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Sam Quirke
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Proprietary futures trader as a career. Trading biotechs as a hobby. 3 years in and going strong. I like micro-cap companies, with upcoming catalysts. Their cash situation, vicinity to 52wk hi/lo, volume are all important factors. As well as going long stock I'm getting experience with options,... More
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  • The Fallacy Of 'If' / Learning Continued

    A little update on my trades of late, and the lessons learned with them.

    I was long AVEO February $7.50 back in January, looking for a run into the release of Overall Survival (OS) data from the trials of their drug Tivozanib. Volume just didn't hit this one, and it was hanging on precariously to it's support of $7.65 a week from the release. Sold for a 20% loss.

    I was long Ziopharm (NASDAQ:ZIOP) April $4 calls at $1.50, anticipating a run into their Phase III results due in Q1. Weathered the storm when they fell to $.90c and if I was a more experienced trader I'd have doubled down on my position here, as they rallied back to $1.60 in one session when the company announced that their palifosfamide Phase III trial had reached its target number of progression free survival events. I was just glad to be able to get out break-even, but was also concerned the management might do a capital raise pre-data which would dilute the stock, so I sold on Feb 12th. But if I'd held I would have seen them rise to $2.10, before ZIOP self destructed last week on poor Phase III results.

    My poor judgement and timing with my Raptor (NASDAQ:RPTP) trade really sickened me. I'd been stung bad with the FDA's 3 month extension of their PDUFA back on Christmas Eve, so making some money off a run would have been sweet revenge. However, with a new PDUFA date of the 30th April and their May $5 calls at $1.20 towards the end of February, I just felt they were too expensive. I bought some stock at $5.15 around Feb 12th. Guess what; the stock proceeded to fall to $4.70 and the May $5 calls went to $.90c but I just didn't pull the trigger on them. Stupid because if I had, I could have realised a 50% gain when they went to $1.35 with the stocks rally in March. The stock is now trading upwards of $6.30, where it was before it's PDUFA extension last Christmas, and the May $5 calls are almost $2 a contract. Textbook run-up that I called but didn't play.

    I didn't cover myself in glory with Delcath (NASDAQ:DCTH) either, despite making a profit with them. I was long their June $1 call at $.80c at the end of Febuary; they have a AdCom in May and PDUFA in June. By the 11th of March my position was up 50%, and I got greedy and didn't bank profit. The company announced a raise with their earnings on the 13th, big pullback and I sold for 10% profit. Definitely not a loss, but far from the gain I could have had if I'd been smart.

    I was pretty bullish on Navidea's (NYSEMKT:NAVB) stock running into it's Lymphoseek PDUFA (set for April 30th) and had some May $3 calls at around $0.80. Early approval in the first week of March for Lymphoseek, saw a big sell off in the stock, once again confirming just how irrational biotech stocks can be! A non-profitable company, gets it's first approved product - and it sells off?! Needless to say, it killed an chance of a run off, and I took a 30% loss on my May calls.

    In hindsight, I might have been better off if I'd put this money into Raptor who shared the same PDUFA date but who had orphan drug status on their Procysbi drug. I'm sure the coming days will confirm whether this orphan drug status affects the direction the stock goes after a PDUFA approval or denial (I expect the former).

    Sarepta (NASDAQ:SRPT) has been a rollercoaster, with a major date-less catalyst causing the hype; whether or not they will file for accelerated approval (NYSE:AA) with regards to their Duchenne Muscular Dystrophy treatment Eteplirsen. The consensus seems to be that Eteplirsen is going to be marketed successfully, it's just a matter of when. The recent FDA meeting with the company appears to have been a big positive. The FDA have asked Sarepta for all the data from their Phase II study and are conducting a 'mini review' of the drugs safety and efficacy which is rarely done before a company has filed a NDA. So it look's like the road for AA is clear, albeit taking a little longer than originally hoped. Feuerstein sums up what's next:

    'So, what happens now? Sarepta puts together the data and submits it to FDA in the coming weeks. The agency will then review the new data, meet with Sarepta again in the third quarter, and make a final decision on accelerated approval.We don't know what the FDA will ultimately decide, but if the agency tells Sarepta, "Yes, you can file," then investors should interpret this as eteplirsen being approved.'

