ROTY Edition 1 Volume 74: A New Feature For Readers, Updates And Trades

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Includes: ABEO, AKAO, ALDX, AQXP, ARGX, CDTX, DRNA, FOLD, GBT, GILD, GLMD, GLYC, IBB, JAZZ, JNJ, MDGL, MRTX, MRUS, MYOK, SALT, SNDX, SNPHY, SNY, TBPH, TCON, ZEAL
by: Jonathan Faison
Summary

So far feedback has been positive for new features added, namely the position explanation section and updated model account snapshot.

Today (and over the next few weeks or months) I begin to add another feature that readers have been requesting for quite some time.

Amicus announced a positive recommendation of Galafold for listing with provincial drug formularies in Canada. Pricing discussions should conclude followed by the formal launch.

I provide updates below on several ROTY Contenders, including what looks to be the beginning of a possible turnaround for Achaogen.

As always, readers are encouraged to do their own due diligence, manage risk appropriately, and avoid blindly following.

Welcome to the 74th entry in our Runner of the Year (ROTY) series.

Our model account utilizes a full position size of $10,000 and can hold up to 10 positions. Trades typically occur in quarter increments ($2,500) with cost averages calculated at the day's close. The model account is primarily for referential purposes, so no matter a reader's account size, they can easily follow along and scale trades accordingly.

Author's note: Readers are encouraged to pay close attention to each entry in the series, as positions could be added to or sold at any moment for a variety of reasons (material events, red flags, swapping out for a more promising stock, etc.).

Expect two to four editions of ROTY to be published each week, depending on the quantity of material developments and trades.

Stocks mentioned in ROTY editions at times experience significant volatility, especially on days articles are published. Readers are encouraged to avoid the urge to impulse-buy. Instead, they should take the time to evaluate ideas for themselves, do due diligence, and only make trades as part of their own plan. ROTY is not about blindly following but instead aiding readers in becoming better traders/investors as they make their own decisions.

Current Snapshot of ROTY Model Account

Position Explanation/One Sentence Thesis

1. Tracon Pharmaceuticals (TCON) - The ROTY model account holds a full position in the stock, although recent weakness is quite concerning. The company has several clinical readouts in the near to medium term to drive additional upside (TRC105 in RCC, JNJ partnered TRC253, Santen (OTCPK:SNPHY)-partnered DE-122 in wet AMD, interim data pivotal TAPPAS study, others), which contrasts nicely to a very low valuation.

2. Zealand Pharmaceuticals (ZEAL) -The ROTY model account holds a 3/4 position in the stock. The Denmark-based, GI/metabolic disease-focused firm could receive significant royalties and milestones from Sanofi (NYSE:SNY)-partnered Soliqua 100/33 ($15 billion market opportunity) and has a deep pipeline with several near- to medium-term catalysts.

3. Syndax Pharmaceuticals (SNDX)- The ROTY model account holds a quarter position in the stock and is looking to build up to a half position (reduced position size due to binary risk). Entinostat had very promising phase 2 results, PFS analysis for the phase 3 study E2112 (under SPA) has a decent shot at success (could potentially displace Afinitor as standard of care) and updated results from combination studies could also drive upside (plans for a pivotal study could be telegraphing encouraging results).

4. Amicus Therapeutics (FOLD) - The ROTY model account holds a full position. Continued execution with Galafold launch, regulatory catalysts and update with promising Pompe program (accelerated approval would be an added bonus but not necessary) should result in additional upside.

5. MyoKardia (MYOK) - The ROTY model account holds a 3/4 position (stock increased too much before we could get in a full position). Positive top-line data from a midstage study evaluating lead drug candidate mavacamten in symptomatic, obstructive hypertrophic cardiomyopathy bodes well for the lower dose cohort, Sanofi Genzyme partnership adds credibility, and pipeline continues to progress as the company targets its slice of the heart failure population.

6. Galmed Pharmaceuticals (GLMD) - The ROTY model account holds a half position (reduced size due to binary risk). This under-the-radar NASH play has two upcoming readouts and several bullish indicators (insider participation in secondary offering, former VP Clinical Research at Gilead Sciences (NASDAQ:GILD) and director at Tobira Therapeutics (NASDAQ:TBRA) added to board, lead investigator Professor Rohit Loomba for the ARRIVE study, etc.).

