What Goes Up Must Come Down

Turning the page on an unpleasant month.

July started with such optimism. Hope for $HGEN getting EUA, hope for $ARDX getting FDA approval, hope for Schumer unveiling a marijuana legalization bill that would energize my weed stocks. And yet, 0/3. Despite such hope, July was particularly brutal. At times down over 20%, I ended up down ~16% for the month. It is definitely easier to stomach given I am still ahead of my “benchmark”, but I worry how I will potentially handle falling behind on that count. Probably give myself 2-3 years to catch up before capitulating and just going index-only and getting a different hobby (Halo is coming out soon, right?). Hopefully August provides a bit better returns. Coupled with some potentially exciting developments on the work/personal front should be a good month!

Portfolio Update

Of note, I own a variety of option plays not reflected in the above that perhaps I will write about in a future update. Outside of $HGEN calls and $PSTH short puts, nothing terribly material (unless they hit, I suppose). I also rolled over some funds I had sitting in $VTI into this ‘active’ portfolio (hence the large inflows).

Notes from July

Sold $ARDX. Sold in after-hours after they released word that the FDA had sent them a letter there were deficiencies in the application that would preclude them from approval. Biotwitter seemed somewhat surprised by the news and I can’t help but also note the juxtaposition between the rejection here versus Aduhelm, but whatever.

Sold $AR. I had been holding out for long term capital gains on this one, but just got impatient and also needed some funds for $ICLTF. My guy raising the bar has been posting about them a bit, and it does seem like expectations are very high. Still holding on to my $SD and curious how they did in Q2 and whether they have started hedging.

Sold $GOED/WS. This was about a triple for me. Thanks special sits and Thomas (note both have many tweets on the subject, recommend following and looking at them all)! At the time of selling the warrants seemed overpriced in comparison to the underlying. I needed to get some money for $ICLTF and do intend to circle back to $GOED when I can.

Sold $GRMWF for $GRAMF. The thought process here is multifold. First, the warrants are exercisable at $11.50 and were trading around $0.85 when I dumped them. The underlying was around $4.20 (hehe). In my estimation, if you get a double from the underlying the warrants really should only go up to $1.50 or so (assuming $8.50 underlying). Thus, took the tax losses and went long common.

Sold $KALA. Needed some money and the tax losses don’t hurt and it had turned in to a very small position and I was annoyed looking at it. Lesson: launching new drugs is hard.

Sold $GHBWF. Similar to $GRAMF the warrants here were holding up extremely well as the underlying fell off a freaking cliff. My favorite chartist went so far as to call it “Fugly”. So, yeah. Took profits on the warrants and went long common. Looking to add here if I can - I believe in the team and what they are trying to do. Greenhouse not closing is certainly a risk, but I think they get it done and when it does should get a re-rate. Long term hold for me (hopefully the next $AYRWF).

Sold some $ORRCF. Drills are turning so this might have been a mistake, but not going to go broke taking some profits. Still a big position for me.

Rolled $PSTH. Oh Spackman. This thing is brutal to look back on. At one point I think I could have closed my entire short position for like $5K which would have been a great, great trade overall (probably 20-25Kish gain). Instead, the deal was called off and $PSTH collapsed entirely. Staring down buying back my Aug/Sep puts for like $30K I decided to roll them all to January to give time for something to happen and this thing to catch a bit. Got some premium for my trouble and will likely try to roll to March in a month or so if there is no news. Biggest risk is De-Spaccing + collapse before my puts expire, but given how long things are taking these days I don’t view this as a huge risk. Still burns that I didn’t get out when I could have, but hopefully all will end up working out in the end.

Bought $ICLTF rights. After successfully working with TD Ameritrade to get myself setup to exercise the 9K rights I had on $ICLTF I decided, on a lark, to call and see if I could buy some more rights. They allowed me to and I bought an additional 20K. I should have bought more, but the underlying at the time was around $1.55 and I figured there was a very real chance the arb closed by the underlying trading down to $1.40 or so. I still am curious how it trades once everyone gets their shares, and will be thinking about what I want to do in that case (l’m a buyer at $1.50 or so I think, otherwise just let it ride). Also, I would be remiss if I didn’t shout out @ThomasBraziel, @KCerminara, and @IgnoreNarrative who were all very helpful throughout the process.

Bought $VRNOF. Seemed cheap and oversold - didn’t get a full position established before I ran out of money and it started going up, but will watch and perhaps add if the timing is right.

$HGEN

Humanigen remains a really big position for me. Both common (though I have trimmed there a bit in favor of options) and options. I know I am a total tourist when it comes to biotech, but I still believe this gets EUA. I also believe that happens before August opex - which is a full 12 weeks following application. It seems overwhelming likely Covid becomes endemic and there will be a need for therapeutics long into the future. Recently the NIH study to expand the population and adjust the primary endpoint to line up with the already completed phase 3 study seems bullish to me. Additionally, and this is certainly a stretch, I’ve been monitoring https://www.lenzilumab.com/ and noticing that they have been making changes to it quite a bit recently. My gut is they are working with the FDA on labeling etc. and getting everything ready. Depending on how things progress I will likely buy more August / September calls or call spreads. The longer this plays out the more A) the market will likely lose confidence, but B) the more I think it eventually happens - if there was something that would preclude authorization I really feel like we would know about it before week 10. I do have to note there has been a lot of insider selling, but I don’t put a ton of weight on that (famous last words).

Some things I liked recently:

I really want to get long tobacco stocks. Have to find the proper entrance / which ones I want to play.

Great presentation here, think I will have to go back to it a few times for everything to sink in.

I still am a copper bull, and this is a good presentation to put some data behind that thesis.