Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here. Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.
The SP500 is not looking too good after this week drop. By looking at the weekly chart above, you can see the possibility of a double-top is becoming more prevalent. Given that the trade talks end in a tariff war, I do not see any potential for a big bounce anytime soon. Also, the article. “China’s currency is sending a warning signal about the trade war,” is highlighting the possibility of a further drop of the SP500 next week.
Because of the above bearish technical and fundamental outlook, I adjusted my portfolio accordingly to prepare for more downward pressure on the SP500. I started to lighten up my positions in my port but keeping $IBIO intact. I closed out my $SPOXF on Monday when it failed to bounce on the SP500 gap down day despite all other gold-related stocks jumping higher. And then I bought back $SPOXF on Wednesday thinking I should have some gold-related stock in my port. But the more I looked at $SPOXF, the more I think it’s not right for me, so I sold it again on Thursday. Instead, I bought $NUGT to play the gold angle. You’re not going to believe it, before Friday closing bell, I closed my $NUGT position because I remembered seeing $NUGT fall alongside with the SP500 on a big down day. Despite my flip-flops on holding either $SPOXF and $NUGT, I take comfort in holding $SPXU and some $SPY put options to prepare for a more possible downtrend in the SP500 next week.
$IBIO – Currently, this one is all about waiting for Thomas Isett, the expert on M&A, to perform his magic. For those who are not familiar with Thomas Isett and my reference to him, please read my last week blog post. The development in the biotech space and iBio prompt me to believe that Thomas Isett will succeed in his endeavor.
I like to start off with the article, “Drugs That Are Likely to Fall Off the Patent Cliff This Year.”
- Drugs That Are Likely to Fall Off the Patent Cliff This Year (2018)
- GenentechandBiogen’s Rituxan for blood cancers and rheumatoid arthritis.
- Amgen’s Neulasta to increase white blood cells in patients undergoing chemotherapy
- Pfizer’s Lyrica to treat nerve and muscle pain
- GlaxoSmithKline’s Advair for asthma and chronic obstructive pulmonary disease (COPD)
- Roche and Novartis’ Xolair for allergic asthma and chronic idiopathic urticaria
- AmgenandJohnson & Johnson’s Epogen/Procrit for anemia
- Allergan’s Restasis for dry eye
- Eli Lilly’s Cialis for erectile dysfunction
- Amgen’s Sensipar to cut calcium levels
- Johnson & Johnson’s Zytiga to treat prostate cancer
- Gilead’s Letairis for pulmonary arterial hypertension
- United Therapeutics’ Remodulin for pulmonary arterial hypertension
- Merck’s NuvaRing, a contraceptive
- Acorda Therapeutics’ Ampyra for multiple sclerosis
- Allergan’s Namenda XR for dementia
Below is an excerpt from the above article:
On one level, if a brand name drug loses patent protection, that often marks the date when companies can begin marketing generic versions of the drug. However, this has grown more complicated with the approvals of biosimilars. Biosimilars are essentially generic versions of biologic drugs, but the difference is they are “similar” rather than the same drug. As a result, there is a more complicated approval process, which can add months and sometimes years to the biosimilar launch. And some biopharma companies have negotiated longer timelines with their biosimilar competitors, and patent battles are common.
The above statement, “As a result, there is a more complicated approval process, which can add months and sometimes years to the biosimilar launch” is the key reason why I believe iBio CDMO will be bought out this year.
My logic is based on the need of the buyer to acquire iBio CDMO as soon as possible to begin the process of manufacturing the off-patent biosimilars to get ahead of the competition by being early in line to pass the complicated approval process to launch an affordable off-patent biosimilar before all others.
Let me outline my long sentence above to get some clarity:
- The sooner a BP acquires iBio CDMO
- the sooner the BP can begin the manufacturing of the biosimilars of off-patent biologic drugs
- With the inventory of biosimilars of biologic drugs in hand, the BP can start going through the complicated approval process
- Given that iBIO CDMO utilizes the low-cost nature of plant-based technology licensed from iBio Inc., the biosimilars will be a lot more affordable than competitors who do not use plant-based technology
- Furthermore, BP smarts enough to buy iBio CDMO receives the advantage of the highly automated facility which will enhance the efficiency of plant-based technology even more
- Hence, rapid production will give the buyer the ability to apply for approval of its biosimilar drugs faster than competitors
Therefore, although it may still take years to get biosimilars of biologic off-patent medicines to receive an FDA approval, the BP playing the long game should know the advantage of being the first in line to get their biosimilars of off-patent medications out in the market. So, it’s a win/win for both iBio Inc. and potential buyer of IBIO CDMO, LLC.
The above logic is what I used to support my opinion that Thomas Isett will succeed in getting a good deal for iBio, Inc. (assuming that is what Thomas Isett is hired to do).
Another major factor why I believe IBIO CDMO will benefit BPs, assuming they are kicking the tires, is the size of the biosimilar market. Per the article, “US$67 billion worth of biosimilar patents expiring before 2020“, it’s a $67 billion market size!
Below is an excerpt from the article.
Twelve biological products with global sales of more than US$67 billion will be exposed to biosimilar competition by 2020, with Enbrel (etanercept) whose US patent has been extended until 2028, scoring global sales of US$7.3 billion by December 2011; coming in second after Humira (adalimumab) with global sales of US$7.9 billion.
As you can see, the sooner BP comes out with approved biosimilar of off-patent drugs, the sooner it can grasp a significant portion of the billions!
Despite bashers, skeptical investors, and short-sellers, I’m holding my shares tight. Even with the prospect of a down SP500, I’m not letting go of any of my $IBIO shares. I may also add more if the price drops from a broad market crash.
$LRAD – Due to the lesson learned from December 2018 market crash, I lightened up on LRAD this week to protect some gain. I’ll be looking to buy back if the price drops from broad market fall I’m predicting. I know I’m risking having to chase this stock back up if there is no drop in the general market.
As you notice, the first thing I discussed on my weekly blog is the action of SP500. I used this as an essential guideline to determine my portfolio allocation between equity and cash. Right or wrong, if I see a significant bear market action coming, it has the potential to override my fundamental belief in the stock. As much as I believe in LRAD, my portfolio safety comes first.
Because I believe a bearish SP500 is happening soon, I bought $SPXU and some $SPY put options to hedge my port.
Due to downdraft on $IBIO and $LRAD, my port gave back some for the week.
Current positions (in alphabet order):
Stocks = IBIO LRAD SPXU
Options = TRXC (call); SPY (put)
Up 22.8% YTD
My 2 cents
From my camera: