX pumpers were saying that the KB CEFF meant that NBIX was worth 7.50 per share.

It is analogous to pumpers citing an FDA phase 3 partnership agreement and saying that it means that "X" biotech will get 500M$ from PFE, ignoring the fact that it is "UP TO 500M".

g

Some info on different types of FDA meetings

http://learn.uci.edu/oo/getDemoPage....topic=5&page=1

And what an SPA is

http://www.minyanville.com/articles/index.php?a=4441

I was looking a bit more closely at the Dec 30 PR from CYCC

http://money.cnn.com/news/newsfeeds/...ire/180950.htm

First, let me say that my background in biotech research (5 years, fulltime, publications, a patent, etc etc) make me a little wary of how long it takes for products to come to market. Obviously, for anyone that has followed my trading style with biotechs, it is apparent that I think that holding a drug company for years until a product comes to fruition/FDA approval is foolish, in most cases. Yeah, HGSI did have a ridiculous run, and yes, I owned 50K shares at 53cents, which would be worth 1.3 million if I still was holding them. Obviously HGSI was the exception, and I could easily be still holding any of the other hundreds of biotechs I have traded that haven't done anything 6 months after I bought them. Or even went BK (ex: VION)

At the time I traded it, HGSI gave me some nice profits, which, I would still make the same decision if I could go back in time. Because at the time I took the profits (not when I went into the trade) they were guaranteed. HGSI could have gone back to 50cents or even BK, in another parallel universe

However, my years trading have also taught me that, for me, biotechs should be TRADED. I think that the speculative bios go through phases of hope and greed, huge runups and huge implosions in their PPS. The CHTP's that run up from 1.50 to 7$ in 6 months. The PARD's of the world, etc etc. What are they running on? they are running on HOPE. And then most of them get smacked around by the FDA. This is the perfect contrarian lab experiment. Buy when people have written off the company, sell when the hype is infectious.

So, back to my point. The super speculative bios (and by that I mean the CYCC's XOMAs of the world, those super small cap bios (and CYCC is tiny in comparison to XOMA, market cap of 20% the size)) have the potential for huge PPS moves. Alot of these companies have a fair amount of early stage products that will never get to market. Products in various areas of medicine that have shown promising preclinical results.

Product development in these early stage companies goes through the following stages:

Preclinical to Phase 1 to Phase 2 to Phase 3

http://en.wikipedia.org/wiki/Clinical_trial

and with each of those studies, the number of candidates at each stage can be seen as a pyramid, with a huge number of preclinicals making up the base of the pyramid, and the top being a few FDA approved Phase 3 candidates.

With progression forward in each step, the odds of failure increase. Yet I believe that the investing (or maybe trading) public greatly overestimates the probability of success in each successive phase, until the drug is found to have failed. This leads to what I consider semi-reproducible runups in PPS, until the release of the results which usually isn't so good.

That being said, if I had to decide which of the following situations I would like to be in

A) FDA drug phase 3 results pending, widely thought to be positive (DDSS now until early Feb, or CHTP maybe mid year until Drox 301 study results are released)

B) Holding from Feb 10 THROUGH Feb 12 and release of DDSS results

C) Early phase Biotech with only phase 2 drugs going INTO the START of Phase 3 (CYCC, maybe NBIX, but don't know what the timeframe on the actual start of the Phase 3 would be)

D) Super early biotechs with successful preclinical molecules going into clinical trials

each of those situations has various likelihoods of success. I think the worst situation is situation "B", where investors have likely already runup a stock and all that is left is the possibility of a huge disappointment. The SOMX's of the world, which ran up 100% and then got crushed. The PARD's. The CHTP's. Etc etc etc.

(continued in part 2)

So clearly, situation A is better than B, since you can look at it as a high probability of either a runup, or at least a flat PPS in situation A, as hype may or may not pour in leading up to the FDA decision.

