Saturday, June 6, 2015

A Drug Stock To Watch

If you're looking for a big biotech that is "not keeping up at all" with the hot sector, as a recent 24/7 Wall St piece on five laggards detailed, then check out Idera Pharmaceuticals (IDRA) for a possible catch up move. Actually Idera isn't all that big with less than a half billion dollar market cap, and it is just a $3 stock right now. But don't you wish you had bought all those $100 plus biotechs when they were just $3 ?

I won't even go into the fundamentals because there aren't any. Idera has no current revenue, but what's even worse is that they had some tiny revenue back in 2010 and then lost that. However, the new medicine developers don't trade on current numbers, and if you're going to profit from them, you have to turn a blind eye to the usual stuff.

If you need a brief primer on the new medicine, I refer you to my recent article at Seeking Alpha "Insider Wisdom And The New Medicine". Here I want to look at a part of the new medicine called "gene silencing". Since the completion of the 13 year Human Genome Project and the platforms that, since around 2006, have made a complete map of anyone's gene operations routine and cheap, they have been fooling around with our genes' programming and are on the verge of learning a few tricks to changing the channel on errant genes and the associated diseases.

DNA makes a material from which our proteins are made called RNA. Proteins facilitate everything including disease. Gene silencing was first conceptualized in 1998 when researchers at the University of Massachusetts found that certain types of RNA can turn off the programming of certain genes. And if you interfered the right way, you could turn off the production of any protein you wanted including those errantly causing a disorder. It was important and new because some 85% of our proteins can't be targeted with traditional medicine. This earned the Nobel Prize in Medicine in 2006 and began the wing of genetic medicine known today as RNAi (the "i" is for interference) and prompted the founding of Alnylan Pharmaceuticals (ALNY) in Cambridge.

Since then it's been a roller coaster ride for RNAi fans as recounted by a recent MIT Technology Review article "Gene-Silencing Drugs Finally Show Promise".

All told, there are about 15 RNAi-based drugs in clinical trials from several research groups and companies. “The world went from believing RNAi would change everything to thinking it wouldn’t work, to now thinking it will,” says Robert Langer, a professor at MIT, and one of Alnylam’s advisors.

But I don't want to look at ALNY in this post, but another of those companies working on RNAi, Idera Pharmaceuticals, also of Cambridge. It was founded in 1989, long before gene silencing came along, but now it is the major focus of the company. They have nothing in Phase III and are one of those speculations with all the associated risk, but I would like to point out a recent development that probably tilts the gambler's odds a good bit in your favor.

To appreciate that development, you should probably read the Seeking Alpha article mentioned above and also the Genomic Health article here on my blog. There are certain key insiders to pay attention to in biotech therapy development and Julian Baker is one of these. On February 13 this year, he stepped in with a near $20 million insider buy (he is a director) and this, along with the stock's fractal condition (my analysis method) makes this stock worth watching: (click on image to enlarge)

Idera came down from around $15 pre- '08 into a protracted base from which it began to emerge in 2013. The Bakers had it in their funds back then and sold some just before the market got really bad. As the graphs on the Bakers show in my articles, when they buy over about $20 million worth in any one year, big rises typically begin in a year or two. That just happened with Idera. It is in a 1 1/2 year base (black lines) and is not a buy until it is clear of it. But if and when such a break occurs, the climb could be pretty good.