Out of the woods...
(It’s a slow Friday on the trading floor pertaining to Anavex, and it’s raining torrentially here, so, this is a long post. A big picture opinion piece, designed for perspective and thought analysis of what is taking place on several key levels - undertake at your leisure. Bio)
3 main sections.
I. Current value
i. current price per share
ii. how reflective is it of actual worth
iii. what opportunities/risks could it present to investors
iv. does it have any meaning
i. As has been pointed out, the current price per share fluctuates daily and has currently run steadily in the upper $3/sh to low-mid $4/sh range.
ii. It has been noted that many small prerevenue biotech stocks, with trials underway, do not enjoy the same benefits of potential revenue being factored in to the share price as established BP’s. We know that BIIB has long legs and each stride of a potential blockbuster drug outpaces our small stride steps because that’s how it is. So, I would not recommend a comparison between what other companies enjoy in the way of price leaps on announcements of trials to our company’s announcements on trials: completions, enrollments, and so forth. I’m fine with that. (I prefer advancements to announcements)
It has also been noted that other prerevenue biotechs have had run ups prior to trial results which appear (operative word) to be promising. I’m thinking of AXON, and NTRP - much higher MC’s which never panned out. Perhaps, this was due to the fact that their method was old guard - the FDA big RCT model, or perhaps institutions got in on IPO’s, or they were closely held, then conveniently dumped before poor results. These do not represent a fair comparison to Anavex in its current state either, imo.
I believe that the current share price is, in fact, reflective of the company’s actual worth as of this very minute. Think of it this way: how much is a bullet lying on a table worth? Second amendment folks out there? A bullet - current price .45 caliber = $0.33/rd.
How much is that bullet worth (worth!) chambered in a gun? How much is that bullet worth, chambered in a gun on your person when walking through a dangerous neighborhood alone at night? How much is it worth if you are carrying it in a gun and actually approached by an assailant? Or an invader enters your home at night? And, finally, how much is it worth if it is used as evidence to either convict or exonerate a defendant in a trial? Same exact bullet as on the table, got it? Very, very situational worth of share price. Let’s say that at present, our company has 8+ trials running, 2 concluded. That would be: we have ammo - several bullets we are putting in chambers or already in chamber. Still worth just the price of the bullets, imo, cheap. But...we are carrying a loaded gun and heading out into the night. As we approach rough locales (places where our results will be necessary to have on hand, for partnerships, regulatory review, moving forward in our knowledge) our bullets should be growing in value and worth to US. We know that we are armed and ready. We may be open carry, like Texas, in which case, everyone knows we are capable of shooting at any time. Our skill might be in question but not our power.
Or, we may be like PA, concealed carry. No one knows if we have anything on our person or not. But, we know.
Well, the TGA, and FDA know we are carrying, and the trial enrollees know, and based on PR’s of trials, the public and investors who wish to know, know. The market knows that we have bullets. In my opinion, the market believes strongly that we are holding 8 or more bullets in our hand and the most we can do is throw them. They don’t see a gun. They feel the trial results will warrant that we go out and purchase a gun for our bullets. That’s what the share price currently tells me. Also, all posters who state that we have no proven efficacy and need to prove it are also viewing us as a company literally carrying around bullets in our hands to throw. Ph2. Not a threat of “shots fired”. Plenty of time to short (look at the short numbers!). They may be right. We may have no gun to propel these to approval for a couple of years. (Same market that bet on AXON and NTRP, not afraid of Anavex bullets at present.)
Not even a run up to positive Ph2 PDD, US Rett trial results. That just gets us to Ph3 - which is good, btw. Decent percentage of Ph3 get approved.
iii. What opportunities/ threats could our current share price present to investors?
Low share price means that if we get great results and a fast track or accelerated approval in any of the trials we are running - we do very well ROI - gamble pays off. If we get good results, horse latitudes until next PR of either good news or bad news on any front - we have no idea how many bullets are in the gun. A partnership or buyout...?