So let's look at things from three angles (Timeframe, PPS magnitude, and Probability)

Timeframes on situation A (maybe a few weeks = less exact). Situation B (maybe can be narrowed down to a few days = more exact)
PPS magnitude on situation A (mildly positive to moderately positive). Situation B (hugely positive or hugely negative, with a bias towards hugely negative, imo)
Probability on situation A (fairly likely). Probability of upside on situation B (pretty small)

Now, let's look at situation C.
Timeframe (maybe months, less exact). PPS magnitude (moderately positive, as the effect of announcing a Phase 3 partnership is moderately positive, and the effect of NOT announcing a Phase 3 partnership isn't really a negative). Probability (decent, but cannot narrow it down to an exact timeframe)

Now let's look at situation D.
Timeframe (maybe months). PPS magnitude (depends, but typically positive, as I stated before, it is much easier to get positive phase 1 studies than phase 3 studies). Probability (fairly high, as early stage companies have a vested interest in generating hype via PR's that will allow money to pour into their companies. They also likely have a ton of these preclinical compounds that show good effect in vitro but will of course never be real products).

Now let's look at that situation D more closely.

In my experience, there are a couple of ways that a company can handle this situation. There is the unethical way, in which a company will send out a ton of PR's of preclinical compounds loaded with hype buzzwords (HIV, Cancer, H1N1 etc) very frequently, in order to get the momo crowd interested and will probably pay a few promoters to pump their stock.

An example would be CVM. Look at how many fluff PR's CVM did, and how frequently. Same thing with HEB.

This is very different than how CYCC is running things. If you look at their pipeline, and do the research on what their drugs COULD be effective on, you will find that they aren't really trying to crank up the hype machine.

Yet, Seliciclib has been shown to have in vitro effects on HIV

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1948018/

Lupus

http://www3.interscience.wiley.com/j...TRY=1&SRETRY=0

Kidney transplantation

http://journals.lww.com/transplantjo...ne__on.19.aspx

etc etc etc... and I haven't even touched on Sapacitabine.

The point is that these super early biotechs have lots of very early studies in many diseases, and some companies choose to PR each and every one of them, and some do not. CYCC is in the latter category, imo. Which unfortunately puts it in somewhat of a sleeper category when it comes to momo. The good thing for longs is that the area they work in (cancer) is a whole lot more sexy than curing, say, toenail fungus. Which means that a momo move (if one started) would be more likely to continue than a company that makes a new formulation of terbinafine.

(continued in part 3)

So, whether CYCC chooses to run up the hype machine, it certainly could, if it had to. But you of course can't count on that. At this point, however, CYCC certainly is getting pushed with it's back to the proverbial 10M$ market cap wall, so to speak. And I feel that while it has held the moral high ground for a while, by refusing to release fluff pr's, this latest dec 30 PR (which did mention multiple diseases)

http://money.cnn.com/news/newsfeeds/...ire/180950.htm

"This is a novel finding with promising implications for the treatment of autoimmune and inflammatory conditions, including asthma. It builds upon previously published data showing seliciclib activity in lupus nephritis, polycystic kidney disease, pulmonary fibrosis and rheumatoid arthritis."

...may have been a sign that CYCC is willing to play the same game that CVM, HEB, and all those early biotechs did. Which could convert CYCC into a momo stock in 2010.

The other thing I noted in the PR was the next sentence

"We look forward to highlighting these non-oncology indications, unveiling Cyclacel's next-generation CDK inhibitors, and reviewing our promising pipeline programs at a Company-sponsored analyst day in 2010."

I think "non-oncology" refers to probably Diabetes and HIV

http://www.cyclacel.com/cyc/rd/programs/other/

which they haven't really PR'ed very much. As a matter of fact I don't see diabetes or HIV as part of any of their previous PR's. However, both HIV and DM (diabetes mellitus, for the non-medical folks) are both 'sexy' when it comes to momo, due to their huge prevalence in the population. Basically what I am saying is that if CYCC chose to really PR their progress in these early phase products, they could probably convert CYCC into a momo stock and bring the pps up quite a bit in 2010.