7. Mirati Therapeutics (MRTX) - The ROTY model account holds a 3/4 position (increased too much before we could add more). This is our targeted oncology play which appeared somewhat derisked due to prior data (promising response in first NSCLC patient harboring CBL inactivating mutation) and has a few key readouts coming up (phase 1b study of sitravatinib as a single agent in genetically selected patients with NSCLC and other solid tumors, mid-stage study of sitravatinib and nivolumab in patients with checkpoint refractory NSCLC, others).

8. GlycoMimetics (GLYC) - The ROTY model account holds a 3/4 position as a result of already taking partial profits on our win here. I liked the valuation gap as compared to Celator (acquired by Jazz Pharmaceuticals (NASDAQ:JAZZ) in a $1.5 billion deal) and looked forward to updated results for GMI-127, initial data in multiple myeloma, and other catalysts.

9. Global Blood Therapeutics (GBT) - The ROTY model account holds a 3/4 position as a result of already taking partial profits on our win here. $2 billion or more of potential peak sales for voxelotor is being increasingly figured into the stock price and upcoming results for the pivotal HOPE part A readout appear somewhat derisked.

10. Argenx (ARGX) - The ROTY model account held a half position in the stock prior to data presented at ASH and sold half after the stock doubled. We then sold another half after gains approached 200%. We continue to hold as I was/am a big fan of its first-in-class FcRn antagonist ARGX-113 and pipeline in a product approach with several indications being targeted (readouts throughout the year) plus promising oncology asset ARGX-111 (follow-up data throughout year).

Performance Since We Started Tracking

Returns for the ROTY model account also compare well to biotech benchmark (IBB) for the same time period.

Chart IBB data by YCharts

Keep in mind that all trades take place at the day's closing price when an article is published for the sake of transparency.

While the benchmark (S&P 500) above is automatically included in TipRanks, readers should be aware that I don't care much for the use of portfolio benchmarks. For me, the past decade or so, it's only been about absolute returns, consistent profits, and learning from my rough patches.

Current ROTY Contenders


Remember that the Contenders List consists of stocks that are potentially setting up for a big move and serves as an alternate idea bank for us. They are not official ROTY picks, but we keep an eye on them for possible swapping out for a current holding.

Catalyst Tracker

Below I´ve included links that will take you to the Excel spreadsheets for ROTY Model Account Holdings and Contenders. Keep in mind the lists are far from finished, so feel free to Private Message me with any material events you believe should be included.

Catalysts for ROTY Model Account

ROTY Contenders Catalysts

General Commentary

For quite a while readers have requested a way of tracking upcoming catalysts- while each person can do it on their own for the stocks they are following, it still makes sense for the sake of convenience to have material events for ROTY holdings and Contenders in the same place for readers to access.

Above you will see two links, one for the spreadsheet for ROTY model account holdings and the other for Contenders. I haven´t had time to start yet, but plan over the next couple weeks to fill these out. Feel free to private message me with catalysts that you believe deserve to be included, as this is a community effort. Even when filled out, it will never be finished and constantly need to be improved/updated. Still, I agree with the readers that suggested it that our ¨Catalyst Trackers¨ will prove an important resource going forward.

Updates on Model Account Positions

Amicus Therapeutics (FOLD)- The company announced that the Common Drug Review has posted the Canadian Drug Expert Committee´s positive recommendation of Galafold for listing with provincial drug formularies. Reimbursement has been recommended as it appears in the Canadian label. In the future we should see the conclusion of pricing discussions followed by the Canadian launch.

Updates on Contenders

Dicerna Pharmaceuticals (DRNA)- RA Capital´s is starting to take profits on some of its position (roughly 12%). Remember that institutions often take similar steps to risk management as we do- in this case it makes sense with larger positions to take partial profits on the way up (selling to retail).

Aquinox Pharmaceuticals (AQXP)- The firm is hosting their Analyst and Investor event on February 9th and will provide an update on the clinical development program for rosiptor (AQX-1125).

Scorpio Bulkers (SALT)- The company will announce their fourth quarter results prior to market open on February 5th. This is our play on a recovery in the dry bulk sector and keep in mind that ROTY is not limited to any one area of the market.

