Position Review June 2025

This is the first position review I have written about. However, I want to start providing updates on positions and clinical trial outcomes in a formal format to analyze successes and failures and reflect on my trading. I also think it promotes transparency in my positions and connects my article writing to my positions.

Successes:

1.      Nektar Therapeutics

a.      This is the biggest win of June and the first half of the year. I never wrote about this position as I initiated it on Monday, June 23^rd, and the data was announced on June 24^th. I have to give credit to biotech X on this one, as @anthonystaj and @monaco_biotech clued me into the idea, and I was able to do 1-2 hours of DD on it before investing at the tail end of the trading day. I ended up selling out at $29/share but have since reinvested at about $25/share after they announced financing. I think this is a great risk/reward moving forward. At some point, I will write a more detailed article on Rezpeg in alopecia areata, which is due to be announced this year.

2.      Vera

a.      I wrote about this one a few months ago. It was apparent that it would reduce proteinuria based on the phase 2 studies. The price increased by about 66% on the data, and I immediately sold. Otsuka announced their data on IgA nephropathy a few days later, which was superior to Vera’s, and the stock tanked. Although this was a significant win, it was a much greater risk than I had initially anticipated. In future write-ups, I will ensure that I detail the announcement timelines of other drugs in the pipeline.

3.      Inmune Bio

a.      You can view my previous article on this. This was a fairly apparent short that ended up failing their phase 2 study in Alzheimer’s. The company announced the announcement several days prior, likely to pump the stock for a rug pull (dilutive financing) the next day. The whole company seems scammy, and frankly, their actions should probably be illegal. For some reason (probably to continue scamming shareholders and cashing paychecks), the company decided to file for breakthrough designation based on the failed results??? This company is a zero in the long term, but I expect a long, slow bleed. I am still short my shares.

4.      Altimmune

a.      I did not write about this one, but it was a much smaller position relative to the other successes. I posted on my X account (@failed_drugs) that I expected mixed results. I was not sure how the market would react to that data, so my short position was smaller. Their drug ended up reducing MASH symptoms but did not show improvement in liver fibrosis (impossible at 24 weeks after reviewing AKRO and semaglutide data). Honestly, I was impressed by the results, especially the trend towards fibrosis improvement, and I immediately closed my short for a nice gain. This is probably a long shot at this point, assuming they design a much longer phase 3 to detect improvement in liver fibrosis. However, I currently have no position.

Failures

1.      Compass Pathways

a.      My thesis on this was very similar to my long on CYBN. They announced “positive” data in their phase 3 trial on TRD. The average reduction in MADRS was -3.6 points over placebo (p=0.01). However, 3 points is considered the minimum clinically relevant improvement. Results were disappointing compared to phase 2, where there was about a 6-point improvement over placebo. For context, esketamine (Spravato) showed approximately a 4-point improvement over placebo in TRD. The company subsequently claimed the FDA stopped it from releasing further data to prevent unblinding/influencing other trials. My calls went to zero on the release, but I ended up buying more at the bottom. I am still optimistic about the company and psychedelic treatment as a whole.

2.      UroGen

a.      This one hurt quite a bit. All my puts went to zero upon the approval. I wrote a few articles on why I believed the FDA would not approve. I still believe the FDA made a mistake, but I overlooked some signals from the FDA. First, and most importantly, Pazdur said at the end of the ADCOM meeting, “I consider this a split vote, and let’s talk.” He didn’t have to say anything, and it was clear he was leaning towards approval. Second, it appears as if one-vote differences by the ADCOM have leaned overwhelmingly positive in the past. Third, it seems that the decision leaked on the Friday before the announcement, as the stock rose about 40% on no news and high volume (mainly institutional buying).

Unannounced Investments

1.      Kalvista

a.      Despite a relatively poor track record with PDUFAs this year (UroGen miss and refusal to short Aldeyra), I am long a small amount of Kalvista (<5% of the portfolio). The data looks compelling. When the FDA delayed the decision, Kalvista claimed the FDA had not raised any concerns with efficacy or CMC, and that they were discussing labeling. Labeling CRLs are extraordinarily rare. Additionally, in what appears to be a hit piece on Makary, it was reported that Makary sent instructions to issue a CRL on the stock. However, the request did not succeed, and the article goes on to mention “the reviewing team was not preparing to issue a rejection.” To me, the combination of these two things makes the odds of approval much more likely.

2.      Aclaris

a.      This investment was a last-minute decision after the Nektar news. The company is trading at a price-book value of about 1.2. It is preparing to announce results from a phase 2a OL study in atopic dermatitis. Given the historically strong placebo response in atopic dermatitis and the MOA (ITP/Jak3 inhibitor), it is likely the drug will do something. To me, this seemed like a free swing of the bat at a potential positive result. They were supposed to announce in June, but the company had not received PK data. I am still holding my shares, as the risk appears to be minimal following this announcement.

Despite my losses in UroGen and Compass Pathways, the month of June was overwhelmingly positive. The net return in June was 50%+.

Lessons Learned

·       Focus on cases where there is skewed risk/reward (Nektar). Nektar was an instant 3X on news that is relatively predictable given the positive phase 1b study. The odds of a positive trial result were at least 50/50, so this is a positive EV bet. Although the correct percentage may not be as high as with other types of trials, the outsized return is worth the risk.

·       PDUFAs are really hard and subjective. Portfolio size should be very limited (2-4% of the portfolio). Listening to the FDA and reading between the lines seems to be key. My betting in PDUFAs may phase out over time if the track record continues to disappoint.