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Bio-Techne Corporation (TECH)
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Talk about resilience and quality: While the biotech sector (at least the mid and small cap sector) and some of the more speculative medtech stocks have been in a bear market for some weeks, BioTechne is reaching new highs.
Actually, it is fair to say that small and midcap biotechs are having one of their well known crashes, which come about with annoying (and nevertheless predictable) regularity. I recently started to add to some of my positions, such as Kinsika (KNSA, currently at ca 15.5), which I bought into at exactly the wrong moment (average buying price ca 22 USD), but think that the company is worth considerably more than 1B. I also bought back a large portion of my stakes - which I sold at considerable higher prices- in Kodiak (KOD, currently ca 115) at ca 106, Crisper (CRSP , currently 118 USD) at 102, Beam (BEAM, currently at 72.5) at 73, and Quanterix (QTRX currently 61 USD) at 64. Thinking of adding to Turning Point (TPTX) in the mid 60's, of Arrowhead (ARWR) in the 50's if ever they come down to that level, or add to Arcutis (ARQT, currently ca 27USD) in the low 20's. I also added to smaller positions, such as Akero (AKRO currently ca 27.5 USD), Oric (ORIC, ca 21.5 USD), and Avidity (RNA, ca 20.5 USD), and started a small Position in Prelude (PRLD currently at 32.5) at current prices. I did not, however, add to those small positions in highflying medtech stocks (all in solidly in the red), such as Berkley Lights (BLI) Twist (TWST) or Seer (SEER), which are still expensive, nor did I add to Schrödinger (SDGR), where I was lucky enough to sell most of my position before the fall.
BTW: Avidity (RNA) and Oric (ORIC) are both early stage (preclinical --> clinical), but very promising companies, with excellent scientists at the helm and top execs with a proven track record.
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@ByeHI: as to EDAP (a medtech company based in Lyon, France) which you mentioned earlier (EDAP, ca 8.7USD, MC 250m, Rev 2019 ca 40m, earnings 1.5m, rev 2020 (Covid) ca 20 less, but good last Q'20).
EDAP has 3 lines of revenue: a) ESWL, a mature market with good cashflow, b) distribution of equipment of other companies (pex of high performance US machines made by Exact Imaging, which it tries to bundle with its own HIFU technology) and c) Focal One, a HIFU (high frequency ultrasound) treatment device, being used in the noninvasive treatment of localised prostate cancer (PC), and with early studies to treat rectal endometriosis. Over the years, EDAP's management team has done a very solid job: They have worked tirelessly to gain approval of Focal1, first in Europe, then in the US, then gaining Medicare coverage (class 1 CPT code). Now they are trying to gain coverage of commercial/private payers covering the majority of eligible patients, something which might take quite some time (years?).
Ultimately, EDAP -somewhat optimistic- believes that 25% of new PC cases might be treated with HIFU and 75% thereof by EDAP (Focal1). This leads them to a hypothetical future revenue of about 600m USD (whereof roughly one third comes form new machines, servicing and consumables each). While these projections are optimistic, recent interim topline results of a large French study, comparing HIFU with radical prostatectomy (RP) were reassuring in that HIFU resulted in more 24m-recurrent-free survival (not needing salvage TTT or additional medical TTT) (p<0.001) and in significantly less urinary incontinence (p0.005) and MED.
While the current coverage by medicare is at favourable terms (doctors earn about 1000 USD per HIFU as compared to ca 730 USD for cryotherapy or brachytherapy and 1300 USD for radical prostatectomy).
EDAP does the right thing, trying to bundle Focal 1 with Exact Imaging's high-perfomance US equipment, giving the urologist access to both diagnosis and therapy. for 2021/2 they concentrate on gaining commercial coverage and to publish (or have published) high quality data regarding HIFU at large academical centres.
Taken altogether, while the path to (ultimate commercial) success might be quite long, EDAP is a solid company with a thoughtful management team, good products, and a solid business plan. If they continue to work tirelessly as they did so far, they should have a good chance of success. In that light the current SP (ca 6x sales) seems rather moderate, especially especially considering the frothy market as we witness.
