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Justin M. Hall
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In transition, I plan to update my Bio in the near future. -- Justin
  • A NECESSARY COMPROMISE  14 comments
    Oct 14, 2009 8:38 AM | about stocks: ARIA, SPPI
    Fusilev®
    A practicing physician dropped me an email yesterday regarding FusilevBased on what is known from last Fridays announcement, it appears that SPPI could be required to conduct a non-inferiority trial to determine which drug is more effectiveThat is odd especially since the drug was approved for osteosarcoma in 2008 as well as a CMS reimbursement under the colorectal cancer setting during the leucovorin shortage of 2008.

    There have been several phase 3 trials already conducted comparing both Fusilev and leucovorinThe most recent indicated that Fusilev or levoleucovorin has a superior risk profile compared to racemic [generic] leucovorin, which has been used since 1952In that phase 3 trial, however, no overall survival benefit was observed.

    Some have correctly pointed out that Fusilev costs quite a bit more than the generic versionThe lack of an overall survival advantage coupled with a higher costonly applicable to colorectal cancerlikely generated the CRL and a request by regulators to meet.

    AdmittedlyI didn't expect the CRLI did believe Fusilev was highly likely to be approvedHowever, I always anticipate that the worst can and often does happen when we least expectI purchased put options to hedge my long positions and repeatedly suggested that all investors do the sameIn ANY and EVERY environment where money is at risk, investors should ALWAYS make it a practice to hedge ALL long (or short) positionsUnfortunately, some have learned this the hard wayIve been there, and it's a very tough lesson to learnDespite the setback, you can and will get through itDo not give up and/or do something irrationalPick yourself up and press forward, but never forget the loss – if a loss has actually been realizedI am not advocating that anyone sell their long positions in SPPII dont view that the game is close to being over.

    Lets move forward.  So, the FDA kicks out a CRL, indicating that Fusilev failed to demonstrate non-inferiority to generic leucovorinThe FDA is interested in meeting with the company and by the way the CRL wont affect SPPIs orphan status for Fusilev under the osteosarcoma indication (a good thing). In fact, SPPI did not specifically state that another trial was absolutely necessaryTo me, that's tellingIf nothing else, it's not the norm.

    IF cost is the underlying issue here, another solution outside of conducting another trial existscut the cost of Fusilev.

    Right now, the market appears to be focused on an expensive trial and is pricing that into shares and then someBut Fusilev is not just another new drug to regulatorsThe FDA should be very familiar with it.  They just approved it last year

    While regulators do know and obviously believe that Fusilve is both safe and effective, the Federal Government (especially right now) is not willing to pay a premium price for the drugThat isunless it can be shown in a non-inferiority (NI) or head-to-head trial with leucovorin to provide colorectal cancer patients with an overall survival benefit.

    SPPI knows a NI trial will cost more than the average phase 3 trial as it will require a much larger patient groupSPPI has no interest in spending a great deal of money to conduct another trialAs I stated above, the FDA has no interest in paying up for Fusilev.

    However, the FDA is willing to meet with SPPI and maybe discuss another way forward, one that is not limited to another option that might help SPPI get Fusilev approved sooner than later.

    If cost is the issue here, then SPPI must be willing negotiatea compromise is neededWhile nothing in this environment is certain, I do think it is possible that the FDA could still approve Fusilev without requiring another expensive and unnecessary trialIf SPPI is able and willing to negotiate the cost [down], then the FDA might be able to find a way to approve it.

    This is exactly where the doctor, supra, and I both agreed.

    Under this scenario, the FDA, SPPI and shareholders would winMy hope is that both the FDA and SPPI are willing to give a little to get it doneFingers crossed, but Im still hanging on to my puts.

    Regarding the FDA, you might refer to this handbook for the 105th Congress by CATO.

    Quick Notes on Zevalin
    • I remain tempered about Q3 Zevalin salesRevenue guidance will be important, and I certainly hope that the company will provide it.

