dakyne

Vivus: Obesity Experimental Drug Has Promising Outlook

Nice post Philly Dan. I'm astounded at what passes as (professional) analysis these days.

You touched upon the high points: the limited data points for the Qnexa clinical trials and the long exclusion criteria, relative to Lorcaserin's. There are reasons for this discrepancy: the adverse side effects of phentermine and topamax (both generic compounds, btw). Even if approved, and prescribed to a limited pool, the profit margin on Qnexa would be questionable.


On Jul 08 02:06 PM PhillyDan wrote:

> Only 756 patients in a 28 week study, not a significant study size.
> Exclusions for this study read like a medical dictionary. Weight
> loss results were achieved with highest dosage of both parts of the
> combo drug. Qnexa needs long term safety data like Lorcaserin has
> achieved with the two year Bloom study with over 3000 patients enrolled.
> They have the Sequel study which is an extension of the Conquer study
> to provide this data. Qnexa will not be ready for NDA until late
> 3rd quarter of 2010 and the earliest it could receive PDUFA is July
> or August 2011.
>
> Safety and tolerability will be more favorably viewed than weight
> loss efficacy by the FDA. Most Doctors don't like prescribing combo
> drugs because of the "unintended consequences from overlapping side
> effects". Phentermine raises concern with a number of MD's because
> it only can be prescribed for a certain amount of time, then needs
> to be stopped and restarted.
>
> In my opinion, Qnexa does have a lot of potential but still needs
> to prove itself in safety and tolerability. What the author conveniently
> forgot to mention is the dropout rate of patients in the Qnexa study
> which is quite high.
>
> The Blossom results for Lorcaserin will be announced in September.
> The Blossom study enrolled over 4000 patients at over 131 clinical
> centers around the United States. In addition, the Bloom-DM study
> will be completed soon and that study is tailored to patients with
> Type-II diabetes. Arena will file NDA in December with expected
> PDUFA in October of 2010. Arena has their own manufacturing facility
> in Switzerland that is ramped up and ready to go. That facility
> already does contract manufacturing for other drug companies.
>
> Recommend that you read about Ed Sussman's successful results on
> Medpage Today. Ed is a medical writer for MedPage who was overweight.
> He lost over 52 pounds (the likely assumption is that he was on Lorcaserin
> not the placebo) in 52 weeks. He was able to reduce both BP and
> Diabetes medications as a result of this weight loss.
>
> The obesity market is very large and will be able to handle more
> than one player to provide treatment for people suffering from the
> effects of being overweight or obese. What the author and other
> proponents of either Lorcaserin or Contrave forget to mention in
> their zealousness to promote the one they favor is the fact that
> people are all different. Some people may do better on Lorcaserin,
> others may do better on Qnexa or Contrave to help them lose weight
> and improve the other secondary endpoints. The main thing is that
> they are SAFE first and tolerable. Efficacy is important but should
> be the third thing that is considered in MD's recommending what to
> prescribe for their overweight and obese patients.
>
> I also strongly recommend you do your own due diligence if you wish
> to invest in any or all of these three companies. Based on your
> own due diligence and research, you will make an informed decision
> on which of the three (and there will be more, in fact Neuro Search
> is another company with a promising obesity drug candidate) is the
> best investment for you.

Arena Patients Keep Weight Off, Bodes Well for Partnership

Ruthanne, does this mean you have turned the corner on ARNA? :-)

Arena Pharma Could Be on the Verge of Collapse

I told you his career as a financial analyst would be brief. Mr. Lowe, you've been p'owned! I'm going to give you the benefit of the doubt--which would you prefer? Are you ignorant or corrupt?

Dendreon Investors Learn a Hard Lesson in Stop-Loss Orders

Obvious criminal manipulation occurred--and not by just one party. Shorts, market makers, hedgies had to collude to take DNDN down for that split second before being halted. Shorts got a quick escape hatch, and their friends let them escape. Longs got a better price.

Solution?