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I see that CRVS diluted Dr John. It’s scary because I’ve followed you for over at least 10 years now. And I’m getting good and figuring out if one of your ideas might be too early. Not always though! And I don’t doubt your long-term thesis on CRVS! I may start to nibble. Might wait to see if I can get it in the low 3’s or high 2’s. I’m expecting the market to have a tough soon. I think all stocks, good and bad might get a haircut.
Dr John, have you had a chance to look at VERU and their Phase 2 Covid results? Curious as to what you think.
Dr John thanks for the recent updates. You have thrown out some interesting ideas to look into. Good call so far on ARQT. And I will second congratulating ByeHl on the SAVA call. Truly outstanding. Dr John I just read your post on the CRVS board about the revenue Lilly had in the 4Q from its ‘anti Covid-man’. My only thought is timing. Don’t you think it is too early with CRVS? Let’s assume trials continue to go well. At minimum isn’t the CRVS candidate 2 or 3 years away? That has been my concern from the first time you mentioned CRVS. Anyway thanks for the updates Dr John. And cheers to yet another great quarter by TECH!!! The one we could always count on.
Upgrades Stifel Nicolaus Buy USD 435
Yahoo Finance Insights
Bio-Techne is down 5.03% to 368.73
Good bye 2018, hello 2019...
For most of us, 2018 has been an "annus horribilis", for me even more so (due to individual judgment errors with performance shattering consequences (pex: MDXG), broad based declines in the biotech sector (pex FPRX) and in the cyclical sector (pex: HUN), which could not have been overcome by the stellar performance of individual stocks (FMI, NOVT, GHDX, BGNE (sold at 150-180), NBIX (sold at 108, reentered at 79) SGEN, CELG (re-entry short before buyout).
I continue to be happy with big long term holdings, such as Bio-Techne (TECH 163 USD) or Becton Dickinson (BDX 242 USD).Taking advantage of the low prices end 2018, I have started (or added to) positions in Danaher (DHR, 105 USD, my buying price ca 96), Mettler Toledo (605 USD, my buying price ca 560), or -again- Gilead (GILD 69 USD, my price 69, after nomination of O'Day as CEO). I also bought (again) a moderate amount of Sage (SAGE 139 USD, my average price 102), Sarepta (SRPT 120 USD, ca my entry price) Madrigal (MDGL ca 117 USD, slightly above my entry price) and NBIX.
Outside of healthcare/life science I initiated (or added to) some of my larger positions (many of them still in the red): Global Payment (GPN, at 114, my average price 120), Huntsman (HUN, ca 22 USD, m average price 24.5), International Game Technology (IGT, currently at 15, my average price 21(!): I don't quite understand the extent to which IGT has been decimated. It is a solid cash generator, can service its debt, trades at 7.2x EBITDA and is currently yielding 5.2%.
Whats new on the horizon for 2019?
Above from all the companies mentioned above, I'd like to mention 2 more companies in the molecular diagnostics/molecular research business: Nanostring (NSTG, ca 20 USD, MC 625m, cash 95m, debt 50 m, revenue 110m, EPS still negative) and Quanterix, which I mentioned here before at 16.5 USD (QTRX, ca 20 USD, MC 460 mill, revenue 2018 ca 33mill, cash 50 mill, debt 7mill, EPS still negative). both companies have intriguing products on the market with best-in-class features and a significant untapped market in front of them. --> more details on NSTG and QTRX to be followed in next posts
so far so good, pt 2:
...and the biotech sector continues to be "en vogue", at least in selected sectors. While many large cap biotechs and more traditionally oriented mid-large caps (such as Alexion or Neurocrine) are treading water at best, selected "targeted"oncology companies and some gene editing outfits are red hot.
