Abiding Ambiguity: Achaogen and Arrowhead

By DrKSSMDPhD, April 29, 2015

[Ed. Note: Dr. KSS writes for the Irregulars about medicine and biotech stocks. He choses his own topics, and his words and opinions are his own. He has agreed to our trading restrictions. Enjoy!]

In his smoky baritone, singer Stuart Staples of British midlands musical act Tindersticks is bemoaning how he suspects the woman he loves is seeing someone else: “Hey, I’ve been wondering where you go so late at night?” (performed live here in Glasgow). He continues:

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“The not knowing is easy

And the suspecting, that’s okay

Just don’t tell me for certain

That our love, gone away

It’s gone away.”

Tindersticks may be the most sui generis recording outfit to emerge from the Green and Pleasant Land since The Beatles. About once a year, say on a cold rainy Saturday night, I try to have over someone whose company I cherish, open a bottle of something that Kris Prasad’s exquisite palate would surely endorse, and listen to Tindersticks’ first album (you can listen to all of it here), something that provided the perfect soundtrack  for me for a sun-drenched drive from Lisbon to Seville.

The Not Knowing: It’s not as if biotech investing doesn’t already burden investors with daunting odds, extreme scientific complexity and an innate tendency for valuations to rise or fall capriciously by 50 percent on news. Some situations are truly ambiguous enough to leave you washed up on a sandbar of ambivalence. Your best quality thinking with your clearest head over your first morning cup may not impart any better sense of how to act. Such is how I feel these days about two stocks in which I have long positions ($AKAO, $ARWR). As we’ll talk about, these stocks are now fuliginous, at least a little, from what they face.

In the spring of 2014, we took on the antibiotics space, paying attention to three situations worth knowing about: Durata (now a unit of Irish roll-up king Actavis $ACT), Cellceutix ($CTIX), and Achaogen ($AKAO). Durata came to fruition and made money for Gumshoe readers, and that attaining profits was slightly more drawn out than anticipated would seem more than compensated by the residual value in contingent value rights Durata holders still possess. These are highly likely to make further payouts.

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