4 Biopharma Swing Trades For The Mid Term - 3 Week Report Card

by: StockMatusow

On March 5, 2012, I listed 4 bio-pharmas I felt would bring some nice midterm returns for investors/traders. It has been about 3 weeks since I gave these picks, and we are approaching the first leg of the midterm time frame, so let's see how my picks are doing as of their last trading sessions on 3/22/21. The picks were based on the 3/2/12 prices per share.

Ariad Pharma (ARIA), 3/2/12 pps: $14.68 3/22/12 pps: $15.68 My self grade: A.

I recommended an entry point from $14.25 and cost basis averaging down if necessary, to $13.90. I believed the stock would spike back to the $15.25 range, setting that price as a good mid term exit point.

Ariad recently had a disappointment with its drug Ridaforolimus. which was basically rejected by an FDA advisory committee. I wrongly predicted the stock would get hammered on this news, as the stock actually rallied on it. I usually stink at predicting sell-offs anyways, so no shock I got that call wrong.

On 3/6/12, after my original article came out on my 4 picks, the stock hit an intra-day low of $13.92, so I got the entry price correct. Moving forward with Ariad, I am hesitant to recommend it for a long term buy and hold at this time. I sense a bit of 'bubble talk' going on with this stock, with many people even stating that its highly valued drug Ponatinib is 'guaranteed FDA approval.'

I find this type of talk highly disturbing, and in my years around the stock market more often than not, this type of talk happens right before a major down-turn in stock price. Therefore, it is my opinion investors stay away from Ariad until the dust settles from its recent news. However, seasoned traders might be able to take advantage of the price movement, but be careful.

Antares Pharma (AIS) 3/2/12 pps: $2.59 3/22/12 pps: $3.02, coming off another recent 52 week high of $3.22 Self Grade: A

I remarked in the original article:

I cover Antares pps action closely and have successfully predicted price moves in 2 prior articles. In one article on Antares, I successfully predicted a move from $2.63 to $2.75 and the stock hit $2.74, so I was off by a penny. In another article, I predicted a move from 2.46 to the 2.60 range, but it actually went higher, into the $2.70 range.

A breakout over $3.00 is coming, in my opinion.

Prediction came true on this one as well. Antares is my big long term investment bet, as I am sure if the company is not bought out in the next 3 years, a pps of over $20 will be in order.

I have gone over my reasons for this call quite a bit in past articles but will refrain from this article to reiterate those reasons, as there are just too many for me to write about here. Please visit both my forum and my YouTube channel for all my commentary on Antares and my other picks.

A move down to around $2.93 is possible before setting another 52 week high soon, with a move upwards over $3.30 coming in a 2 to 3 week time frame in my opinion.

Short term catalyst to look for with Antares:

A big deal partnership for Nestragel, which is the company's Female gel contraception product, that has finished phase 2 clinical.

Mid to longer term catalyst:

An acquisition of the company by a larger pharma as I remarked in the original article:

Antares has generated some recent buy out speculation, as the company announced the hiring of John "Jack" Howarth as Vice President of Corporate Affairs/investor relations on Feb.27th. Howarth has a history of being directly involved in company buy-outs as we can see below:

  • Oct 2007 Alphapharma hires Howarth VP of Investor Relations
  • Nov 2008 King acquires Alphapharma
  • June 2009 King hires Howarth VP of Investor Relations
  • Oct 2010 Pfizer acquires King
  • Feb 2011 Antares hires Howarth VP of Investor Relations

It is easy to see a clear pattern with the companies Howarth has been involved with. It appears to me Antares is giving the market a signal that they are willing to be bought out for the right price, and I speculate the hiring of Howarth is intended to communicate this, and also designed to boost the stock price in order for Antares to eventually sell for a nice premium.

Spectrum Pharma (SPPI) 3/2/12 pps: $13.12 3/22/12 pps: $13.11 Self grade: C-

The Spectrum pps has been all over 'The Spectrum' lately as it appears to me trading groups and funds are playing around with it before it pops up much higher.

Spectrum aggressively seeks out drugs created by small pharmas, acquiring the small pharmas for cheap, getting those drugs FDA approved, then turning around and aggressively marketing these drugs. I expect Spectrum to continue this business model as I believe it is a long term winning one, notwithstanding the company has an excellent CEO.

I did not give any targets for Spectrum other than to say I liked the price at $13.12. At its current price of $13.11, my pick has been flat for the midterm so far. However, Spectrum is one of my best long term investment picks. As stated above, its business model is a solid money making one, so expect this stock to continue to slowly appreciate upwards, and the trading manipulation to calm down a bit. Spectrum is grossly undervalued in my strong opinion, and at its current price range, the stock is a steal.

Questcor Pharma (QCOR) 3/2/12 pps: $39.15 3/22/12 pps: $37.71 Self Grade: D-

Questcore is another stock I feel is strongly manipulated by traders and funds. I did not give a target on this one or the midterm, but obviously I have been wrong so far with Questcore, as its current pps is about $1.50 lower than my recommended buy price of $39.15

This is another bio-pharma I feel is a strong long term investment, as most Analysts' lowest price target is $49.00, which is well above its current price.

Questcore's lead drug Acthar, has seen its very strong sales continue as 3,360 vials of the drug have recently shipped out.

Acthar is an injectable drug that is approved by the FDA for 19 indications. The company generates most of its net sales from two indications: the treatment of acute exacerbations of multiple sclerosis in adults, and the treatment of infantile spasms, in infants and children under two years of age. Potential future uses include treatment for proteinuria among diabetics, lupus and rheumatic diseases. Questcore bought the rights to Acthar in 2001 from Sanofi Aventis (SNY) for about $100,000 plus some royalty payments. The company has a similar business model like Spectrum Pharma; buy drugs that already exist, get them FDA approved, and market them aggressively.

On Feb. 22nd, Questcore reported revenues of $75.5 million, smashing consensus opinion of $71.5 million. Sales also crushed the prior-year quarter's $29.3 million. The reported EPS was $0.48, also smashing the consensus estimate of $0.40 per share. GAAP EPS of $0.48 for Q4 were 433% higher than the prior-year quarter's $0.09 per share.

This is one company I highly recommend for long term investment as stated above. I want investors to understand that the best long term stock prospects are usually the ones that are manipulated the most. Also, the best long term investments usually entail investors hold 'the bag' for awhile. This is why it is very important for investors to be solvent enough to ride out stock down moves that are almost always ones that are manipulated. This is also why I constantly remind investors I speak with not to margin too many shares. Never buy any more than 10% of your total position in a stock on borrowed money.

If you are holding a bag, think long term growth prospects for Questcore and other long term investments you have that might be losing positions at this time for you. I speak about some of this stuff on my YouTube channel, and will make more videos over time to better explain and assist investors the best I can.

In my opinion, the time to take losses on long term investments is when the fundamental story changes in the company you are vested in. Missed earnings, poor guidance, and mis-management are 3 important fundamental issues that you should consider selling a stock for loss. Obviously, an over all market headed for a crash is another reason, but I do not see this happening any time soon.

I hope to continue to do my best in bringing you good picks that can make you some nice money. I have what I believe are 2 good ones coming next week, so stay tuned.

Disclosure: I am long AIS.