Since my last post 3 weeks ago (somewhat "buried" in an answer to LMP), Oric (ORIC) has been performing very well (then 25, now 35), as did Crisper (CRSP: then 106, now 148), while Mersana (MRSN) is still trading at ca 23.5 USD (Interim top line results in rr-Ovarial Cancer should be released soon).
I have repeatedly mentioned (and added to my position) Beam (BEAM, now at 67) and Fate (FATE, now at 83), which have been outstanding performers, as was ALXO which I increased significantly in size. All have shown impressive new (proof of concept-) data and, aprtly due to the SP-appreciation, all three figure now among my "top 10" biotech holdings (my top 10 positions being: CRVS >TGTX >ARWR >TPTX >BEAM >FATE >AUPH >KOD >ALXO >MRSN=ALXN)
for quite some time, I owned a rather small position in the opthalmology biotech Kodiak (KOD) (initial purchase price at ca 50, now at 124). Only recently I woke up and increased my position significantly. For some reason I did not appreciate the true value of their pipeline and the strategic brilliance of KOD's top management team. (I strongly suggest to listen into their MorganStanley Healthcare conference presentation).
As to these Zoom-Healthcare conferences: For me as an investor it is extremely helpful to see/judge how the top management team of different biotech companies is responding to questions. You feel immediately who is top notch/ with whom you'd like to invest (provided the stock is still reasonably priced). Examples being: Beam, Fate, KOD, ORIC, KROS. I also strongly suggest to look into the Jefferies London Healthcare conference and specifically listen to those Zoom "fireside chats", which were hosted by Michel Yee from Jefferies, an extremely bright analyst asking very informative questions (he interviewed, pex Beam, Fate, Oric, Alxo, Kron, Akro, amongst others). Access via the respecitve biotech hoempage)
Three large long term medtech-/life science positions of mine (which I have repeatedly written about) have shown a very nice performance in 2020: Nanostring (NSTG: beginning 2020: 27 USD--> now 63) and Quanterix (QTRX: beginning 2020: 23 USD --> now 47) and Natera (NTRA: beginning 2020: 35 USD --> now 90). I recently bought a midsize position in Illumina at ca 295 (ILMN , now ca 340USD), because I think their acquisition of GRAIL is a long term winner in the liquid biopsy space. Grail with its methylation based NGS platform is IMO superior to Thrive (also an interesting company, recently acquired by EXAS) and at least equivalent to Guardant Health (GH).
Taken altogether: Moments like now are dangerous: You look back on a very decent portfolio performance, to say the least, and pat yourself on the shoulder, thinking you are sooo shrewd. However, in the end, 3/4 of it is the "flood lift all boats"- effect (you happen to be in the right sector). I am still positive, but there is no reason, why all these wonderful biotechs could not trade 50% below the current valuation. Therefore, I increased my cash position again.
There are some very very promising "next-gen" companies in the biotech/medtech space, which, unfortunately are too expensive most of the time, such as Ten-X Genomics (TXG), Berkley Lights (BLI), Schroedinger (SDGR), or Relay (RELY). (I won small amount of BLI and SDGR).
Yahoo Finance Insights
Bio-Techne is up 5.83% to 364.98
Well, for one, Bio-Techne had another stellar quarter. Quite impressive how this team delivers! Could not think of a better longe term holding (for me it is indeed: bought my first shares in the last century).
Then, Quanterix (QTRX, ca 35 USD, MC 1.1B) and Nanostring (NSTG, 38 USD, MC ca 1.4B) are delivering as well, despite Covid19. Still plenty of room ahead for both, especially for QTRX.
For a change, my large "pure" biotech positions are all doing well. Chemocentryx (CCXI, 54.5 USD) came back some 20%, which is deserved, because the stock got ahead of itself at 65 (Isold 20% and bought more AUPH instead). Aurinia (AUPH, 14.5 USD) is too cheap at a MC of 1.8B. The same goes for TG Therapeutics (TGTX 22.5 USD, MC 2.85B), even though the stock is doing ok this year.