1) do not tell your broker your stop losses--keep them mental. If you tell your broker, the MM's will steal your shares. If you're going to trade volatile biotechs, this is especially applicable.
2) if you do use stop losses, make sure you understand the difference between a stop order and a stop limit order. A stop limit order would have prevented you from being stopped out at $8--in fact, you wouldn't have been stopped out at all that day. A stop order is basically a stop market order--once triggered, your sell order becomes a market order. In a bear raid, look out below.

Arena Pharma Could Be on the Verge of Collapse

Derek, it is your career as a financial journalist that is on the verge of collapse. lol! You should learn to read before you write.

Arena Pharmaceuticals: Near Term Gamble May Be Worth It

After reading this thread and comments, I sure am glad I'm already long ARNA. Some of you are coming up with the right conclusion, but using flawed logic.

David, your instincts are correct--part of due diligence requires fundamental and subjective analysis of the scientific data. Looking at charts alone could steer you wrong.

Having said that, this is a binary event that could go either way. If you are long, you have to understand that with biotechs, the odds are against you, as most drugs fail clinical trials.

With ARNA, after some due diligence, the probabilities of success are higher than the average biotech, but it certainly is no guarantee.

Good luck to longs.

Buffett, Grantham and China: What the Savers Are Buying

Buffett is admittedly a poor market timer. Having said that, he has a horrific short-term track record of being early during recessions, but is long-term performance speaks for itself. So 10 years from now and beyond, he will probably be proven correct again.

However, his performance hasn't held up in a meltdown as severe as the 30's, and potentially the one today. Because if he is indeed early again, he will get crushed even more. If the markets don't hold at current levels (Dow 7400), you will see the markets plunge past circuit-breakers. Insurance companies are better funded, are less levered,and better capitalized than bank. The market's recent plunge drove many banks into insolvency, but merely stressed the finances of most insurers (with the huge exception of AIG, which doomed itself with CDS).

But, if equities continue to deteriorate, the circuit breakers for insurance companies will also bring into question insurer's solvency. We could see another 50% plunge from these levels.

Another metric for "value": during the depths of the Great Depression, the Dow/Gold ratio was 2:1. Think that was extreme? Yes, but don't think it can't happen again. Because in 1980, when gold spiked, the Dow/Gold ratio was 1:1. Even assuming a conservative ratio of 5:1, that could hypothetically suggest a Dow of 6000 and gold at $1200.

But if history repeats itself, things could get a lot worse for the Dow and/or a lot better for gold. Just sayin'.

Precious Metals and Shipping: Some Recent Developments

Mark, hate to rain on your parade, but you were long commodities and metals at exactly the wrong time last summer--it's clear for all to see. How do you resolve that disconnect?

You keep mentioning the fundamentals from the supply side, without even a mention of the demand side, which is in destruction mode.

Of course, you will be right at some point in the future, but the question becomes when?

California's Tipping Point

Hence, my exit strategy from this once-glorious state.

Evidence That Big Inflation Is Coming

Jim, did you even read Adam's article? He's saying what we are experiencing is NOT deflation. Yet, you declare we fell into deflation in the Oct/Nov timeframe. A look at the money supply growth in the last few months refutes that mistaken notion.

Deflation only occurs with a contraction of money supply. It does not occur with plummeting asset values. The Fed and Treasury are implementing inflation monetary policies. However, it is being hoarded by banks in an effort to shore up their shaky balance sheets--it's a liquidity trap. The irony is that Ben and Hank were telling them to lend the money, but the government's only regulatory bodies are saying they cannot lend money until their capital reserves rise to acceptable levels.

Prices may be falling, but the overarching issue is that dollars are being created at an unprecedented rate--that is the definition of inflation--money supply growth. The resultant higher prices down the road (once the capital is released into the economy in the form of loans) are due to the flood of dollars chasing the limited quantities of good and services. These higher prices are the result of inflation, not the source of inflation. Money supply growth is the source of inflation, and money supply contraction is the source of deflation. The latter is not happening.