Biggest threat is the company fails trials and investors lose (some or all) of their investment which many have averaged to current price or below. That’s worst case scenario, which doesn’t seem too bad if discretionary funds. Win some, lose some.
iv. Since we have established that Anavex has gone about its trial designs differently than the old method, using precision medicine, and since we have established that it is impossible to know the impact of the new method we are using, I contend that the share price has no real meaning. It’s impossible to value the unknown. We could be the greatest thing since cellophane (Cole Porter - great line), or we could be a flop. We have no tangible assets (no labs or buildings) but we have IP for the compounds and a Sigmaceptor which may be worth $4/share? Day to day means nothing. The market has no idea whether a flag with the word “BANG!” will pop out, or a full fledged point blank range .45 caliber live bullet will come flying out. No one will find out until....you know... the gun goes off. If that’s pointing at your head right now, give it some thought what’s the worst that could happen.
II. Breaking Barriers
i. Precision Medicine - what’s at stake
ii. Out of the woods
i. When we approached the trials using a new model, precision medicine for CNS, what’s really at stake? Good news, bad news when you try to innovate. The bad news is that you have the skeptics (market, science?) who believe that change is much too risky and represents a place where the “brave dare not go” when facing an “unbeatable foe” because it’s akin to “dreaming, the impossible dream”.
- Man of La Mancha, Don Quixote, Cervantes
People call you crackpot, do not associate with you, etc. The establishment casts you as a heretic or nut - same as all people/visionaries who questioned long held beliefs throughout history. Copernicus, Galileo, Round earth/flat earth, etc. You get written off pretty easily. Rodney Dangerfield, “I don’t get no respect!”
The market undervalues you. The burden is on you to prove the new system works. Fair enough.
The good news is that when a new system is ushered in which does work, the world makes a giant leap forward, never has to go back, and owes you a debt of gratitude (usually paid in cash and overestimated at that point). Columbus didn’t sail off the earth and he is a household name despite not having found a shortcut to the east by sailing west (his mission!), but, instead, found a whole new world. That works!
Here’s what’s ultimately at stake when you take a different route to solving an old problem. You must do 2 things instead of one. Anavex must not only help alleviate or modify CNS diseases, we/they have to do so under new conditions: using precision medicine. Therefore, we/they must prove 2 things at once: that our drug works, yes, but also, that precision medicine works. We could have set out to do the standard RCT’s and simply tried to demonstrate A2-73’s efficacy through the main door. But, we chose to go through a side door, which hasn’t been tried to see if the side door will get us in. Not just our drug is on trial, the entire system is on trial.
“This whole court’s out of order!” Al Pacino, And Justice for All
What’s at stake? If Anavex fails the trials, it’s conceivable that it will not only disprove our drug, it could set back the cause of the precision medicine concept, perhaps for good. That’s a heavy load.
That’s why it was crucial that Jackie Robinson broke the MLB barrier. Jackie Robinson was doing much much more than playing ball on that field like every other player. He was affecting the future of every non-white player to come. If he had failed, baseball might never have been integrated. The case could have been made that it was not time. Or that it was not possible. It’s why we honor what he did. And a lot a thought went into choosing Jackie Robinson - just like so much more planning and oversight of results and company communication must play into our work with A2-73 and the introduction of precision medicine to solve horrible disease states in the world. Looking back, imagine how great it was that they chose Jackie Robinson instead of Smokey Robinson or Mrs. Robinson.
We know what’s going on and what it will mean if we fail, so we must have a lot of confidence in number 42.
ii. Out of the woods
I’d like to thank all posters for all the great contributions of “breadcrumbs” (dots) which were the code words for simple clues that we might someday find our way out of the forest to the light of day. Having a path of little clues to follow was helpful at the time, imo, and it was a group effort to find them all pointing the way.
I would especially like to point to a post from earlier today made by Investor2014, which clearly spelled out the most important thing we should know right now. It has no bearing on whether the SAS (TGA) was for 2,7,18,21 persons. It has no bearing on whether we will collect a dime of revenue or whether we will continue to pay for the A2-73 supply for these recipients. It says one undebatable thing to Anavex shareholders, company, and patients: no more breadcrumbs. We are out of the woods.