    The stock traded over $40 in the days preceding this news as investors hoped for AA to be given but has drifted back to $30 since as short term investors get impatient with a lack of AA for the time being. If I had spare capital I'd look to add if SRPT goes below $30.

    Along with SRPT stock, I'm also long Rockwell Medical (NASDAQ:RMTI) August $2.50 calls at $1.75 since the end of March. The stock has had a pretty heavy selloff in Q1 of this year, falling more than 50% from $8 to under $4 due mostly to messy cash management and an heavily discounted offering. However with Phase III trial results due in July for it's lead product Solluble Ferric Pyrophosphate, RMTI stock could see a strong bounce from current levels, given that it rocketed to $8 (albeit before continuing sell off) on positive Phase II results in February. They release earnings in 5 days on the 29th April, and if they're miserable, I will happily go in heavy on any sell off that occurs to the calls.

    So I'm still not making my first million, but I'm learning all the time without losing the shirt on my back which is a more than can be said for a lot of novice investors. Planning to do an in depth article on RMTI over the next week.

    Disclosure: I am long SRPT, RMTI.

    Apr 24 7:22 AM | Link | Comment!
  • Greed & Irrationality Are Good

    Another week in biotech world begins and countless fortunes made already. Keryx Biopharmaceuticals (NASDAQ:KERX) announced very positive and promising results this morning that led the stock to rip into a 5 year high and at one stage a 100% gain. Some of their options were up 1,400%! What I found interesting about this was that despite results coming out before the open, the stock continued to surge throughout the day, with late profit-taking finally leaving the stock up 76% from yesterday's close.

    Going on past experiences, I would expect a sell-off from tomorrow as investors look to sell and lock in profits (look at Sarepta's chart - blue circle - below for an example of profit taking after massive 300% gains post data release). This shows the moves that are possible in biotech trading - it's all about getting in on them before the moves begin that's the hard part!

    (click to enlarge)

    Update On Current Positions:

    Sarepta Therapeutics Inc. (NASDAQ:SRPT) surged 14% after an outlook upgrade on Friday and I'm hoping that she holds onto those gains. There was a dirty slide from the start of 2013 until last week as investors sold and moved on to quicker moving biotech stocks. Sarepta has a very promising drug for Duchenne Muscular Dystrophy that the FDA could well give accelerated approval (NYSE:AA) to which could lead to an easy double in stock price. Timeline wise, the general consensus is that we'll have a decision in the next 1/2 months. Eteplirsen has been shown in trials (albeit with a tiny number of patients) to be very effective at slowing down the rate of degeneration and in some cases even reversing it. The FDA would face considerable public backlash and anger were they to slow down the production and distribution of this drug. One only has to read of twins Max and Austin Leclair to find it hard to imagine the FDA saying no to the first effective treatment of DMD that has had no adverse side effects.

    For those with belief in Sarepta's drug Eteplirsen (me) and with spare/extra money to invest (not me) these lows are great buying opportunities as the stock has bounced off the support line each time it has come close to, or hit it. Also, if my limited technical analysis skills are correct, each low has been higher since the post approval low of $21 at the end of November. This is pretty bullish.

    I own their stock at $21 (bought twice at $15 in October and then again at $27 in November).

    (click to enlarge)

    Ziopharm Oncology Inc. (NASDAQ:ZIOP) stock seems to be holding above the $4 floor - just about. I'm holding April $4 calls that will be in trouble if ZIOP breaks $4 and holds. They are due to release Phase III data in Q1, but volume is pretty low, showing that ZIOP isn't really on the radar of the biotech world yet. However, all this needs is a positive article to come out by someone respected and followed by thousands or else an positive initiation of coverage by some analyst. Bear in mind both these things could happen but be negative regarding ZIOP.