On Jan 25 07:51 AM Jim Hawthorne wrote:

> Thanks for a most controversial submission, Adam! Contrarian it most
> certainly is!
>
> I agree that there is a widespread tendency to confuse simple falling
> prices with deflation, and you are correct to label deflation as
> a sustained contraction in the money supply coupled with a sustained
> contraction of credit. In addition, these contractions take place
> with an inflation rate below 0%.
>
> By several accounts then, we entered a deflationary trend sometime
> back in October/early November, when real inflation dipped below
> the line and we saw a dramatic increase in the purchasing power of
> money. Credit had dried up to the extent that it appeared that nobody
> was lending much of anything!
>
> Currently, and most troubling, the the 10-year TIPS yield is running
> at about 1.85% compared to about 2.60% for a T-bond, and this seems
> to imply a trending 10 year annual inflation rate breaking at about
> -1.0% to -1.1% annually.
>
> So if it looks like a duck, walks like a duck and quacks like a duck,
> let's go ahead and call it a duck. It looks like we are in a deflationary
> dip at the moment.
>
> The question is, are we about to enter into a deflationary spiral
> which leads inexorably to depression?
>
> You supply some very credible reasons why Central Banks (this is,
> after all a global event) are doing and will continue to do everything
> in their power to more us back across into the inflationary lane
> so they can deal with the devil they know, inflation being the better
> choice.
>
> Whether or not this move will once again move us way over into inflation's
> fast lane is the big question. There is also, as always, the thorny
> question of timelines. The Bank of Canada's latest report predicts
> rising commodity prices in expanding global markets and a rapid recovery
> from the current recession.
>
> Many economists, and a few of us skeptics find this assessment overly
> rosy and optimistic, at least in the short term.
>
> If you're right, Adam, and you might well be, we will witness a monumental
> shift away from paper assets and a tsunami of money piling into hard
> assets. Gold has certainly become more attractive recently. Perhaps
> movements in the spot price of copper and corn/soy contracts will
> give us the first clues as to whether or not you're correct!
>

Evidence That Big Inflation Is Coming

You don't get it--employment figures are a lagging indicator. Right now, corporations are worried about access to capital, and lowered earnings due to demand destruction--hence, they are restructuring to right-size their companies to prepare for a tough environment (i.e. lower earnings projections). So they try to hang on, but at some point (even strong companies like Microsoft, with plenty of cash) they reluctantly have to reduce their workforce as part of their "restructuring." It's a last resort to reduce costs, and that's why it's a lagging indicator. The government finally acknowledged we came into a recession Dec. 2007--a year after the fact. Many would argue it occurred sooner than that. But due to its lag, expect unemployment to continue rising.

The opposite is also true. Company earnings have to bottom out, and then show a confirming uptrend before employers will look to start hiring again. Again, employment figures are lagging indicators because the share prices would have already increased long before companies hire again.

The timeline for an upcycle would be:
1) share prices move up first, as the stock market is a forward-thinking discounting mechanism, usually 6 -9 months before business metrics improve.
2) business picks up, adding to earnings
3) hiring starts sometime after earnings projections improve.

In other words, this doesn't happen overnite. Adam is correctly in stating the public and companies are fearful of a deflationary spiral, even tho inflation is the danger going forward.

Two counterpoints: are inflationists really contrarian? I'm starting to read a lot of articles that people are starting to go long commodities and precious metals. I started buying in November, near the absolute lows for gold. But I'm starting to see interviews on CNBC about gold, so that has me worried. Hell, even Suze Orman started recommending gold--that is a troubling thought as her followers are pretty much sheep and late to the party.

2nd counterpoint is when does this excess money supply flow into the economy--the V velocit?. We have M money supply in place, but it's being trapped. Once it gets unleashed, the dam will break and you will see inflation pick up. Due to the profligate printing of dollars, pending inflation is a mathematical reality. The question is when, not if.


