A couple of weeks ago I bought a very small (just over 1%) (probably too small) portfolio weight in 4D Pharma at 247p per share.
This is very much an experiment for me – its the first pharma stock I have ever bought in my 17 years investing.
DDDD are a company involved in developing remedies related to bio-theraputics. This is using the body’s own bacteria / product of that bacteria to heal. They are initially focused on gastrointestinal issues.
I have something of an interest in this as I suffer a bit from my stomach which has been seriously helped by taking probiotic bacteria… This means I know the underlying logic is sound – this stuff can be used to help people. What I don’t know is if 4d will be able to successfully apply this but it derisks it in my mind. I think some level of success as these guys are effectively using what is already in the body to repair it.
4D are backed by a successful UK fund manager Neil Woodford he holds 27% of the shares.
They have completed first stage (safety) clinical trials of their blautix drug they said:
IBS patients receiving Blautix showed an increase in microbiome diversity and microbiome stability that was comparable to healthy controls. Conversely, as expected, IBS patients receiving placebo showed a reduction in microbiome diversity and exhibited microbiome instability over the period of the trial. This result may be indicative of a relevant therapeutic effect of Blautix and will be investigated further in phase II clinical studies scheduled for 2017.
They have a pipeline of other drugs / diagnostics based on the same underlying ideas / technologies (below). This means lots of scope for good news.
Another couple of things I like is that they have been working on developing tools / methods of developing their technology. Its near impossible for me to assess the accuracy of what the are saying / likely value but they have been buying research companies / tools so it seems on the level.
They have 68m cash and a market cap of 168m – enough to do quite a bit of work and I think they are cheap at this price for the potential opportunity – although it is very hard to value.
I’d like to emphasise this is very much a punt. Having said that my last biotech idea (which I didnt do) was Hutchinson China Meditech – I lived in China so knew Chinese medicine worked and there was opportunity there. It went from £5 to £35.
I hear about lots of people making money on pharma / biotech. As ever with investment people like to talk about winners, not so much losers…. This is one I intend to buy (small) and forget about.
With markets getting higher my usual investment staple of winding up investment trusts are getting harder to find. I need to get developing new investment skills and trying new things… Any advice / book recommendations on this sort of investment from my readers would be gratefully received…
Deep Value Investments Blog 
for Pharma/biotech punts, 1% is fine. In this space,to have a chance to make it work, one needs a portfolio/VC approach.
Possibly – issue with it is even if it goes up 10 fold a 1% position only equals a 10% portfolio gain. I’m not rich and am doing this to get wealthy so perhaps need to take greater risks than this on the rare occassions I have a bit of insight… Then of course the downside is more painful….
i tried the approach value investing “get rich fast” and got wipe out (distressed companies, bankruptcy with net asset value expected to be positive) with too much % of portfolio… i think you are forced to get rich very very slowy with value investing
i bought 3 biotech net net , lucky with 2 successes one wipe out. the burn rate is so fast in biopharma, so net net (market cap below cash) doesn’t mean much
what do you see in this one? what is the insight? what is the cash burn rate?
Cash burn rate isnt what matters here. My insight is personal – I suffer from stomach problems, these are relieved with certain probiotics. As a result I strongly suspect there is something in their approach. You may well suggest that this is not a very scientific approach – and it isnt but the last time I thought this was with respect to Chinese medicine and Hutchinson China Meditech – which achieved substantial returns….
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