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(B)(N) The New Insiders

October 2, 2013

Drama. We’d all like to be “ahead of the curve”, so to speak. For example, in baseball, the “curve ball” is slower (only 90 mph over sixty feet) and all that we have to do is hit it out of the park before it breaks to the left or to the right.

That sounds easy and some well-connected folks think that there’s a new game in town that can beat the slow pitch on Wall Street (The Street, September 29, 2013, Twitter Trounces Wall St. With Real-Time Take on Achillion Pharma’s Hep C).

And it turns out that the tweets were right this time (MarketWatch, April 24, 2013,Twitter trading influence laid bare by fake tweet) and the free-swinging market traded nearly half the stock (50 million shares) on Monday and Tuesday to drop the price from $7 to $3 and the lawyers-without-portfolio (LWPs) are already on it (for example, PRNewswire, September 30, 2013, Bronstein, Gewirtz & Grossman, LLC Announces Investigation of Achillion Pharmaceuticals, Inc.). Please see Exhibit 1 below.

Exhibit 1: (B)(N) ACHN Achillion Pharmaceuticals Incorporated – Risk Price Chart

(B)(N) ACHN Achillion Pharmaceuticals Incorporated

(B)(N) ACHN Achillion Pharmaceuticals Incorporated

Achillion Pharmaceuticals Incorporated is a biopharmaceutical company which focuses on the discovery, development and commercialization of innovative treatments for infectious diseases.

(Please Click on the Chart to make it larger if required.)

From the Company: Achillion Pharmaceuticals Incorporated is a biopharmaceutical company that discovers, develops, and commercializes anti-infective drug therapies in the United States and internationally. It focuses on the development of antivirals for the treatment of chronic hepatitis C viral (HCV) infection. The company’s drug candidates for treating chronic HCV infection comprise Sovaprevir, a NS3 protease inhibitor, which has completed a Phase IIa clinical trial; ACH-3102, a NS5A inhibitor that is in Phase IIa clinical trial; and ACH-2684, a NS3 protease inhibitor, which has completed Phase Ia and 1b clinical trials. Its pipeline of antibacterial product candidates includes ACH-702 for the treatment of dermatologic and ophthalmic infections; and ACH-2881 for the treatment of serious resistant bacterial infections, including methicillin-resistant staphylococcus aureus. The company was founded in 1998, has 60 employees, and is headquartered in New Haven, Connecticut.

The Cash Machine Courtesy: MindsAlive

The Cash Machine
Courtesy: MindsAlive

We’re impressed. Achillion Pharmaceuticals Incorporated has sixty employees, no inventory, some lab equipment, and five years of double-digit multi-million dollar losses behind it, and is still worth $250 million to somebody.

In fact, it was 30% owned by just three companies (FMR LLC, QVT Financial LP, and RA Capital Management LLC) and 50% owned by just ten in June, at $8 or more per share ($800 million) and that could still be true today else it might be trading at zero.

But to get rich, and to stay rich, we need to play this game and to play the game, we need to be thinking ahead of the curve which means that we, as investors, need to think about our portfolios – the big picture – and not just the odd stocks here and there.

The Curve Ball

The Curve Ball

For example, there’s a reason – easy to figure – that the batter goes “through his stance” and the pitcher “through his motions” and that they spend a lot of time staring at each other before the pitch which will arrive in less than a half second.

“Preparation” – because they know that a lot can happen in the next half second which is coming. Tick-tock.

The Curve Ball Trajectory Courtesy: NASA

The Curve Ball Trajectory
Courtesy: NASA

And, of course, there is a science to the game that doesn’t change and we could master it before the game begins.

And if we knew enough about the new drug and treatment research for the illness, Hepatitis “C”, to tweet about it to one thousand of our closest friends – all pharmacists – then we should also know that there are six other players in the game who might affect the outcome which could be a “home run”, a “grounder” or just a “pop-up”.

Students of the Game

Students of the Game

And as students of the game, we know more than the price of today’s ticket and the box score, and our approach is to “load the bases” before the pitch, so to speak, and to study them all in a portfolio because when the game is over somebody is going to buy the winner in the post-season play which we know is coming. (Tick-tock.)

And while we’re still playing, we need to check our helmets frequently so that every pitch is a good pitch even if our smartphone is turned off.

So, the seven regular players who are in the lab are on the team, and there are six on the bench who might be doing the clean-up, and we’re managing it as a Perpetual Bond™. Please see Exhibit 2 and 3 below.

Exhibit 2: (B)(N) The New Insiders – Cash Flow – October 2013

The New Insiders - Cash Flow - October 2013

The New Insiders – Cash Flow – October 2013

(Please Click on the Chart to make it larger if required.)

Exhibit 3: (B)(N) The New Insiders – Portfolio – October 2013

The New Insiders - Portfolio - October 2013

The New Insiders – Portfolio – October 2013

(Please Click on the Chart to make it larger and again if required.)

This portfolio sold for $580,000 (or million) in December whereas buying them all cost $691,000 (Companies line). It currently has ten companies in it and is worth $880,000 (Portfolio line) for a gain of +52% so far this year.

But of the seven who are in the lab, we declined to own Achillion, Enanta (up +16%) and Vertex (+83%), this year. Please see Exhibit 3 above.

Enanta Pharmaceuticals is headquartered in Watertown, MA, and is still substantially owned by the employees and directors and two investment companies (Obp Iii – Holdings Llc and Shionogi & Co Ltd) each own 10%.

Batting Helmet Courtesy: Rawlings

Batting Helmet
Courtesy: Rawlings

The situation of Vertex Pharmaceuticals, however, is similar to that of Achillion; over 20% of the stock is owned by three institutional investors (Capital World Investors, Jennison Associates LLC, and Wellington Management Company LLP), and over 50% by just ten.

Exhibit 4: (B)(N) VRTX Vertex Pharmaceuticals Incorporated – Risk Price Chart

(B)(N) VRTX Vertex Pharmaceuticals Incorporated

(B)(N) VRTX Vertex Pharmaceuticals Incorporated

Vertex Pharmaceuticals discovers, develops and commercializes small molecule drugs for the treatment of serious diseases.

(Please Click on the Chart to make it larger – but not clearer – if required.)

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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