Two of my biotechnology stocks, Biogen Idec (BIIB) and Onyx Pharmaceuticals (ONXX), are climbing on good results from clinical trials. In Biogen's case, results are for daclizumab for multiple sclerosis and for BG-12 for MS as well. Onyx's results are for regorafenib for metastatic colorectal cancer, which is being developed by Bayer, but for which Onyx gets royalties.
My hopes were high. I said,
"I think some biotechnology stocks are going to be worth a lot more money (better than market returns) in a few years than they are now, and may make me filthy rich if I live to see the long run. I could spread the risk out by buying a lot of different biotechs, or going to a fund. But, well, while I would recommend a fund to anyone too lazy to do their own research, the problem with spreading risk broadly is that you can't get any alpha (profits above typical market) that way."
I already owned Celgene (CELG), Dendreon (DNDN), and Anesiva (which went bankrupt later). I mentioned Gilead Sciences (GILD) and Biogen Idec as being the kinds of companies that I would look at. In Part 2 I took a close look at Gilead. In Part 3 I took a close look at Biogen, but then said that despite its pipeline, "Wow, they have a very strong pipeline (See BIIB pipeline page)," I would buy Gilead first.
Of course, after that purchase came the recession, when most stocks were oversold. I ended up buying Biogen and Onyx as well, and added to each position. The result, so far, has been a mixed bag.
I already owned Celgene, which I first bought in June 2007 for $59.34. I bought more as low as $38.59 in May 2009. As I write it is selling for $66.09.
I first bought Gilead in October 2007 for $42.23. I bought more for $46.55 in February 0f 2010. As I write it is selling for $41.06.
I first bought Biogen in February 2008 for $61.57. I bought more at a low of $46.67 in September of 2008. As I write it is selling for $117.87. Clearly this turned out to be the best investment in the group, so far.
I first bought Onyx in May 2008 for $34.87. My best purchase was for $26.20 in May 2010. As I write it is selling for $39.59.
Gilead has been the dog of the group, but my selection criteria were pretty good overall. That should remind all of us who are seeking alpha to keep diversified, even when we have found a sound strategy for investing.
It also reminds me of the importance of patience when doing long-term investing. When a biotechnology company has value in its therapy pipeline, it helps to think in terms of 5 to 10 years, not 5 to 10 days.
Disclosure: Author holds a position in above mentioned companies.