Biotech Values

[biomaven0]

>ARIA

What is the right market cap? Seems a little high now.

In absolute dollar terms, the biggest mistakes I've made in over a decade of biotech investing have been selling companies with excellent drugs too early because they looked "expensive." Losing half or more of my stake in a company because of some pivotal event turning out badly (which has certainly happened to me over the years) "feels" a lot more dramatic a mistake than selling too early, but in actual dollar terms it is not. So, for example, I was very early to CELG and to ALXN, sold both after doing very well (and feeling more than a little pleased with myself), but in actuality missed out on a much larger dollar gain.

So basically that colors my approach to stocks like PCYC, MDVN and ARIA. All potentially look fully priced to some right now, but not to me.

In terms of ARIA specifically, we'll know more on '113 after ESMO.
The ALK+ aspect is likely fairly low risk at this point given the known dose escalation and the preclinical data among other news.

But I've also been growing steadily more bullish on pona as anecdotal tolerability and durability of response data mount up. CML is a $5 billion dollar market, growing at over 10% a year (with a dip coming up when Gleevec goes generic in 2014). Pona is the most efficacious drug in the class with what looks like very good tolerability and durability. The folks that currently think of it as only (or mostly) a 3rd-line drug will at some point see the error of their ways. (Not saying this will be quick - people doing well on their current regimen will stay on it).

Obviously this is not a risk-free story at these prices. We could see some subtle but serious side-effect emerge that could cut into potential front line use (think the new reports of PAH with Sprycel) or (good news for patients) someone discovers a CML cure.

Peter