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  • Protalix: Undervalued Growth, Plus A Possible Biotech Breakthrough [View article]
    Quick update: It looks like I significantly underestimated how quickly Protalix would grow Elelyso sales in Israel. I estimated $1.6 million over the course of the coming 4 quarters, but Protalix just reported $1.4 million in sales just for Q3 2013.
    Nov 13 10:57 AM | Likes Like |Link to Comment
  • Insider Selling At Inteliquent Signals The Top [View article]
    All of these headwinds you cite have been around for years. They are well known by anyone who follows the company. But most importantly, the headwinds are generally stabilizing or diminishing, not increasing as you imply.

    While voice minutes continue to trend modestly downward (as they have for years) prices per minute have turned up, suggesting competition isn't as fierce as it has been. Management recently upped guidance for this year, and they're talking about growth in minutes next year.

    The Tinet disaster is behind them. The business is stabilizing and looking at the possibility of (modest) growth again. The company still throws of lots of free cash. The stock just hit its (dividend-adjusted) highest level since 2011. Of course insiders are going to take some profits.

    The company has an enterprise value around $325 million and has generated $35-40 million of free cash flows in each of the last 4 years. It looks like it will do as well if not better this year and next.

    You're right about the "value" part of your value trap call. Trouble is, all those headwinds, which have been around for years, still haven't reduced IQNT's ability to generate cash. As I said, management just increased guidance, prices per minute are up, and they're talking about growth in minutes. That's not what happens with a value trap.
    Nov 12 05:29 PM | 1 Like Like |Link to Comment
  • Protalix: Undervalued Growth, Plus A Possible Biotech Breakthrough [View article]
    If anyone has a chance to check out Protalix's presentation on the oral biologic delivery and/or the recent press release on oral results in Gaucher's patients, I'd love to hear others' thoughts on its likelihood of success.
    Oct 31 07:34 PM | Likes Like |Link to Comment
  • Alnylam Developing The Next Generation Drug Platform In The $19 Billion Cholesterol Market [View article]
    I don't have any particular opinion on ALNY, but I wouldn't bet too much based on the PCSK9 work. There is significant competition in the PCSK9 space, some of which is already in phase III. That's why ISIS shut down their PCSK9 program.
    Oct 8 02:30 PM | Likes Like |Link to Comment
  • 3 Reasons Why Sanofi Rights (GCVRZ) Could Return 50% This Year [View article]
    Very interesting article on an unusual investment. I'm tempted to go long, but here's what concerns me. If I'm reading the CVR correctly, the $2 payout for the $400 million milestone requires that $400 million mark to be hit in the first 4 full quarters after launch in major markets. While it's a sure thing that Lemtrada will do a $400 million year, I'm not sure how likely it is to sell $400 million in the first year. There have been a lot of approvals of exciting new drugs for MS recently, and generic copaxone could be on the market within the next year. Also, Lemtrada seems to have more serious safety issues than some other new treatments. The couple of peak sales estimates I've found are in the $600-700 million/year range, which wouldn't be enough to pay out any of the additional milestones at all.

    That said, Sanofi's purchase of some of these at $1.75 suggests they're reasonably confident of hitting at least one of the milestones.
    Sep 19 05:35 PM | Likes Like |Link to Comment
  • Trius Acquired Last Week, Tetraphase Could Be Next [View article]
    Tetraphase is a reasonable prospect among biotechs, no question. However, the Trius buyout says absolutely nothing about any buyout possibility for Tetraphase.

    Trius had completed all phase III trials and was ready to file for approval worldwide. Tetraphase has only completed phase II, so their drug could still easily fail in phase III. They'll still need more money to get it through those phase III trials.

    Pharma companies don't buy uncertainty. If they wanted uncertainty, they could do their own research and get a program to phase II for a lot less than $200 million. Pharma companies buy assets that are ready to produce cash flow. TTPH isn't a sure thing and it isn't about to produce profits, so it's very unlikely to be bought.

    When pharma buys in earlier, it's because there's a unique asset that they might lose to someone else. TTPH doesn't have anything unique. Cempra has two antibiotics at roughly the same stage of development. Pharma can wait to see which of these looks best and then buy.

