Sunday, January 20, 2008

January 2008 Performance Review

It is time again to review past picks and to learn about my mistakes.

The table below includes a list of my historical picks.

ARNA and ALTU stand out as worst performing picks. Interestingly they are both small cap picks, so this drop is not so unexpected. I am removing ALTU from my picks due to current conflicts of interest. ARNA ( link to original post) has suffered because they have not announced a partner yet for its weight loss drug Lorcaserin. This is probably because the pharmaceutical industry thinks that weight loss drugs have litigation liability and are waiting for more safety data. I still believe Lorcaserin has a great chance to be successful because of its specific mechanism of action.

On the upside, Pharmasset (VRUS) has been a huge gainer. I did not expect it to do so well but their HepC trial drug is moving well in the clinic. Again, this is expected of small biotech companies.

In 2007 I stayed away from Onyx (ONXX) and Alnylam(ALNY). I missed an opportunity in ALNY which has had a good performance ($17-$30.5) while ONXX has been moving sideways ($52-$50).

I was first wrong about getting out of Celgene (CELG) at $51 based on valuations just watch the stock to go up to $70. However, poor european sales and a tactical purchase of its partner has brought the price down to a more reasonable price of $54. I like CELG at these levels but I believe 2008 will be a disappointing year for CELG stock as wall street will anticipate benefits from its buy-out and the level of competition for Revlimid.

I am putting Rigel Pharmaceuticals (RIGL), Advanced Magnetics (AMAG) and Regerneron (REGN) on my watch list and I will write about them shortly.

Finally, I have been a bit stubborn while holding on to Vertex (VRTX). I still believe Telaprivir is superior to other HepC products in the clinic and will be a blockbuster. I am recommending another long position here at $22 as I believe the start of phase III trials in first half of 2008 will drive the stock price much higher. Interestingly, Vertex has recently announced they will start clinical trials for a combination therapy with an existing investigational compound from another company. I speculate this will be Pharmasset's (VRUS) polymerase inhibitor as their mechanisms of action may have a synergistic effect in weakening Hepatitis C virus.

Disclosure: The author has long positions in some of the stocks mentioned above.