Dr. Harvey Tran Daily Letter: The 50/50 Principle

 

Summary

• I share with you the investing lesson to take 50% profits on your big winners while letting the rest ride further upsides.
• After rising to its peak of $273 back in 2020, Galapagos shares tumbled due to fundamental depreciation.
• By implementing my strategy, you could have secured your profits while banking any upside if the company managed to turn around.

Tatiana Dyuvbanova/iStock via Getty Images

Dear Readers,

In this letter, I want to share with you an important biotech investing principle that is the "50/50 principle." In my view, this rule is important to your investment success because it lets you know when to sell. Now, I'll illustrate this phenomenon through the investment story of Galapagos (GLPG). 

Back in June 2018, I initiated this under the radar Belgium company, Galapagos. During the time, the shares were trading at $100.19. After the company inked the $5.05B mega partnership with Gilead Sciences (GILD) for the development and commercialization of its lead medicine (filgotinib), the stock rose as high as $273 in February 2020.

IBI Educational Series: Classify Your Stocks Into Stories

Summary

I share with you tips on your investment research and monitoring.

Placing your stocks into their appropriate categories helps you to monitor them better.

Categories include growth, stalwart, value, asset, and turnaround.

Make sure you follow the stories in each respective classification and place companies into new categories as the story changes.

Either holding or averaging down during this biotech bear market would lead to lucrative gains in the next bull market cycle.

bombermoon/iStock via Getty Images

Such a study indicates that the greatest investment reward comes to those who by good luck or good sense find the occasional company that over the years can grow in sales and profits far more than the industry as a whole. It further shows that when we believe we have found such a company we had better stick with it for a long period of time. It gives us a strong hint that such companies need not necessarily be young and small. Instead, regardless of size, what really counts is a management having both a determination to attain further important growth and an ability to bring its plans to completion. - Phillip Fisher (Warren Buffett's mentor)

Dear Investors,

To assist you in tracking your stocks, I want to share with you various strategies for classifying your investment into thesis, stories, or categories. That way, you would be more organized and methodical in your investment approach. In my view, being more organized leads to higher returns.

What exactly is an investment thesis?

As you can see, an investment thesis is essentially a story of why you invested in a particular company. Asides from gurus like Warren Buffett, Benjamin Graham, Charlie Munger, Phillip Fisher, John Templeton, etc., I studied Peter Lynch's work. As you can tell, I got this inspiration from Peter Lynch.

Accordingly, Peter Lynch recommended investors write down the investment story for each of their holdings. Back when he was running his fund, Peter Lynch would write down the stories for his universe of thousands of stocks. As for you, I highly recommend that you keep track of your own in this simplified way. Additionally, be sure to utilize all the resources that I provide to you inside IBI.

Figure 1: Peter Lynch and his wife Carolyn

Retirement Secrets: Ask More From Your Life & Investment

 To the maverick bio-investors,

At IBI, I focus on boosting all aspects of your life. 

As you're now in New Year 2022, I want you to focus on the first and most important investment: YOUR HEALTH!

Source

IBI Market Insight: To Profit From Value Disconnect

Summary

In recent years, stellar breakthroughs such as CAR-T and gene therapies painted the bioscience landscape.

Previously limited by expertise, we're witnessing an increasing number of companies brewing gene-editing molecules.

Precision medicine therapeutics and companion diagnostics are powering the next wave of innovation.

Nonetheless, the China Trade War and drug pricing pressure lead bioscience stocks to exchange hands at a deep discount.

At the turn of the next market cycle, the long-term oriented investors will enjoy sizable profits.

I like the idea of using artificial intelligence because we're so short of the real thing. - Charlie Munger

I hope that you guys had a great weekend. Asides from doing light tasks like posting on my social media, I shifted away from work during the weekend. In my view, it's best to conduct investment research and news analysis during weekdays. As family and God are matters of the heart, they should at least have the weekend. I believe it's more healthy and balance for you to reserve the weekend to rejuvenate and improve other arenas of life. After all, there is more to life than investing. And, the investment process is not a sprint. It's a marathon so pace yourself accordingly.