The 5 year open label trial is ending/ended. Time to make a decision - how did the drug do? Pass? Fail? Well, it was open label and very small n so no general approval. But, the question lingered: what about the people who have been on the drug? Useless, and end it? Or, still receiving benefit, continue, compassionately?
Based on the UK quote in Investor’s post, the drug has been recognized to be benefitting these patients still (think of Barrie Pittock’s blog replies after a year in the trial...placebo or drug we don’t know) but we know that after 5 years the original patients are still benefitting enough that the TGA, who does expert research to validate their decisions - per a fantastic post by Gernee, and UNDERSTANDS THE PLACEBO EFFECT - which does not go on forever (Golden wonka tickets and everlasting placebo effects...and Daddy is not out buying us bikes and actigraphs, he’s really out drinking and gambling...and the placebo effect eludes retail investors but not hedge funds so they don’t waste their time...?????, say what??) but the TGA understands the placebo effect and granted SAS. The breadcrumbs were just the trail to get us back home safely. According to the AU govt agency, our drug is being mainstreamed at the end of a trial process. Patients who participated will now go see their regular doctors and continue receiving the same treatment and dosage scheme they were on in trial same as before. They are being mainstreamed back to the care of their doctors and it includes our drug.
Baseball was not integrated the minute JR put on the uniform with number 42, it was just the first step.
There’s no going back.
What this means for shrewd investors is that there is a “delayed arbitrage” in effect. Our drug is worth a lot more than it is priced at. That’s a given imbalance which will correct, not instantly, but reliably, and it is not breadcrumbs but signal flares. We have been recognized as achieving the goal. Since market algos and analysts are programmed to sniff revenue - they’ll get in when revenue is imminent - price higher. This is legit tradable information which is as valuable as insider info because outsiders are not getting the gist. They could buy now cheap or they can buy later at a premium. But, they are mainstreaming the drug and just like the Honus Wagner T209 in the back of the junk drawer - we know ahead of time to hold on to this - it’s a keeper. Thanks, Leo - diehard Pirates fan - pass his statue every game!
III. Biotech - why so risky?
i. How to deal with the risk
ii. THE END!
i. Someone posted a couple days back (I think it was BioChecker4, apologies if not, but it was a great point!) that the “greatest innovations come from private industry” (paraphrasing).
The point of the post was good, but this line was not even remotely close to the truth. Ask NASA where the greatest innovations come from. Military, space program, academia/research, government funded national efforts. Period.
Here’s the situation with biotechnology and pharmaceutical industries. They trade and compete in a free enterprise capitalist market similar to all other sectors which sell widgets. But, and this is a big BUT, they are overseen and regulated by a government agency FDA. Apple and Tesla can make products and money and only have to worry about patent infringement and demand. Biotech cannot just put out any product there is a demand for. And the products affect our lives and death, unlike iPhones.
Biotech walks in 2 worlds: private competition and funding, and government regulation (not the same as the commercial airline industry).
So, how does a company survive in such an environment let alone thrive, like big BP’s, let alone overcome the entry barriers which include BP competition with greater resources?
So, I say that it is necessary in this case to work smart not hard, and be different, innovate and have no fear. Combine the science of the drug with the power of technology (KEM correlations, and actigraph monitoring, and knowledge gained from OLE’s) necessary to lift the heavy stuff, and compete with bigger opponents, by forming coalitions with MJFF/SIU, Rett.org, pursuing the path to SAS via 5 years of validation to gain recognition of the benefit of our drug by the TGA, members of the US govt - the mention from the lady on the panel with Missling which TTT posted (great stuff always!!). This is the strategy to survive in this landscape and win. And if the public has to wait for results until “late mid-year” make it worth the wait. So far, so good. While BP’s have vast resources to just keep “buying” their stairways to heaven through big long costly random (really random) trials, or not, we can only succeed through a deliberate, coordinated, disciplined, process which is not random and has no room for error, No matter how long that takes, Because the BP’s enjoy the luxury of wasting investors’ time and money as it allows them to move the ball an inch and they gain a mile. We are patiently gaining or losing share price inches in our attempt to move an entire system miles.
The End
