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)