    • Im not at all convinced that CMS will not give Zevalin a fair shot in November, especially since the FDA approved the treatment for first-line useFrom my view, the first-line approval was a game changer.

    • Q4 2009 Zevalin sales should shed some light on whether the companys strategy is working.


    Shares on Sale
    With regard to the recent sell-off, SPPI is now extraordinarily cheap compared to all of its optionable competitorsRight now, SPPI is trading at 1.43 times its cash value, which ranks 10th among 182 of optionable drug makersSPPI ranks 15th out of 182 in price to book value.

    Below is a list of ALL 182 optionable drug makers (and some others), sorted by price to cashWith small cap drug makers, cash is absolutely criticalSo, price to cash is a very important metricIf I were wrong, ask yourself why is it that only THREE companies are trading under 1.0 X their cash valueIts important and in my opinion the lower the better.

    Unlike most trading at or near their cash value, SPPI has two approved drugs and a solid collaboration with AGNSPPI is also highly likely to grow both its revenue and earnings over the next 12 monthsI have held that shares have been undervalued and oversold since $7.00While the price has certainly changed, my view has not

    Unlike most, I do anticipate that SPPI will bounce back.

    Final Thought 
    I would like to reiterate the following two points which I have made consistently over the past four months (thats all) since I began writing here at SA:

    (1) SPPI and ARIA are and should be viewed as longer-term investments.

    (2) Hedge ALL long positionsBuying put options is an effective way to preserve and protect your hard-earned moneyDont assume unnecessary risk, manage it.


    Please feel free to drop me an email at HiRxInvestor@aol.com
    .


    Disclosure: Long ARIA and SPPI
    Themes: Small Cap, Biotech Stocks: ARIA, SPPI
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Comments (14)
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  • castle
    , contributor
    Comments (109) | Send Message
     
    SPPI is continuing to sell off at an alarming rate. Over 500,000 shares sold off in the first 15 min of trading and this is on a strong up day for the overall market. While I would love to write something with optimism there just isn't any at this time. We have had enough dreaming, time to stick with reality. I still have a modest position left in SPPI and the future of recouping my losses lies in the future fundamentals. However coming up with reliable information to valuate the company is far and between. This appears to be a one horse pony with much riding on the future sales of Zevalin. A lot people believe that the numbers will be dismal at best. If this is reality, this stock could trading much lower than $4.00 in a couple of months. Justin's version of 180 mil is just plain ridiculous. A more optimistic realistic version would be 90 to 100 m. With out any guidance from the company it is all a shoot in the dark. My best recommendation today, keep your $40 / month or 400.00 yearly in your damn pocket. You will need it and a prayer to get out of this mess. SPPI has recovered its earlier am losses.
    14 Oct 2009, 10:13 AM Reply Like
  • Justin M. Hall
    , contributor
    Comments (753) | Send Message
     
    Author’s reply » Castle:

     

    Last I checked, the buying appeared to be strong and the share price was up. I think your view of the company is a bit on the negative side. I still believe that you made a good investment presuming you are a shareholder.

     

    Try to remain patient and good luck.

     

    Justin
    14 Oct 2009, 10:35 AM Reply Like
  • rrtzmd
    , contributor
    Comments (206) | Send Message
     
    ...oh, please!...do you know ANYTHING about the FDA approval process?!...price is NOT a consideration for approval!...the FDA CLEARLY indicated that the data that SPPI presented did NOT demonstrate that fusilev is "non-inferior" -- more commonly known as "equivalent" to non-bureaucratic types -- to leucovorin...the FDA will meet with them to determine whether there may be other data available that would demonstrate non-inferiority or whether a trial will ne necessary....
    14 Oct 2009, 12:51 PM Reply Like
  • sdmy123
    , contributor
    Comments (2) | Send Message
     