Figure 1: Charlie Munger and Warren Buffett (Source: Robyn Twomey)

That being said, I'd like to kick off the week with another series coined Market Insight. This publication is similar to the Industry Trends analysis that I conducted from time to time. Despite the resemblance, there are significant differences. Specifically, Market Insight explores current affairs that are driving broader market behaviors. Aside from providing you with the intelligence affecting your investment value, Market Insights offers various strategies to help you capitalize gains and minimize losses.

Aimmune: Contextualizing The ICER Statement

Summary

Aimmune published highly robust Phase 3 (RAMSES, ARTEMIS, and PALISADE) data for AR101. Therefore, the drug is positioned to gain FDA approval for treating peanut allergy by January 2020.

Nonetheless, ICER recently issued a report that questioned the utility of desensitization therapies for peanut allergy.

As opinions rather than facts, the ICER statement is a theory that is used to generate discussion. As such, they do not have any material impact on AR101's approval.

This idea was discussed in more depth with members of my private investing community, Integrated BioSci Investing. Get started today »

The stock market is designed to transfer money from the active to the patient. - Warren Buffet

In bioscience investment, it's crucial to filter out opinions from facts. Despite that you hold a fundamentally sound company, you will face streams of negative market opinions. To stay grounded, it's imperative for you to conduct research due diligence to know when the news is simply a "head fake." This phenomenon is best epitomized by the investment thesis on a food allergy innovator dubbed Aimmune Therapeutics (AIMT).

Though Aimmune delivered extremely robust clinical outcomes for the Phase 3 (RAMSES, ARTEMIS, and PALISADE) trials, its desensitization therapy has been the subject of market negativity. The latest discussion originated from the Institute for Clinical and Economic Review. Notwithstanding, the intelligent Aimmune shareholders are undeterred because such news is simply opinion rather than fact. In this research, I'll present a fundamental analysis of Aimmune while dissecting the negative arguments.

Figure 1: Aimmune chart (Source: StockCharts)

About The Company

As usual, I'll deliver a brief corporate overview for new investors. If you are familiar with the firm, I suggest that you skip to the subsequent section. Headquartered in Brisbane California, Aimmune Therapeutics is focused on the innovation and commercialization of medicines to serve the food allergy market. As the crown jewel of the pipeline, AR101 is an oral biologic for peanut allergy. Designed by the characterized oral desensitization immunotherapy (i.e. CODIT) platform, AR-101 is a powerful preventative (i.e. prophylactic) therapy. Asides from AR101, Aimmune is expanding its development to serve the unmet needs in other food allergies such as egg and walnut.

Figure 2: Therapeutic pipeline (Source: Aimmune)

Achillion: Shifted Gears For Success

Summary

Achillion Pharmaceuticals delivered extremely robust outcomes for the Phase 1 study of ACH-5228 and thereby galvanized the shares to trade multiple folds higher.

The second-generation Factor D inhibitor (ACH-5228) demonstrated over 95% inhibition of the alternative complement pathway.

With stellar data, Achillion advanced ACH-5228 into a Phase 2 study. An investigational new drug application for ACH-5228 is expected by year-end.

Looking for more? I update all of my investing ideas and strategies to members of Integrated BioSci Investing.  Get started today »

You only have to do very few things right in your life so long as you don't do too many things wrong. - Warren Buffett

Though successful innovation entails mega-profits, the field is fraught with risks. Therefore, a bioscience theme that I like is when a company genuinely admits failure and thus abandons a former area of focus. In my view, it's prudent to shift gears when either the drug did not generate promising data or the market is overcrowded. The aforesaid phenomenon epitomizes the saga of unfolding events centering Achillion Pharmaceuticals (ACHN).

