How I'm Responding to 2 Biotech Calls Gone Wrong in Uncertain Market
Here's what I am doing on a couple of my biotech holdings that haven’t worked out as planned.
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In my column on Friday, I discussed several recent investment picks that have performed well and recently delivered more than solid fourth quarter results.
It included names like The St. Joe Company JOE and Lantheus Holdings LNTH. Unfortunately, no investor hits with every investment, especially in the uncertain market environment that currently applies to a good deal of the equity space. In today’s column I will highlight a couple of picks that haven’t gone as hoped so far and what I am doing with these positions.
One of my most disappointing long calls to date has been around Viking Therapeutics VKTX. The stock has been cut in half in recent months. Frustratingly, little of this downdraft has been the fault of the company itself. Viking remains a quite promising potential new entrant in the burgeoning GLP-1 weight loss space. However, some of the enthusiasm around this part of the market has ebbed notably in recent months. The stock also has suffered from a lack of news flow around its pipeline development.
In addition, as the market has gone into "risk-off" mode, clinical stage biotech/biopharma concerns haven’t exactly been in demand. The SPDR S&P Biotech ETF XBI lost 3% of its value last week, and that was even with a nearly 2% rise on Friday to close out a sour week on a high note.
There are also a lot of potential new entrants in the GLP-1 space and the buyout rumors that boosted the shares from time to time have faded into the background. However, Viking has a Phase 2 study around its potential game changing oral version of its GLP–1 candidate VK2735 that has now been fully enrolled. Investors should see interim results from that trial early in the second half of this year, which could easily change the narrative on the shares. In addition, a Phase 3 study for the subcutaneous version of VK2735 should also kick off next quarter. Therefore, I am sticking with my core stake in VKTX as there is potential for a more positive backdrop on the stock in coming months.
Iovance Biotherapeutics IOVA is another small-cap biotech whose shares have gone north in recent months. The shares fell nearly 20% in trading on Friday following the company posting its Q4 numbers. Part of this downdraft seems to have been triggered by some hyperbolic or even erroneous headlines on Seeking Alpha. They portrayed management being concerned about things that were not highlighted in the company’s fourth quarter press release or earnings call transcript. Iovance slightly beat both top- and bottom-line expectations with its quarterly results.
I added to my position in IOVA late Friday via some new covered call orders. The company’s primary asset Amtagvi (Lifileucel) delivered nearly $74 million worth of net product sales in Q4 and $164 million in FY2024, at the top end of management’s previous guidance. Leadership also reaffirmed FY2025 sales guidance of between $450 million to $470 million as Amtagvi is expected to get approval in the U.K., EU and Canada during the year. The stock has a market cap of approximately $1.4 billion and ended FY2024 with just over $400 million worth of cash and marketable securities on its balance sheet.
At the time of publication, Jensen was long IOVA, JOE, LNTH, VKTX and XBI.