Ovid (OVID) did well since I first mentioned it 8 months ago (then at 3.9USD, now at 7.9, MC 450m). I continue to hold my shares, since I am in mainly because of the epilepsy program. But it is a risky position: Angelmann trial results should be out relatively soon. If they disappoint, the stock will take a heavy beating (if the are positive: the contrary)
The biggest disconnect between share price and pipeline value is in Corvus Pharmaceutical (CRVS, ca 4USD, MC ca 110m): I do not understand, how the financial community does not appreciate the potential of CPI-006 in Covid-19. Is it because Corvus is seen as a Oncology company? Is it just flying below the radar? As I said before, I usually shy away from "Covid stocks". Sure, we have only very scant results for CPI-006 in Covid19. However these results are both remarkable and outstanding. Index patient: Advanced NSCLC, tested positive for acute Covid infection, mortality risk with Covid expected to be 40%: Receiving CPI-006 (oncology study), produces anti SARS-Cov-2 titres of >1:50'000 (including domain binding region (DBR), clears virus in 1 week, remains asymptomatic. This patient could be an outlier, for sure. However, the first patients in the recently started phase 1 study (CPI-006 in Covid 19 infected patients with PCR results positive <7d), showed exactly the same pattern: production of massive anti-virus titres, including against the RBD within 7 days, increasing even more at 14 days. BTW, these patients were receiving the lowest dose of CPI-006, which was >50times lower than the dose given to the NSCLC patient. Titres of the magnitude of 1:100'000 are bound to contain significant amount of neutralising abs, and I just cannot imagine how these titres should not have a significant influence of the speed of virus clearing, and consequently a positive impact on outcome. If this were not the accepted thinking, why would Regeneron & Co develop monoclonal abs against the RBD of the spike protein? What Corvus is doing, is giving a one shot immune booster (activating CD73), which, in turn, activates B-cells, "transforms" them into memory B Cells and Plasma-cells (which are secreting abs against SARS-Cov2). CPI-006 could not only be used in early stage (or even late stage) Covid 19, but would also make tremendous sense also as adjuvans to vaccinations, or used in the preventive setting with populations at risk.
I have been sorely wrong before, p.ex. when I bet a large sum on Mimedx (MDXG), just to see it fall from 15 to 1. (Well I had bought my first shares at 1, and bought again when the new management team came in at average 4. Now we are again >6, but still a long way to go). However, with Corvus I take again a large but calculated risk, making it in my 4th largest "pure play biotech position" (average price at about 4.1 USD)(The 5 largest positions are: TGTX>AUPH>TPTX>CRVS>CCXI). If, as I expect, most patients in the phase 1 study will show large increases in anti-SARS-CoV2 titres (results will be due in November), then the market cap will not be 100mill but 1B. And that's only for starters...
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BioTechne has become expensive (P/S 11, P/EBIT 36!), but so are many other life science companies as well. IMO, it makes sense to hold long term on high quality companies, such as TECH, even if valuations sometimes get rich. (okay, unless valuations become extreme, such as in 2000).