    That will be late 2015, if I had to guess.
    Aug 6 10:36 AM | 4 Likes Like |Link to Comment
  • 4 Months Post-IPO, Enanta Pharmaceuticals Carries Compelling Valuation Next To Hepatitis Peers [View article]
    Interesting, but I always feel like people are significantly overestimating future HCV revenues. Like your prediction that one drug from AbbVie's combo will generate $2 billion of annual sales, even though you don't think AbbVie will be the top seller in HCV.

    Vertex's Incivek, which was the market leader at the time, only managed one quarter of sales at a $2 billion annualized rate. That seems to have been due to a backlog of patients that had waited for Incivek's approval before treating. And after treating that backlog, revenues dropped off quickly (partially from next gen. treatments, but partly because the backlog was finished) In this case, that backlog will be going to Gilead, not ENTA/ABBV. So ABT-450 will be missing the peak, and taking a minority share of the smaller, post-backlog market. Unless, the HCV market has grown tremendously in the past two years, I would have to estimate significantly less than $2 billion revenue for ABT-450. Probably no more than $1 billion.

    And that's assuming ABBV doesn't try to screw ENTA. Just picking random numbers, let's say ABBV decides to charge $80,000 per patient for treatment. Is there anything to stop them from charging $79,000 for ABBV's wholly-owned compounds and $1000 for ABT-450? That seems absurd, and I hope it's not possible, but if it's not written into a contract somewhere, why couldn't they? By the way, I'm not making a short case here or anything. I'm genuinely asking.
    Jul 25 02:14 PM | Likes Like |Link to Comment
  • Is Coronado Biosciences A Feast Or A Fraud? [View article]
    The author of the original article you cite is a hack and deserves whatever losses come his way. You tend to do good research and write ups, so I'm hesitant to intervene, but I think you might want to reconsider this short.

    The science behind intestinal parasites taming the human immune system is strong. And while that author did find one paper citing significant side effects from these eggs, he failed to cite other work showing few-to-no side effects. This work shows efficacy and no side effects:

    As for how regulators will view whipworm eggs and their manufacturing consistency? They will view them just as they view all the other products they regulate. Lovenox is made from the intestinal mucosa of pigs. Botox is an incredibly deadly toxin derived from food poisoning bacteria. Whipworm eggs should not be more of a challenge to manufacture or get approved than any other biological drug out there. It's a manageable engineering process to manufacture and the FDA will approve if it's safe and efficacious.

    And as for this drug not selling as well as it might otherwise because it turns people off, let's give this one a little more thought. Inflammatory bowel disease is a very serious and difficult to treat illness. There are many patients who suffer profoundly with no effective treatments. If there's something new that works, these patients and their doctors will use it whether it's a worm egg or a bacterial toxin. And then consider the size of the autoimmune disease market in general-- it's many $10's of billions annually. Even a tiny, tiny fraction of that market would be huge revenues for a company as small as Coronado.

    While it's true that over 90% of drugs that enter trials fail, many fail in phase I, and Coronado is already in phase II. And as I said the science of parasites and autoimmune disease is pretty strong. I'd put their odds of success at closer to 50% than 10%. So I don't think the odds of Coronado failing are all that great, and if the results are strongly favorable, the stock price could more than double overnight. That would put your losses at greater than 100%.

    I'm not saying that's likely to happen, but it's not a long shot either.

    In the end, I just think the risk reward balance isn't very much in your favor as a short. (which is not to say I think it makes a good long either)
    Jul 22 07:13 PM | 1 Like Like |Link to Comment
  • Alexco Resources: The Premier High Grade Growth Story [View article]
    Unfortunately, it covers the whole district. AXU got royally screwed in that deal.
    Jun 22 12:46 PM | Likes Like |Link to Comment
  • Nutrisystem Partnership With Wal-Mart And New CEO Are Game Changers [View article]
    It seems that the new CEO and many others have forgotten about the last time Nutrisystem had an exciting new agreement to sell in Walmart:

    The agreement isn't exactly the same, but it's worth remembering that Nutrisystem took a (roughly) million dollar loss on the costs of that failed Walmart initiative in 2009.
    Jun 17 06:10 PM | Likes Like |Link to Comment
  • Simulations Plus, Inc.: Enhancing Ethical Biomedical Research [View article]
    If I was their VP of marketing and sales, I would probably say the same thing. No one likes it when the marketing guy says, "our main market is pretty much saturated and there isn't much prospect for breaking into new markets."