As far as the 'second generation CDK inhibitors' I did look at that as a bit of a hole in the CYCC pipeline. Other companies have 2nd gen CDK-I's, why was CYCC still first-gen?

http://www.um.es/biomybiotec/web/Sem...0al%202007.pdf

At least that quote referring to 2nd gen CDK-I's was reassuring.

Finally, the last bit:

"We look forward to highlighting these non-oncology indications, unveiling Cyclacel's next-generation CDK inhibitors, and reviewing our promising pipeline programs at a Company-sponsored analyst day in 2010."

...makes me wonder if they are referring to the Jan 13th conference. Maybe not, but if they are, since they told us what they are going to tell us in 2010 (= pps spike), next they will tell us (= pps spike on Jan 13?) and then maybe they will tell us what they told us (= third pps spike )

I guess in summary, those are my thoughts about CYCC as a trader. The question is, will (or rather, how much will) CYCC be under pressure with this dilution. Will PPS get delisted and fall to 20 cents? or will it become a momo darling and run to 4.00? Will I sell it all on monday? or add more? Will I even post about what I do (probably not, just like I didn't feel like posting every exact transaction with CYCC during the past two weeks). Or maybe I am just trying to get suckers to put in a bid on monday morning so I can unload

Keep your eyes glued to the L2 screen, folks. It sure isn't going to be boring...

g

Nope, but I would be late jan or so. there is still enough time for a pull back, imo... may not happen, or it may. I looked at a bunch of 'run into FDA phase 3' situations and think I have found the optimal time frame to buy and sell, when balanced with the pps action and the risk of early news release.

g

To clarify,

No (but I will be) and No (at least 'No' for the vast majority of my position)

g

For those of you playing along with Gambler in the home version, I would always appreciate upcoming FDA decision dates and your thoughts on them, so I can put in my 2cents too. This is not necessarily restricted to FDA decisions, but also to practically anything related to drug development (phase transitions, big conferences, or anything)

For example, MNKD's date is Jan 16? I think. If you look at a stock like MNKD, what is it that I don't like it as much? Well, the ideal setup for the 'run into FDA' decision is a low float, low market cap stock that has stabilized before the runup.

Take a look at the SOMX chart. From aug to mid nov it was stabilized at between 2 and 2.50 for 4 months.

http://finance.yahoo.com/echarts?s=S...urce=undefined

The market cap was tiny, 50M, at the 2$ price point.

This was perfect in that you had a defined FDA decision date, and probably little risk if you sold before it, in that the pps had not run up in advance. I'd love to be informed of more of those types of plays in the future.

With MNKD, the pps has had more gyrations in advance, but it also has a market cap of near 1B, which is too large imo to have a good momo runup develop. Plus from Nov to Jan it has already runup alot. Yeah, it could power up to 10.50, but it could also pull back to 7 in the next couple of weeks.

So I sit on the sidelines on that one.

g

BEBE at 6.42 trying to cup and handle breakout, but I believe it came up too far too fast... I think the b/o attempt will fail. No position.

Still no position in DDSS. I may be rebuying if this is under 2.50 in late January, because almost no matter how high it is at that time, I expect more momo to come in in the next weeks after that date.

I think SQNM at 4.22 may be getting ready to run to 4.60 or 4.70 soon... It has been gathering strength at this 4.20 ish level, imo.

Watching PIP 1.88 for capitulation, maybe to 1.65 then bounce.

g

ETRM at 0.548 punishing those who bought the hype a couple of trading days back. A good reminder that, no matter how hard it seems, it is usually right to be a contrarian after a stock has run up 40% on no news in a day.

ANX-type stocks with a fairly predictable pattern, but knowing what the right thing to do is, and actually doing it are two different animals. 0.305 now.

I just found out TG was banned. I guess it isn't surprising. If anyone wants to pm me his recent emails I'd be interested, actually, out of a morbid curiosity, I guess. thx.

g

SQNM spike, bought some 4.24

That was me selling the 12K + 500$