    Any update on ARIA? I'm holding both ARIA and SPPI for now..
    14 Oct 2009, 02:57 PM Reply Like
  • castle
    , contributor
    Comments (109) | Send Message
     
    OK guys, if you are looking to average down, the price action is starting to look a little better. We had a large sell off the first 15 mins and large buy surge the next 15 min with stable price action since. This is going to give us a hammer pattern for the day. Each of you has an idea of how many shares you are interested in purchasing as a "buy down" . Purchase 1/3 of those shares in the $4.50 - $4.60 area. Lets wait and see what price action looks like tomorrow before moving any further. Remember, this was a very big up day for the market as a whole. Lets not get fooled here. But, hey its looking better. A little sun shinning. I like it
    14 Oct 2009, 03:26 PM Reply Like
  • castle
    , contributor
    Comments (109) | Send Message
     
    Just as another quick thought for everyone. We should get some excellent earnings from Goldman Sacs in the am. JPM results gave us some clues as to the results of BAC. WFC is a different story. The real profits are being made from the investment side. If you are a long term investor in JPM or GS sit tight, you are in great shape however if you are a trader beware of profit taking after GS reports. Me, I'm a trader and will be taking profits and buying back in the financials a little lower.This can easily be done with a trailing stop. If you are into buying puts for protection, remember all the financials and therefore the market is rising making puts cheaper. Puts are usually cheapest when the stocks are rising. Just my 2 cents :-)
    14 Oct 2009, 03:49 PM Reply Like
  • Kumar_kp
    , contributor
    Comments (18) | Send Message
     
    Hi Justin, any thoughts on the November $5 calls at 35 cents or the January $5 calls at 65 cents as a low(er) risk strategy of investing in SPPI ?
    While playing the November calls seems like a gamble(at this time)
    I am more favorably inclined towards the January calls.
    If SPPI's problems are temporary and the current price is an overreaction, I am thinking 2-3 months is sufficient time for things to cool down and hopefully for a rebound to take place?
    14 Oct 2009, 07:16 PM Reply Like
  • Buddaus
    , contributor
    Comments (122) | Send Message
     
    When do you think this "meeting" with the FDA will take place?
    14 Oct 2009, 08:14 PM Reply Like
  • supermankind
    , contributor
    Comments (16) | Send Message
     
    here's a quick thought--- i would do yourselves a favor and look at the whole biotech sector!!! mnkd- opxa- onty- aria- cvm- jazz- even VANDA on word of a $200mil and possibly half a billion dollar total drug deal (not sale of the company) sale of A drug!!!!--- they end up flat on the day!! look at alth or even hgsi --- all these have tanked or at best flatlined for the past month to two months--- the big boys have left the party or shorted the hell out of us!! this is a bad deal right now-- top "quality" stocks are all the rage right now!! i hate it i think its a joke (JPM "earnings" that's a laugh ) these banks would not exist without free money for them to hold or invest-- woulndn't it be nice if we had free money to invest- pump up what stock we choose at a leverage of 30 to 1 ( did i mention that "1" in the 30 to 1 wasn't yours to begin with?) and then call that earnings while we hide the losses we have from every dumbf-- investment we made before??? I HATE IT BUT UNTIL THIS punchbowl party is over the "junk stock" ( i.e. real possible growth companies with a less than $10 price are just not in vogue)-- hold your nose if you want-- but that appears to be the only strategy for the time being!!! this is why with an approval SPPI tanked AND without a second approval(a less important one at that) SPPI COMPLETELY TANKED!!! WATCH ACOR tomorrow even if it gets the nod from the board -- it probably with barely jump or die-- this is bad real bad!!! i hate to say it but i got out of sppi not because of the company but because of this fickle trend -- i thankfully did "hedge" and even without didn't lose money on avg price (got in early thanks to Justin) i screamed LONG SPPI GO LONG SPPIers over and over! but now i say cut your losses and join the party-- even though i hate the guests and can't stand the music-- the punchbowl is full-- and i need some "drink" to get a "buzz"-- sppi will continue to go down-- i won't short i hate succeeding from failure -- i just won't stand in the way of a runaway train!!!! i admire anyone who sticks it out!! just thought i'sd share my thoughts!!
    14 Oct 2009, 10:45 PM Reply Like
  • castle
    , contributor
    Comments (109) | Send Message
     