    At the moment, it's clear I bought too early on this one, but I'm confident I'll still profit. Position is currently down around 20%-30% (I bought around the last little peak thinking the run up was on), but there's absolutely no reason this shouldn't run up into their release, and if they do, it's mucho dollars in the pocket for me. Expecting some short covering (people who were betting the stock would fall, buying the stock to exit their trade) to fuel the rise when it kicks off. However will be watching the $4 floor like a hawk this week and will get out if it breaks and holds under it.

    (click to enlarge)

    AVEO Pharmaceuticals Inc. (NASDAQ:AVEO) stock is looking steady and strong just below $8. I'm in trouble if it goes below $7.50 and stays there as I hold their February $7.50 call which will lose value if the stock price goes below its strike (which in this case is $7.50). No reason for that to happen though and while it doesn't, the Feb $7.50 call shouldn't fall below $0.70c (where I bought it). It's been flickering between here and almost $1 over the past 2 weeks which was giving me an unrealised gain of close to 30% at times which just shows how quickly your capital can grow if you're using enough so that 30% is a big rise nominally. For me taking a 30% gain just isn't worth the risk I take on because my positions are so small in the grand scheme of things. Which is why I'm happy to take on huge risk (which I have and do) in expectation of decent (60% to 200+%) reward.

    In the run up to data release on February the 14th, AVEO could hit $10+ which would be the dream. Volume is not as low as ZIOP and I think it will continue to rise. Again, all it needs is some coverage for investors to notice how cheap it is here.

    Questionable technical analysis on this chart here by me, I'm not sure if I've correctly identified the trends (anyone with some knowledge please feel free to correct).

    (click to enlarge)

    On both ZIOP and AVEO, I'm playing greed and irrationality. Just like with KERX, in anticipation of results, investors tend to buy into a biotech company in the 3-6 months prior to a data release. This increase in volume and buying sends the stock flying up which brings in more investors who want to make a quick buck. It's a self fulfilling prophecy of sorts.

    Here is one example of greed and irrationality playing a stormer.

    AP Pharma Inc. (APPA) has a PDUFA date with the FDA at the end of March in two month's time. The share price is up 50% in a month in what is a penny stock simply because awareness has increased due to several articles being published and volume has surged. I can't account for the circled sustained fall in share price (didn't think it would go under it's more recent low) other than that it was a few heavy volume days of selling and profit taking. It's clear how quickly APPA bounced back and is continuing it's run-up.

    It's vital to note that nothing has fundamentally changed in the stock in the last month and no new information has come out regarding it's chances of approval and profitability. Awareness and knowledge of it have simply increased and the results are there to see.

    (click to enlarge)

    Now part of my strategy is that I don't plan to hold through any announcements or release of data. And I'm not the only person to do this as you can see a fall in the chart before the meteoric rise in both KERX's and SRPT's charts. Aside from the obvious cratering of a stock that would occur if results were bad, as I've said already a sell-off often happens anyway (Sarepta chart in particular) even in the event of positive results, as those who've caught the pre-release run-up, look to sell and lock in gains.

    It's just too much risk in my opinion to hold through. Saying that, I was lucky that my naivety saw me hold through Sarepta's Phase II results in October and realise a gain of almost 200%.

    This year though, I hope to have caught enough of the run-up in order to sell for a decent profit pre-event.

    I'm looking at DCTH, DVAX, TSRX and CYTR calls for my next investments and will detail the background and plan for these trades on my day off on Wednesday.

    Disclosure: I am long ZIOP, SRPT, AVEO.

