My Last Biotech
Decades of trial and error deserve to end with a bang.
I’ve been a technology investor for over 40 years. I should stay in my lane but it’s hard when you do research and get smart enough to be dangerous. Every so often I get into a situation in biotechnology that is so fascinating and compelling and what seems like a great investment. There have been so many promising blow ups over the years.
When I was still a DoR on Wall Street I asked our team of biotech analysts to backtest stock performance around the results of clinical trials. Being short every single one was a great way to make money, the few that succeeded were swamped by the sheer number of failures. That was 2004 and I haven’t run it again but I have come to learn the tremendous power of the placebo effect.
But here I am getting sucked in again after doing tons of my “own work” on top of a heap done by “experts” in the industry. The name in question is Inmune Bio $IMNB which is developing a cure to treat Alzheimer’s.
It’s been about two years. I have read several books about the disease and the history of development for treatments. There are many very smart people who have really dug in. One of the smartest is Carl Kestens. I’ve enjoyed his notes and investor discussions about the name.
If you are wanting to learn more and potentially be sucked in too you might enjoy this recent writeup - INmune Bio: Imminent Phase 2 Alzheimer’s Readout.
Here’s another one that has a paywall but the gist is that if successful the results could pave the way for a market that will reach “several hundred billion dollars.”
To put all this in context the view of many “experts” based on years of work is that this is going to work but the EV of INMB is just $124M! How an it be?
There’s also another card in the mix which is Kuppy who owns over 1M shares. He’s no biotech expert but he’s very deliberate and definitely “knows people.” The position size exceeds what one might put in place just because it’s asymmetric. Still Kuppy is a pro’s pro and he knows he might end up a “baggie” on this one.
There are of course some shorts who are actively publishing on the name. The most infamous is Martin Shkreli who has been vocal but not very rigorous. A rather pasty and unfit Martin has a discussion on YouTube that may or may not be helpful.
Days (bombs?) Away
The results are due to be announced by the “end of June” which is in a matter of days. Next Monday is June 30th.
My conclusion on the stock was simple - own a little bit in case it works. Many investors though have decided it’s too difficult to resist making it a “meaningful” position and a potential path to wealth creation. That’s not a good plan with biotech trials but I hope it works out. Even better will be if we get a treatment for ALZ which we all want.
Tactically I thought that shares of INMB would ramp ahead of the release of the study results. So I had a little “extra” in order to sell that off prior to release, further reducing my risk. As you can see in the stock chart this has not happened.
The recent weakness and large short position in the stock adds to the drama! To short INMB here you would need to have supreme confidence (our fully hedged with calls). In the last week the stock has gone from $8 to $6 on increasing volume.
I still have some net long exposure as we go into the last week of the month but have taken evasive action in terms of the shares and options to have a more creative but limited exposure.
There may also be ways to play the stock in the aftermath of whatever happens. There is some residual value to the stock and the short position will need to be covered.
Okay Maybe Not the Last
No matter what the outcome for INMB I have to confess it won’t really be the last. Only because there will be more tiny biotech companies with stunning potential, strong science, a massive R&D investment and no cap!
My newest one is called IO Biotech $IOBT.
DON’T GET SUCKED IN! ;-)