The Young And Restless Portfolio: Adding A Tiny Biopharma Stock

As many readers might know, I have started a new portfolio called "The Young and Restless" portfolio. The portfolio is for an investor that has a long-time horizon, is young, and has a risk tolerance to suit an aggressive portfolio. The goal is to become very wealthy.

The portfolio consists of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX).

Stock Orig.Price
AMZN 230
AAPL 520
GOOG 640
FB 23

The foundation of this portfolio has been established with the share prices noted above, and in order to better familiarize yourself with the portfolio, please refer to the first 2 articles about "The Young and Restless:"

1) The Young And Restless: A Portfolio Not A Soap Opera

2) Adding Yahoo To The "Young And Restless" Portfolio

Now that the foundation has been established, we can add another stock that has the potential to make an investor of this type very wealthy: Achillion Pharmaceuticals (NASDAQ:ACHN).

A Small Biopharma Company With A Big Goal

All too often, we read about drug companies who are developing drugs that can "manage" disease. That is great, and has extended mankind's lifespan and cannot be dismissed. What we do not hear very often, is about a drug that could potentially cure an insidious disease. ACHN and other companies have been working on a new class of drugs to actually cure hepatitis C.

The market is said to be a $20 billion segment, so it is no wonder that many companies are chasing this pot of gold.

I have written 2 articles about ACHN which outlines the drugs, the competition, and the developments that have occurred. The most recent article can be reviewed right here.

What is notable is that Achillion has 4 drugs in the mix; ACH-2684, 2928, 3102 and 1625, each of which are showing strong promise at various phase I and II trials, and can either work independently or in combination in an oral fashion, not injections.

Just this morning, a press release was issued on the recent positive developments of ACH-3102.

"We are very pleased to see that the profile of ACH-3102 continues to exceed our expectations for providing a truly improved barrier to resistance. As the first-ever clinical trial to evaluate a NS5A inhibitor as a single direct-acting antiviral in combination with ribavirin, we are extremely encouraged by these initial results that demonstrate rapid suppression of the HCV GT1b virus and a well-tolerated safety profile through 12 weeks of therapy," commented Milind Deshpande, Ph.D., President of Research and Development and Chief Scientific Officer of Achillion. "As this data set continues to mature, we look forward to reporting initial SVR results at a medical meeting in the second quarter, and are planning to expand enrollment in the study to include non-CC GT 1b treatment-naïve patients later this quarter pending regulatory discussions."

What makes this stock very compelling, is that along with the 4 drugs within this business segment, the company has wonderful fundamentals:

  • An enterprise value of only $560 million.
  • $81 million in cash.
  • Only $750k in debt (virtually debt free).
  • 73% of all outstanding shares are held by institutions (of which 40% are held by insiders).
  • 12 million shares of the 61 million share float, is short (short squeeze anyone?).

I have personally purchased this stock at about $8.50/share since suggesting it at $8.01 last week, and the stock has since had the classic rise prior to the news, and is selling off today. As far as I am concerned, it creates a wonderful opportunity to place the stock right in the middle of our new portfolio, as a "coulda, woulda, shoulda" entry.

Buy the rumor, sell the news, is a classic move but obviously for those who are investing for the longer term, it creates an opportunity to buy shares at a discounted price.

My Opinion

As of this writing, the stock has dropped by nearly 10% based on great news. I feel this is temporary and the traders in the stock are pocketing profits.

The growth lies not only with the potential revenue and earnings of this small company, but for the very real possibility that the company can be bought out.

From this article:

"The company also revealed Phase I data from a short proof-of-concept study of its protease inhibitor, ACH-2684. It showed antiviral activity in patients both with and without previous exposure to treatments for their hep C.

Achillion has been one of the most discussed potential buyout targets for companies interested in beefing up their portfolios of oral hep C drugs, yet analysts have speculated that potential buyers might be waiting for further clinical data on its top drug candidates."

Now that even more news has been released, I feel the time is ripe to add this stock to our new portfolio, the "Young and Restless."

Please do your own research and do not rely on this article or my opinion to buy or sell any security. This stock is a risk-oriented investment for any potential buyer or seller.

Disclosure: I am long ACHN. 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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