After years of tinkering with molecules for the hepatitis market, Achillion shares took a beating. Make no doubt, Achillion can make excellent medicine. It's just that hepatitis isn't a fertile investment field. With the prowess similar to Achilles, Achillion switched aim to shoot for the mega prospects of the complement-mediated disease market. As it rolled in uncanny data, the stock recently enjoyed a gargantuan rally. The elephant in the room is whether there is further upside. In this research, I'll present a fundamental analysis of Achillion and provide my expectation on this intriguing grower.

Figure 1: Achillion chart (Source: StockCharts)

About The Company

As usual, I'll deliver a brief corporate overview for new investors. If you are familiar with the firm, I suggest that you skip to the subsequent section. Based in Bluebell Pennsylvania, Achillion is focused on the development and commercialization of small molecule complement inhibitors. Poised in the delivery of hopes to patients, Achillion is striving to serve the strong unmet needs in neurology, nephrology, hematology, and ophthalmology.

Achillion initially targets markets without an approved medicine. Moreover, the company seeks to capture niches having a robust demand for better treatment options. Accordingly, the ongoing development includes paroxysmal nocturnal hemoglobinuria (PNH), C3 glomerulopathy (C3G), and immune complex membranoproliferative glomerulonephritis (IC-MPGN).

Figure 2: Therapeutic pipeline (Source: Achillion)

Atara: The Silver Bullet For Multiple Sclerosis

Summary

Atara recently published excellent tolerability data for ATA-188 at the 5th Congress of the European Academy of Neurology (EAN) in Oslo Norway.

In 2H2019, the company will deliver initial efficacy results for the first cohort taking ATA-188.

That aside, the firm will report Phase 3 results for its lead franchise tab-cell this year. The positive outcomes will erase doubt and fear regarding the departure of senior management.

Looking for more? I update all of my investing ideas and strategies to members of Integrated BioSci Investing.  Start your free trial today »

We always live in an uncertain world. What is certain is that the United States will go forward over time. - Warren Buffett

In my view, a copycat drug usually procures meager sales. By the time a biosimilar comes to the market, a legion of "me too" therapeutics already decimated the profit margin. On the contrary, the largest investment profits typically arise from a molecule with a novel mechanism of action. Essentially, investors reward for innovation rather than duplication. Despite my affinity for tab-cel, I believe that Atara Biotherapeutics (ATRA) has two wildcards with a disruptive mechanism of action that can galvanize the company's prospects.

Specifically, ATA-188 and ATA-190 are designed as silver bullets for the dread condition (multiple sclerosis). They attack multiple sclerosis as if the disease is of viral origin rather than autoimmune. This is in stark contrast to the conventional paradigm that multiple sclerosis is strictly autoimmune. As such, I believe that any positive news on this front will induce a vigorous rally. In this research, I'll present a fundamental analysis of Atara while focusing on the multiple sclerosis franchise.

Figure 1: Atara chart (Source: StockCharts)

About The Company

As usual, I'll deliver a brief corporate overview for new investors. If you are familiar with the firm, I suggest that you skip to the subsequent section. Headquartered in San Francisco California, Atara is focused on the innovation and commercialization of allogeneic T-cell immunotherapies (“A-TCI”) to serve the strong unmet needs in cancer and autoimmune diseases. Since A-TCI functions similar to a CAR-T, it activates the most important cells of the immune system (i.e. T-cells). I noted in the prior research,

Instead of engaging CD4 (helper T-cells), A-TCI primes CD8 (killer) T-cells with intelligence to improve these cells’ adeptness at detecting and destroying cancers and virus. Powering by A-TCI, Atara is growing a robust pipeline of immunotherapies. The partnership with Memorial-Sloan Kettering (MSK) also enabled Atara to deliver the next-generation mesothelin-targeted CAR-T (i.e. MT-CART).

Figure 2: Therapeutic pipeline (Source: Atara)