Friday, September 25, 2015

Just my luck: the Hillary Clinton biotechnology meltdown

Before looking at the biotechnology meltdown, I'll review my trades since my last report on September 12:

I sold my few shares of Adept Technology (ADEP) because it is being bought out by a Japanese company for $13.00 per share; I took $12.93 rather than wait. I had bought the shares in May for $5.92 per share, so no complaints except that if I had had a crystal ball I would have bought a lot more shares and probably some options too.

With my vast wealth I bought small amounts of:

Medivation (MDVN) at $50.66 per share

Juno Therapeutics (JUNO) at $37.36 per share

and added to my Agenus Bio (AGEN) position for $5.44 per share.

Medivation and Agenus are already down substantially, but Juno is up a notch. I'm not worried, they were all bargains at the prices I paid and I'll be laughing at the panicky sellers in a couple of years. Agenus in particular has an amazing platform that is going to wow people in 2016 and 2017.

Lots of tempting stuff by the end of the day, especially the companies that are already profitable and not dependent on clinical trial results or FDA approval.

Gilead (GILD) is ridiculously undervalued. Cash from operations will continue to flow in, as we'll see when Q3 is reported, and they will continue to buy back stock (as well as pay a nice dividend). It is the opportunity of a lifetime. Don't say no one told you so. Based on trailing earnings GILD is trading at a P/E of 11.4, which means earnings are 8.8% per year and growing. The Hepatitis C cash will keep rolling in as more nations in Europe and elsewhere approve reimbursements.

Presidential candidate Hillary Clinton I'm sure has good intent, and yes, sometimes pharmaceutical companies gouge their customers. But she is complaining when the Orphan Drug laws are doing exactly what they were supposed to do: encourage companies to develop new drugs, which after their patents expire will go generic.

Could the market use some regulation? Perhaps, but I think that except in a few cases the payers and patients can simply not pay prices they think are unfair. Take Gilead's Harvoni. If there are cheaper alternatives (taking into account effectiveness and the cost of side effects), consumers would choose them. But Harvoni is priced fairly compared to prior, less effective treatments with worse side effects. Even the strict European regulators think Harvoni is worth the cost. I doubt Gilead has anything to fear from Hillary Clinton.

This is especially true when you look at political reality. Given the boost that biotech firms give the economies of California and Massachusetts, their congressional delegations are not going to support draconian legislation. Neither are most republicans. Any actual signed legislation will be to make the public feel good while having little impact on most of the drugs most companies sell.

The smartest thing Hillary Clinton (or whomever becomes President) could do for health care would be to use government funds to accelerate the eradication of Hepatitis C (and B) because that would eventually mean no new cases, which would be a great savings to individuals, insurance companies, and Medicare.