Aug

15

Biotech, from Tom Marks

August 15, 2008 |

T MarksA good friend from the Comex metals pits told me about a year ago he wanted to eschew the violent volatility in those markets. Recently at one point, silver had dropped about 5 1/2 bucks the last month alone, $27,500/contract.

Looking for a more placid pastime, went eyeing individual stocks. Amongst others, recently some of the biotech persuasion. Out of the frying pan, into the fire. Oops.

Bought 5000 Elan at $24, quickly went over $37. Analysts were saying eventually over $70. Clinical results come out, a few patients got sick out of 31,800 on the new drug.

Check out the chart for your basic what-the-heck picture. He didn't get out after the first big gap, saying that it was still only a few bucks underwater from his entry, and wanted to weather the storm.

The next gap though was a doozy!

Mark Isbic writes:

You can get the same momentum and potential with the Casino stocks with less risk of being blindsided by a study from pencil pushers. I'm long LVS and Wynn. At least with these you can see the future and potential with less chance of being blindsided and a large upside. Certainly the same could be said for other groups, but I'm not a professional trader like the majority here. I simply follow a few groups, build a position when they get slaughtered and hang on for the hopeful rise. As usual I'm always a little early. The only thing i own that resembles a biotech is Merck. I bought it a few weeks ago at 35 only to watch it go down to 31 or so the next day based on what else, a study on Vytorin. The shorts love to hate LVS because of the big P/E, debt issues etc., but in my humble view it has the most potential to run the fastest because it has a great storyline with Singapore's Marina Bay Sands and with most stocks it's all about the story lines.


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2 Comments so far

  1. steve leslie on August 17, 2008 3:05 am

    I have been on a four-year rollercoaster ride with Biogen also. Tysabri is the culprit here. I have ridden the stock from 56 to 36 to 83 to 62 to 72 to 50. Originally it was linked to PML, a rare brain disease that is fatal. Stock drops to 36. It was voluntarily removed from the market. Extensively evaluated, brought back by huge popular demand by MS patients with a black label. Ever thing goes somoothly and the stock rises to the mid 60s. Then the company announces that it has put itself on the blocks to be bought. Stock to 83. Says it is no longer for sale. stock drops to 60s. It slowly climbs back to low 70s. Company announces that two cases of PML discovered in patients in Europe. stock drops to 50. Company reports that 27,000 patients receive Tysabri and feasibility studies indicate one in 1000 are at risk for PML. Icahn announces that his company increases his stake in company to under 10 percent and stock climbs. Reminds me of the song `Helter Skelter' by the Beatles.

  2. Bob Johnson on August 20, 2008 8:39 am

    Years ago, I thought that I could divine the future of biotech companies’ fortunes. Account damaging stock gaps from failed “sure thing” phase–three studies and unexpected drug side-effects required a reassessment of how to successfully invest in the sector. Fortunately, before long I realized that foretelling a novel compound’s efficacy and long term safety was beyond my prophetic ability.

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