On Jan 25 07:49 AM [e-mail] wrote:

> Your comment -- "When a central bank doubles the monetary base in
> a matter of months, a lot more money is going to be flooding into
> the real economy. It will compete for finite goods, services, and
> investments, driving up prices" -- doesn't this instance send a message
> to manufacturers and service providers to rehire and crank up production
> to satisfy demand, thereby correcting the problem?? What am I missing?

Treasuries Struggle Alongside Stocks

There are other reasons why sovereigns find US Treasuries at these yields distasteful:

1) future threat of inflation over the next 30 years (risk profile at these levels are potentially catastrophic)
2) they already have too much exposure in the dollar in their reserves, which is being debased by monetary easing.
3) Because of deteriorating fundamentals of the dollar, the Chinese and the Saudis are diversifying their reserves into gold, which is a hedge against debased currencies (worldwide).

Basically, there is growing distrust in the US government, and by extension, its monetary policies and the dollar. At some point, US Treasuries will no longer be viewed as havens in a flight to safety and quality.

That's when the game will be over, as rising rates will render servicing of the national debt untenable. In other words, these trillion dollar bailouts won't be free lunches, and the burden will be placed on tax payers to fund, even though the American consumer is already tapped out. God help us all if the US Government loses its AAA rating--the UK is on the brink due to its teetering banking industry.

On Jan 25 04:33 AM dakyne wrote:

> I think that's what he's fearing--hence, he's not re-entering the
> TBT trade, which is a bet on rising yields and lower bond prices.
> If the Fed does start buying the long end, it will stimulate demand
> for bonds, driving up prices, and yields down.
>
> One thing he did not address is the huge upcoming bond offerings
> this week. If the auctions aren't well-received, and there are few
> buyers, that will exert downward pressure on bond prices. He kind
> of accounted for one scenario where the Japanese will buy bonds (and
> sell yen) to weaken the yen, but there are other large sovereigns
> who normally purchase US Treasuries for their reserves, namely the
> Chinese, Saudis, and Koreans--all of whom are declaring they no longer
> find yields on US Treasuries appetizing. With huge supply being
> auctioned off, and little demand, rates will rise. I agree that
> the Fed will intervene which will temporarily drop yields, but that
> is a short-term move which will prove problematic long-term for the
> reasons he mentioned.

Treasuries Struggle Alongside Stocks

I think that's what he's fearing--hence, he's not re-entering the TBT trade, which is a bet on rising yields and lower bond prices. If the Fed does start buying the long end, it will stimulate demand for bonds, driving up prices, and yields down.

One thing he did not address is the huge upcoming bond offerings this week. If the auctions aren't well-received, and there are few buyers, that will exert downward pressure on bond prices. He kind of accounted for one scenario where the Japanese will buy bonds (and sell yen) to weaken the yen, but there are other large sovereigns who normally purchase US Treasuries for their reserves, namely the Chinese, Saudis, and Koreans--all of whom are declaring they no longer find yields on US Treasuries appetizing. With huge supply being auctioned off, and little demand, rates will rise. I agree that the Fed will intervene which will temporarily drop yields, but that is a short-term move which will prove problematic long-term for the reasons he mentioned.


On Jan 25 04:18 AM The hand wrote:

> the fed has threatened to start buying treasuries. how does that
> play into your scenario?
>

Ultrashort Lehman 20+ Year Treasury Is Rocking

Your trade was right, but your timing was awful. You were too early and will now have to sit on that trade until rates come up high enough for you to show a profit for the trade. Not the best position to be in, but not the worse, as the trend is your friend. I got "lucky", getting in at 36, near its all-time low, and again at 39. Should have loaded up a couple days ago when it dipped below 39 again. I'll watch it closely, and if it dips back to 40, I'll load up the truck.

Time To Short Treasuries?

John, your bubble analysis is pretty good, but your numbers are off. How can 20 year Treasuries be yielding 3.22%, when the 10 year is yielding 2.37% and the 30-year is yielding 2.79%? Perhaps that's why you're down 30%--the devil is in the details. TBT is at 39, with an all-time low 35. I happen to get in at 36, so I'm hoping that low holds (the 30 year was yielding 2.5% at the time).