    Jan 29 7:12 AM | Link | Comment!
  • Lessons From First Year Trading & 2013 Trading Strategy

    I traded my first ever stock last August while on holiday in France. I bought Navidea (NYSEMKT:NAVB), followed shortly by Amarin (NASDAQ:AMRN) and AIG (NYSE:AIG). I had studied Finance and Political Science in college, sitting my finals the previous May and it was high time I felt to put the theory I'd learned, into practice.

    Aware that the biotech industry saw much greater movements in its share prices compared to other sectors and that my initial trading capital of $900 ($200 in each position) wasn't going to go anywhere without some volatile swings, the decision was made to invest in biotech companies, with short to medium term catalysts approaching. AIG was bought on the premise that it was viewed by the experts and those with more experience than me as a very undervalued large cap, that was in a good position for a move of up to 50% in 2013. NAVB had LymphoSeek data approaching and speculation regarding a buyout of AMRN was at fever pitch. And so my portfolio was born.

    5 months on, I can honestly say I've learned more in those months trading my own money that I did in 4 years of college lectures and tutorials. I've seen my capital swell to $1600 (+45%) and fall below $600 (-33%). I was lucky enough to buy Sarepta (NASDAQ:SRPT) two days before their 48wk data on Eteplirsen was released and stupid enough to set up option trades like strangles on Exelixis when I had no idea what I was doing. One of my more idiotic trades was going in heavy into Vringo (NASDAQ:VRNG) close to its 52wk high in the midst of its intellectual property trial with Google (NASDAQ:GOOG).

    I've looked from the sidelines as Celsion (NASDAQ:CLSN) tripled and continue to be amazed that pure speculation on a stock like that can make people fortunes so easily.

    Going into 2013 a wiser man (I hope), I have endeavored to formulate some trading rules and do my upmost to stick to them. At times when I look at the movements that occur in biotech stocks, I can't help but feel like a dog who's had a hundred tennis balls released around him and is going bananas trying to catch them all. For this reason, it's time I copped on and got serious about making some money, because if the last 5 months have taught me nothing else but this, it's that there is money to be made, and lots of it.

    Rules and facts to check:

    • Vicinity of stock to 52wk high/low.
    • When and what is the next catalyst (must be close to 3 months)?
    • Has volume increased yet with approach of the catalyst?
    • How does the 10 day EMA chart look?
    • Level of insider sales/purchases over the last 12 months.
    • Sell before the event. Take profit.

    While these factors may seem trivial and come natural to more seasoned traders, they're the first of what I hope to be many trading rules that I develop that give me a better view of the stock I'm looking at, and not be buying on a whim or because someone else is advocating it. And the important thing to do is to stick to them. I am slowly but surely learning that this is a long game, that there will always be opportunities especially in the biotech industry to catch a run, and that missing one today or tomorrow, isn't that big a deal.

    I'm trying to delve into the world of options in order to get more leverage with my trades and make each one count more. Trading options has been a harsh lesson but that's the name of the game. I was holding Raptor (NASDAQ:RPTP) Feb calls on Christmas Eve when the company announced the delay in FDA review until April. I took a 80% hit when I panicked and sold like a novice, when if I'd thought about it logically and objectively, and held, I could have exited 2 weeks later almost at break even.

    In contrast I was 80% down in an unrealised loss with Impax Laboratories (NASDAQ:IPXL) Jan options 2 weeks from expiry and had a GTC order in to sell at my break even price. On the 9th of Jan they unexpectedly (and temporarily) rallied 135% and I got out with no damage but a hell of a lot of experience. Patience and commitment to the theory and belief behind your trade are absolutely essential.

    Currently my portfolio is:

    Long SRPT stock

    Long AVEO Feb $7.50 calls

    Long ZIOP Apr $4 calls

    Going into 2013, I hope to update this blog pretty regularly, at the very least with each trade I make, and my reasoning behind it. If nothing else it'll serve as a journal and also keep me focused on playing the game and not sitting back and just watching.

    Disclosure: I am long SRPT, ZIOP, AVEO.

    Jan 21 10:12 AM | Link | Comment!
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