Welcome to my first blog. I’ll be discussing biopharmaceuticals and other topics. I am not recommending any stocks or making investment advice. This is merely me “thinking out loud”. I’ll try to mark sections clearly for those who are here for industry commentary as compared to my personal life.
–Tesaro and Jazz sold products they don’t want anymore. For those that business, this was noteworthy.
–Recordati’s sale to private equity marks the probable end of an era, but we’ll see if the family sticks around. An incredibly well managed roll-up for the naysayers out there. Rollups are best done slowly (see Berkshire, Loews, but not Valeant).
–Global Blood Therapeutics intrigues me. I will write in further detail in the near future.
–SEL-212. I think this drug should do well, take new patient starts away from Krystexxa. Not a huge problem for Horizon or anything, but notable.
–Novartis’ much-telegraphed sale of Alcon and the continued implosion of GE reminds us conglomerates are more out of fashion than probably at any point in the history of business. This flies in the face of mechanical logic, but practically makes sense. Finding good managers is hard (I’ve maybe found a very small handful of decent managers out of close to 1000 I’ve employed over the years) and conglomerates can only work if you have an engaged CEO (about 5% of CEOs) and engaged managers (less than 5%? less than 10%?), which probability tells you is far lower. The flipside is you get enormous diversification and cash flow stability. Even Bayer pruned some assets, but Berkshire continues to prove everyone wrong. Anyway, I’d rather have a well-managed conglomerate than a well-managed single-focused MNC anyday. Vasella’s failure in buying Alcon was the asburd price paid at the time. Now, divesting it for half the purchase price (~10 years later!) is a sad day for his legacy. The purchase price was $50 billion, but including opportunity cost, the company lost $50 billion on Alcon ($25b asset value, $25b lost opportunity). Given Novartis is still top 5 big pharma, a great performance from the rest of the business.
–In teaching discount rates to some of the guys here, we find dogma like ‘sovreigns always have less default risk than corporates’, when obviously most S&P 100 companies have lower default risk than the Eastern European countries I come from. Or my notion that a conglomerate should always have (all else being equal) less default risk than an industry-focused company. Certainly GE has more default risk than Amgen. You can slap together a lot of low-margin businesses with leverage and you’re far less safe than a well-run industry leader. But, ceritus paribus, the Novartis move is risk-neutral since healthcare conglomerates aren’t really conglomerates. Having an eye healthcare business isn’t particularly diversifying other than somewhat eliminating concentration risk which naturally comes with scale. GE selling Healthcare markedly increases risk, in my eyes. Any precision that comes from better operational focus is overwhelmed by the idea that one of their highest-return businesses is being spun off. Companies need to weather bad times. There’s a reason Berkshire Hathaway, the consummate rollup/conglomerate (dirtiest words possible) bailed everyone out in 2008.
–Alexion’s new antibody should position the company for further complement growth. No one is going to show up and eat their lunch. Having said that, owning this stock is a labor of love (actually, that doesn’t exist in finance!) similar to owning IDPH in 2002 (for you fellow old-timers!). In Idec’s case, you watched great growth of Rituxan but were always wondering “what’s next”. Alexion has their work cut out but sometimes the best solution is to just grow and grow with your middle fingers proudly displayed (a bit of AbbVie’s solution to product concentration risk).
If there is a biopharma company or medicine you want me to think about, email email@example.com (gets snail mailed to me by a friend) or send me a snail mail at:
FCI Fort Dix
Federal Correctional Institution
PO Box 2000
Joint Base MDL, NJ 08640
Papers I’ve Read Today
Prostate Cancer Metastatis — Fueled By Fat? Cory Abate-Shen. NEJM 2018 378;17
NEJM should stop this ‘clinical implications of basic research’ section. It’s embarassing to dumb down basic research and this is the wrong audience. Just make a NEJM Biology journal or something.
Making Sense of Triple Inhaled Therapy for COPD – Suissa & Drazen. NEJM 2018
Authors are too critical of IMPACT, in my opinion.
Once-Daily Single-Inhaler Triple versus Dual Therapy in Patients with COPD. Lipson et al. NEJM 2018 378;18.
The “IMPACT” study worked. Disagree with the editorial. I like GSK.
Association of Serum Retinol-Binding Protein 4 Concentration With Risk for and Prognosis of Amyotrophic Lateral Sclerosis. Rosenbohm et al. JAMA Neurology 2018.
Embarassing this got published. Look at the delta in serum RBP4 between groups and you tell me that is of any value.
Identifying fast-onset antidepressants using rodent models. Ranmaker and Dulawa. Molecular Psychiatry 2017.
100 ways to torture a mouse.
Genome-wide association study of positive emotion identifies a genetic variant and a role for microRNAs. Wingo AP et al. Mol Psychiatry 2017.
Less fun paper than it sounds.
I have around 38 months to go assuming no success on an appeal. I spend most of my time reading. A newspaper misreported that I’m ‘buff’. This is not the case. Oh, the Wu-Tang album is still in my possession. As are all of my assets. I couldn’t have a lower opinion of newswriters now that I’ve had folks report on me. It’s astonishing, really. I understand that not everyone can be capable or excel at their chosen career, and the reporting of occurrences and chronicling of history is not a vitally important task to those charged with it. So, don’t pay too much attention (an admonishment to the reader and a reminder to myself). Anyway, the fate of the Wu-Tang album remains to be seen, but the choice is distinctly mine. I’m a bit frustrated by the Clan’s insistence on making a further album. I was told this would be the final work–I would have never purchased ‘Shaolin’ if that representation was false. That sounds like a violation of a certain section of Title 18 I’m familiar with, come to think of it. Anyway, I’ll decide at some point if I want to sell the album. If a higher-return troll opportunity occurs, I just might.
What else? Politics seem to be tearing this country apart. I think both sides have to start capitulating or perhaps California/NYC should become a special entity with their own federal government. The rest of the backwards nation will have to make do. It’s more practical than what we have going on. Same federal taxes but less whining. Just thinking way outside the box 🙂
You probably won’t find me talking too much about jail as I think it’s in bad taste. This will undoubtedly be read my inmates and staff and it’s easier (and safer) for me to just avoid certain topics. The only thing I can probably say is I miss my family, friends and cat, roughly in that order.
Well, this will be a living project. If you have any advice, like, “less this and more that”, leave some comments or email firstname.lastname@example.org (my people will slowly deliver this email to me in the form of printed snail mail — takes about 2 weeks from your email until I get it in the actual paper mail). I write this message on our “TRULINCS” prison email system to a friend. That friend posts it on the blog. Hope you enjoy this!