    I do not know about "runaway trains" or catching a "buzz" but I get your point. However I feel if you exit here you will have bought at the top and sold at the bottom. I believe SPPI will form a bottom in this $4 - 5.00 range until some further news moves the market. Probably earnings. Those who bought into this stock earlier should begin to average down in this area. The move back up into the $6.00 area could take a while.
    There is a pattern that Bio tech traders are using. I first saw it with BDSI and now SPPI. I did some basic research on companies with FDA approvals or some other significant market moving event (ALTH) and found this to be true. Go long the stock early pending FDA approval. After approval or just prior sell the stock and short the bounce. Yes the smart money is on the short side post approval. It seems that launching of a new drug often causes problems and delays. I will be trading this pattern next time.
    My problem area is I can't come up with a real credible fundamental analysis of SPPI at this point. What is a reasonable expectation of the sell of Zevalin. Does this company have any other means of income besides this one drug? What is a fair valuation for the company? It is the fundamentals I am confused about. There is only two analyst following this company and I can't get anything out of either. Mike H?? however you spell his name is strangely quite as well. He also was long SPPI but now no thoughts at all. We need clarity on the fundamentals really bad in order to make any real decisions. Without clarity the SPPI grounds should read "CAUTION, LAND MINES"
    SPPI did sell of in the last 30 min of trading yesterday destroying our hammer pattern. The rest of the market bought into the close. I will be watching today looking for signs.
    15 Oct 2009, 07:02 AM Reply Like
  • supermankind
    , contributor
    Comments (16) | Send Message
     
    i get your idea -- but what i'm saying is this stock and any other like it are only going down for right now-- so unless you short-- the best position is get out and wait for the party to end in the bernanke stocks- because frankly if you sell at 4.50 and get back in at 4.35 or 3.35 or hell who knows .50 cents that's much better than holding it! I was at least initially wrong with ACOR this morning i took a small (100 share position in it at 15.90 two days ago before trading halted) but i will be selling at the open this morning-- i'm am sure it will drop by days end! ----This is a just a rotten "puppet show" but if you don't join in you miss the whole show-- there are no real actors just a bunch of howdy doodys and Big Ben holding the strings!!!

     

    On Oct 15 07:02 AM castle wrote:

     

    > I do not know about "runaway trains" or catching a "buzz" but I get
    > your point. However I feel if you exit here you will have bought
    > at the top and sold at the bottom. I believe SPPI will form a bottom
    > in this $4 - 5.00 range until some further news moves the market.
    > Probably earnings. Those who bought into this stock earlier should
    > begin to average down in this area. The move back up into the $6.00
    > area could take a while.
    > There is a pattern that Bio tech traders are using. I first saw it
    > with BDSI and now SPPI. I did some basic research on companies with
    > FDA approvals or some other significant market moving event (seekingalpha.com/symbo...)
    > and found this to be true. Go long the stock early pending FDA approval.
    > After approval or just prior sell the stock and short the bounce.
    > Yes the smart money is on the short side post approval. It seems
    > that launching of a new drug often causes problems and delays. I
    > will be trading this pattern next time.
    > My problem area is I can't come up with a real credible fundamental
    > analysis of SPPI at this point. What is a reasonable expectation
    > of the sell of Zevalin. Does this company have any other means of
    > income besides this one drug? What is a fair valuation for the company?
    > It is the fundamentals I am confused about. There is only two analyst
    > following this company and I can't get anything out of either. Mike
    > H?? however you spell his name is strangely quite as well. He also
    > was long SPPI but now no thoughts at all. We need clarity on the
    > fundamentals really bad in order to make any real decisions. Without
    > clarity the SPPI grounds should read "CAUTION, LAND MINES"
    > SPPI did sell of in the last 30 min of trading yesterday destroying
    > our hammer pattern. The rest of the market bought into the close.
    > I will be watching today looking for signs.
    15 Oct 2009, 08:23 AM Reply Like
  • Buddaus
    , contributor
    Comments (122) | Send Message
     