    My feeling is that neither "1" nor "2" is going to contribute much to growth, but I could be wrong. I guess this is one of those things that only time will tell.
    Jun 4 05:04 PM | Likes Like |Link to Comment
  • Simulations Plus, Inc.: Enhancing Ethical Biomedical Research [View article]
    I think there's a significant flaw to your thesis here. As you point out this is a niche market that SLP operates in. They already sell to all the major players and regulators, as you point out. Those major players make up the vast majority of the market for SLP products. There is very little opportunity for growth beyond the market they already have. I work in the industry, and SLP is never going to be able to sell their software to start ups or small biotechs on terms anything like they get from big pharma. Either their price will come down drastically or they won't sell any at all. So sure, there might be a tiny bit of growth left here, but nothing to get excited about.

    And it is certainly not the case that they can grow into other industries such as "agricultural chemicals, household chemicals... and general industrial chemicals." The real value added by their software is in predicting what happens when you take a pill of a given drug molecule. There is no value for companies that aren't making drugs.

    For me, a 20+ P/E on a company with very modest growth prospects is not a convincing long, but to each their own.
    Jun 4 02:28 PM | Likes Like |Link to Comment
  • 5 Reasons Hydrogenics Could Triple [View article]
    They may be using issued patents to their advantage in negotiations somehow. However, patent law is basically written to give the inventor a government-sanctioned monopoly on the invention for the duration of the patent. And in that sense, HYGS does not have great IP here. If they did, they would have won 7 out of 7 hydrogen storage projects-- that's what a monopoly allows you to do. Since other companies are winning hydrogen storage projects, one of a few things has to be going on:

    1) HYGS is allowing other companies to use their patented technologies in these other two projects in the spirit of charity (not likely) or for licensing fees (nothing in their filings suggests this is the case).

    2) HYGS patents aren't enforceable or they're easily worked around, such that other players are using similar technology that doesn't infringe the HYGS patents.

    3) The other companies are infringing HYGS patents and HYGS is suing to block the infringing projects. (nothing in their filings suggests this is the case)

    Those are all of the possibilities. Since HYGS would have mentioned any developments like '1' or '3', and they have not, I have to assume scenario '2' holds.

    Again, clearly HYGS has something working very much in their favor to win 5/7 hydrogen storage projects. All I'm say is, the evidence suggests that it's not strong IP getting them the wins, whatever management says.
    May 30 11:52 PM | Likes Like |Link to Comment
  • 5 Reasons Hydrogenics Could Triple [View article]
    Very nice article. Competition would seem to be the biggest concern here. Ballard Power and FuelCell Energy have both been in the fuel cell business for decades, so I'm sure they also have a lot of patents. Bloom Energy seems to be the popular press's favorite player in this area, and they do have some Major backers and have done some impressive sales. United Technologies is there too, and they've got considerable resources.

    On the power-to-gas concept for load balancing, you and Hydrogenics claim they have strong IP in this area. If the IP was so strong, I would have expected HYGS to get *all* of these projects in Europe, since they own the technology. The fact that others are getting wins suggests to me that HYGS's patents aren't much of a factor. They should at least be suing the other companies for infringing their patents on power-to-gas load balancing, but they aren't. As far as I can see, the only way this situation could arise is if HYGS has patents, but they're not strong enough to enforce.

    Obviously, the fact that HYGS has had a good win rate on these projects suggests that their technology is very good. But the fact that others are winning too, and HYGS isn't suing to keep them out, means that competition is going to be a continuing issue in power-to-gas. (as in all their business areas)
    May 28 03:56 PM | Likes Like |Link to Comment
  • Vertex Pharmaceuticals Incorporated Management Discusses Q1 2013 Results - Earnings Call Transcript [View article]
    I'd be very careful with that VRTX short. VRTX isn't about Hep C any more. Either their VX-135 will work in all oral combinations like the one you're on, which will send the stock up, or it won't, which won't affect the stock price much at all. Everyone knows Incivek is on its way out. That's already priced in. What will drastically affect the stock price is the continuing evolution of their cystic fibrosis programs. If you've researched the CF franchise and still think it's a short, good luck to you. If you're short based on Hep C, you're making a mistake.
    May 25 04:08 PM | Likes Like |Link to Comment