December 3rd Biotech Update

The broader market backdrop is not nearly as positive with some China fears creeping into the market but the sector remains strong. I still think the stock reactions to ASH data this weekend will go a long way in signaling expectations and whether they have become extended. So for me I will be watching not only the data but how stocks respond to positive (and negative) data.
1. BOLD was bought by Astellas for just about $3B. This was not a name on my radar but it is another gene therapy company that is bought. That has been THE area that has seen the most M&A. I do not think that slows down in 2020 and makes me think about looking at other pure play gene therapies. This is a company with 1 drug in the clinic and goes for $3B. This not only signals that gene therapy is hot but SRPT is undervalued. Yes, they are not a pure play in gene therapy but they likely have one of the deepest gene therapy pipelines. They have 6 in the clinic and 5 more pre-clinical. That has to be one of the largest gene therapy pipelines (and also explains the SRPT strength today on this deal news). All that being said I am going to go back and look at some other names to see if they are worth buying.

2. CLVS is crazy. Looking at these moves and thinking it through there are really only two ways this ends: buyout or financing. If there is not a buyout coming then CLVS would be crazy not to raise after this run. While I think they claim to have cash into 2021, you cannot let this move go by without a capital raise (assuming there is no buyout). The only reason not to raise at these levels would be a buyout. So either we get a deal or this momentum is broken by a capital raise. I have no idea which is more likely but that is how I see it ending.

3. There is ASH coming this weekend but we also have the BIIB data coming Thursday. This should move the stock given such a large opportunity Alzheimer’s would be but I think everyone is lining up to dunk and dump on the data as soon as it is presented. There is no one to know how bad (mediocre) the data will look or how the stock will react as clearly the FDA has indicated that it is willing to consider approval. What is odd is that in the new data almost 40% of the data points are imputed (i.e. they have no measurements for the patient so they estimate what they think the data should be). Imputation is so sensitive to assumptions and so the data will be picked apart and there will be a ton of negative stories and takes on it (and likely justifiably negative). In any case, it should move the stock but I do not think anyone had a real edge on the data or how the stock will react.
I will end it here as the week is starting heavy. The sector is doing fine but the market itself just has a heavy feel to it but that can always change.

Disclosure: Long SRPT

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