    ACOR has a nice pre market pop. When do you think this meeting will take place with SPPI and FDA?
    15 Oct 2009, 08:49 AM Reply Like
  • castle
    , contributor
    Comments (109) | Send Message
     
    To argue with your logic of taking your medicine now instead of taking the chance the stock could move much lower would be ridiculous on anyone part. I sold half my position when it broke the 50 ma. Should have followed my rules and sold it all. I am hoping for some clarity on the financial of this company before making a final decision. SPPI is more weak now in pre market. Buddaus keeps inquiring as to when the meeting will take place between SPPI and the FDA. I am not sure near term being the next couple of weeks whether it is relevant. At best it would months away from seeing any results. We need clarity on the fundamentals bad. Where is Mike Havrilla? No matter the clarity, SPPI needs to bottom very soon or the financial pain will simply be to much to bear.

     

    On Oct 15 08:23 AM supermankind wrote:

     

    > i get your idea -- but what i'm saying is this stock and any other
    > like it are only going down for right now-- so unless you short--
    > the best position is get out and wait for the party to end in the
    > bernanke stocks- because frankly if you sell at 4.50 and get back
    > in at 4.35 or 3.35 or hell who knows .50 cents that's much better
    > than holding it! I was at least initially wrong with ACOR this morning
    > i took a small (100 share position in it at 15.90 two days ago before
    > trading halted) but i will be selling at the open this morning--
    > i'm am sure it will drop by days end! ----This is a just a rotten
    > "puppet show" but if you don't join in you miss the whole show--
    > there are no real actors just a bunch of howdy doodys and Big Ben
    > holding the strings!!!
    15 Oct 2009, 09:15 AM Reply Like
  • supermankind
    , contributor
    Comments (16) | Send Message
     
    castle- the point is if you sell at 5.00 (which i sold my last position at-my overall selling avg. was 5.85-- my avg. purchase price was 4.51) and then get back in at 4.00 you can repurchase either the same number of shares at 80% of the price or get back 125% of your original position-- i'd prefer the former and pocket the $1 a share i "saved" remember saving is just as good as making in this game-- NOW-- that is assuming of course that THE STOCK WILL THEN GO UP AGAIN- but if you didn't think that why would you hold it buy it or ever look at it again-- so who is in the better position-- me who sold at 5.00 or you who is still holding a 4.40 price-- at the 2500 shares i had remaining i say i'm $1500 ahead on this one-- AND COUNTING!!! I realize or at least i gather that your purchase price wasn't as low as mine and therefore you are probably looking at a loss -- whereas i looked at a "less gain" but it doesn't matter where you bought -- it's where the stock is at and i am just afraid where it's at, is on the stairs -- and it's the stairs to the cellar-- i'm sorry!!! Look i had a $18000 dollar profit looking me in the face and i instead got a $5700 return- i was naked i didn't want to be stopped out on a hiccup-- stupid i know but at least i came out ahead-- i wanted that $31 imean $27 i mean $21 dollar share price-- ha ha! well we all learn i just got less lucky- hey do what you want all i know is the money i got from sppi funded my $10/ share gain this morning on ACOR -- THAT WAS LUCK -- TOO BAD I ONLY HAD 100 SHARES!! A LITTLE CAUTIOUS after this last bee sting!!!
    15 Oct 2009, 01:46 PM Reply Like
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