Cidara Therapeutics (CDTX)- The company announced that data from preclinical studies evaluating rezafungin acetate will be presented at two upcoming medical conferences. Abstracts have been accepted for presentation at both the 8th Advances Against Aspergillosis (AAA) Conference in early February and at the 2018 BMT Tandem Meetings later in the month.

Merus (MRUS)- The company announced that the first patient has been dosed in a phase-2, open-label study evaluating MCLA-128 in two metastatic breast cancer populations including HER2-positive MBC patients and hormone receptor positive/HER2-low MBC patients.

Abeona Therapeutics (ABEO)- The company announced that the FDA has granted the Regenerative Medicine Advanced Therapy (RMAT) designation to EB-101, their gene-corrected autologous cell therapy product for patients with recessive dystrophic epidermolysis bullosa (RDEB).

Theravance Biopharma (TBPH)- Together with Mylan the company announced that the FDA accepted their NDA for revefenacin (TD-4208) for review. The drug candidate would be the first once-daily, nebulized bronchodilator for the treatment of COPD if approved. A PDUFA date of November 13th has been granted and currently there are no plans for an advisory committee meeting.

Achaogen (AKAO)- It looks like this might be the start of the short squeeze we´ve been talking about. A key milestone was achieved when the FDA classified the outcome of their reinspection of Pfizer´s McPherson facility as Voluntary Action Indicated. Keep in mind the company´s NDA for plazomicin is under review and the change to VAI status removes a key obstacle to crossing the finish line. A run up into the PDUFA date of June 25th could be in the works.

Aldeyra Therapeutics (ALDX)- This recent addition to the Contenders List announced it has enrolled the first patient in a phase 2b study evaluating topical ocular reproxalap for the treatment of dry eye disease. As mentioned in prior articles I believe the candidate has a strong possibility of success in this lucrative indication. Results should be reported in the second half of the year.

Madrigal Pharmaceuticals (MDGL)- The company announced that Week 12 phase 2 results for MGL-3196 will be presented in a main plenary session at the Annual meeting of the European Association for the Study of the Liver during the International Liver Congress (April 11th through 15th).

Today's ROTY Model Account Trades

Taking advantage of today´s weakness to add another quarter-sized position to our stake in Syndax Pharmaceuticals (SNDX). The final amount of shares traded will be determined by the day´s closing price per our transparency rules. The ROTY model account as a result will hold a half position, which is our maximum considering the very real binary risk here.

Changes to the ROTY Contenders List

Additions: Abeona Therapeutics (ABEO), Aldeyra Therapeutics (ALDX)

Removals: None

Final Thoughts

Keep in mind that my objective for readers is to make their own decisions, trading their own plans, and adapting ROTY to fit their own needs and objectives. If you don't agree with some of the holdings in the model account (or they simply don't appeal to you), consider substituting ideas from your own research or the Contenders List while still implementing the overall strategy.

Feel free to ask questions, as we strive to have an ego-free atmosphere where readers bounce ideas off each other and contribute their own DD. The ROTY community consists of both expert and novice traders/investors who are quite generous with their time and knowledge.

In the end, the goal is to constantly improve, booking more profits and especially managing risk and emotions. We learn from losers and winners alike, knowing that if we stick to the process and analyze our trades, the end result is a growing brokerage account.

Notes

*Each position entails its own unique risks, from binary catalysts to disappointing data, competition to dilution. Weakness in the biotech space, as well as ideas with a lack of near-term catalysts, could also contribute to increased volatility.

**All positions in the ROTY model account are established at the closing price on the day this article is published for the sake of transparency.

Author's note: My goal is to bring to readers' attention undervalued stocks with catalysts that could propel shares higher, as well as provide a fresh perspective on stocks you may already be aware of. I also touch on planning trades and risk management, as those are two areas I feel are often neglected. If you found value in the above article, consider clicking the orange "Follow" button and getting email alerts to receive my latest content. My sincere appreciation for readers who add value and join the discussion in the comments section, as well as those who share my work with others who could benefit from it.

Disclaimer: Commentary presented is not individualized investment advice. Opinions offered here are not personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to (and encouraged) form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account. I am in a collaborative relationship with The Biotech Forum/Bret Jensen.

Disclosure: I am/we are long ZEAL, GBT, GLYC, FOLD, TCON, SNDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.