Contact Information

      portfoliomgt1@gmail.com
             586-431-8000

ACAD Parmaceuticals

We sold ACAD yesterday in the $14.20 range after the stock has doubled within the last few months.  We used the strength of the stock from being inducted into the Nasdaq Biotech Index as of Monday the 20th.  The nearest catalyst looks to be the starting of the Alzheimer's (ADP) phase II trial which the company guided for  the second half of 2013.  Since we are still bullish on the long term prospects of ACAD we will look to re-enter the stock at lower prices after working off severely over bought technical readings, not only on the stock itself, but on the overall market in general is also overbought.

Above is a daily chart of ACAD.  We may be interested in owning the stock again if it drops to around the $13.00 level or lower, approximately -10% lower than our sell price on Tuesday.  

Bottom Line:  Although we like the long term prospects of ACAD, we think the stock will retrace some of the move higher it has achieved over the last two months.  The retrace will be healthy and set the stage for new highs in the coming months ahead.  Thank you for reading.

Monday May 20

Mixed bag on performance today as far as the biotechnology world goes. There are a couple of notable conferences approaching. First there is ASCO - American Society Clinical Oncology which starts on May 31st, and in June there is the  Movement Disorder Conference on the 16th. PCYC has an abstract at ASCO and ACAD should be involved in the Movement Disorder Conference as they have been testing PIMA  for Parkinson's disease.  Below is a chart of the XBI - S&P Biotech Index.

The chart above is a weekly look at the index.  Notice it has had a nice run and is in overbought territory.  The sector has been one of the leading performers of the S&P.  A pullback in the sector would be healthy.  Thank you for reading.

ACAD Secondary Offering

ACAD is pricing 8 million shares at $12.50 for a total of $100 million.  The offering would bring their cash total to approximately $178 million at 2013 year's end company forecast.  I like the move, as it can help in potential negotiations for partnership or outright purchase by a larger entity.  The stock in pre-market is actually trading higher than the offering price which is extremely positive for now.  The cash will also aid in running the Alzheimer's (ADP) trial phase II, and a European Parkinson's trial if they wish to.  After the offering the share count will total around $88 million shares outstanding.  We hold shares of ACAD.  Thank you for reading.

Contact Information

    portfoliomgt1@gmail.com
          586-431-8000

PCYC Gets an Upgrade

RBC analyst Michael Yee upgraded PCYC from a $70.00 price target to $100.00 target.  Below are the key points to the upgrade.
Upgrading ahead of many big events expected for PCYC in next 12-18 months and likely strong launch in 2014-15; Conf call 5/13 @ 10am ET to discuss survey results.

Key Points:

We are upgrading to Outperform and increasing PT to $100 from $70. Our Ibrutin-APP model bull case can get us to $128. We expect enthusiasm to build for PCYC and we want to own into H2:13 and 2014 based on 1) the first detailed CLL survey on the Street on 100 docs showing already high awareness and planned utilization of Ibrutinib in CLL including growing the market to very large "watch and wait" pts not in consensus and upside to estimates, 2) catalysts ahead including J&J R&D day May 23rd, FDA filing in Q3 for MCL, and likely fast approval by YE:13 or early '14 under Breakthrough Therapy, 3) first Phase III pivotal CLL data Q1:14, and additional studies in 2014, 4) potential compendia listing in CLL and off-label use and huge prevalence pool to penetrate, 5) new data at ASH in myeloma and DLBCL only upside to our $4-5B CLL estimates.

Highlights from survey suggest sizable market expansion potential not in consensus: 1) large unmet need due to current drugs w/ limited efficacy, 2) very high awareness and enthusiasm for Ibrutinib because of easy transition to a simple oral pill with high-end efficacy, long durability, and benign side effects (this reminds us of BG-12 in MS and GS-7977 for HCV), 3) key "expansion of the market" to not only relapsed/refractory pts getting chemo, but to 30-40% use in 2 large markets that make up majority of patients and where there are no sales today "elderly" (30% of pts), and "watch-and-wait" (30% of pts).

Our projected adjusted Ibrutinib sales is now $5-6B WW (25%+ more patients but years of chronic treatment). Ibrutinib should find use not only in the 7-10k pts treated annually on chemo/Rituxan (only 30% maintenance) but another 5-10k who are elderly/unfit or don't immediately get chemotherapy. Over time, with 30-40% penetration into 20K pts x $100k drug with duration of 2-4 yrs, we get $2-3B+ in US alone for CLL and $4-5B WW. Put another way on a $5B drug x 5x sales is $25B EV with half to PCYC is $12B EV , which when discounted back by 7 yrs at 8% still yields 27% upside potential from here (our PT of $100).

PCYC responded positive to the upgrade by tacking on +8.82% today on twice the average volume.  Below is a daily chart.

Bottom Line:  PCYC is an emerging biotech specializing in oncology and has some potential catalysts to look forward to.  We currently hold shares of PCYC. Thank you for reading. 

CYTX 1st Quarter Results

CYTX reported 1st quarter results on Thursday.  The focus of the conference call from my perspective was on the U.S. phase II Athena chronic ischemic heart failure trial.  They are still on track to successfully enroll all the patients by mid summer, and have data six months later, or roughly the first half of 2014.  They expect 45 total patients to be treated. They ended the quarter with just 16 million in cash and investments on hand.   Below is a weekly chart of CYTX.

The chart above shows support around the $2.50 area.  

Bottom Line:  CYTX is a leading stem cell company with a focus on the heart.  The company only has 16 million in cash at this time, so I am expecting some sort of announcement for either a partnership or another secondary offering soon.  CYTX is a 3-5 year portfolio holding. Thank you for reading.

Disclosure:  We currently hold ACAD, CYTX, PCYC, TSRX