One competitor of Techne's Protein Simple business unit is Quanterix (QTRX, currently at 16.7 USD (first mentioned on this mb about 1 m ago, at ca 15 USD), MC 370m, EV 290m). Quaterix' SIMOA assay/technology allows for an increased sensitivity of 3 orders of magnitude of detecting proteins (and in future also RNA, DNA) in the blood. SIMOA (=single molecule array) allows to detect trget molecules at fg/ml level, due to the ability to trap molecules in femtoliter sized wells of its array, thus allowing for detection of single molecules. Why is this interesting? Because it allows for "non-invasive" measurement of molecules (proteins) in the blood at levels, which up to now could not be measured with conventional instruments (due to their lower sensitivity, ie at pg/ml -ng/ml level). Therefore, markers for pre-symptomatic diseases states can be followed, which up to now were not accessible. This is promising not only for academic R&D, but may -almost inescapably- play a prominent role in future drug trials, disease follow-up, etc. Neurology, with its blood brain barrier (BBB) is on of the most interesting fields: tiny elevations of brain derived proteins pex Nf-L, Tau, Beat amyloid...), which in a disease (especially at early/pre-symptomatic levels) are elevated in the spinal fluid can now be measured in the blood as well (at fg/ml levels), thus giving a new opening to doing R&D and clinical follow up of some of the most important neurological diseases, such as multiple sclerosis (MS), Alzheimer's (AD), brain concussion, etc. An recent publication in Brain shows the potential of the SIMOA technology in MS: Nf-L measurements in the blood correlated not only with disease activity, but also with brain and spinal cord atrophy up to 5 years later (brain atrophy and spinal cord atrophy are the most important predictors of disability in MS). Importantly, Nf-L measurements predicted disease course as well or better than brain-MRI does (and at lower costs). Taking the example of MS, it is likely that in future Nf-L SIMOA measurements will be "mandatory" not only for drug studies, but also in the clinical practice for monitoring patients and in the decision process whether to escalate treatment in a given MS- patient. Similar scenarios are likely in the dementias (pex AD).
QTRX has a sound management team an BOD (including ex-Fisher Scientific and ex Bayer CEO M.Dekkers). It's growth has been accelerating (40-50%) and will do so even more in future due to increasing scientific publications, such as the Brain paper mentioned above. Revenue is:a) 40% consumables, 35% instruments; b) 60% US, 30% Europe, 10% Asia; c) 60% Pharma-Biotech, 40% Academia; d) 70% Neurology, 15% Oncology, the rest inflammation, cardiology etc; Head count is ca 150, whereof 40% in commercial/sales. Half year 2018 revenues were 16 m (vs 10.5 in the first half 2017) and the company expects to grow in the next couple of years by at least 40%. They are not yet cash flow positive. They have ca 60+ mill cash and no significant debt. The CEO owns ca 900'000 shares, Biomerieux 2 Mio shares. I think the path to success is quite clearly written, but it will be the long term story which is particularly interesting.
A word on my big loosers: I added some 15-20 % of TSRO at 27.5. At ca 32 it is unbelievably cheap im eyes. Wait&see.
With MDXG, I'll not add or sell unless there is news of a) new CEO and b) audited results. I still believe that the business is sound and 90% of what the old management team did was ok, but it is hard to keep confidence, when the top 3 had to quit.
A while ago I sold my Radius (RDUS) at ca 36 (at a loss). Now I bought some back at 20.5. Also too cheap to ignore, IMO. By the way, BB-Biotech added to both, TSRO and RDUS at higher prices in the first Q.
As to Five Prime (FPRX, ca 14 USD): continues to trade at a deep discount IMO, but the outlook is promising as ever.
Luckily, not all is bleak: Novanta (NOVT) is continuing its stellar run (now at 76; excellent growth company, diversified markets & end customers, excellent management team), so does Neurocrine (NBIX, currently at 120 USD). Globus Medical (GMED, currently ca 52 USD) had good Q results as well and is a good quality company. Seattle genetics (SGEN, currently at 76) is doing just fine as well (could be had not long ago for 50 USD).
All in all a horrible 2018 for me (down almost 15%), took my portfolio to the beginning of 2017... ah well, as the Austrians use to say: It's catastrophic but nothing serious.
What else? Took positions a while ago in the 3 CRISPR companies (CRSP >EDIT = NTLA). Long term holdings. Too much potential to stay aside...
If only TEUM loyalists knew how long Ipass courted CTXS...Long time...CTXS does business with TEUM because the finances look way better....THERE IS MORE TO COME!! #TECH DATA IS LIKLEY NEXT..
good bye 2020 - hello 2021 (part3)
5. My dermatology pick is Arcutis (ARQT, ca 28 USD, MC ca 1.22B, 190m cash). Long-timers of this message board might remember Anacor (ANAC), a dermatology company being bought by Pfizer in 2016 for 4.5B USD. ANAC had a Boron-based topical PDE-4 Inhibitor for atopic dermatitis, and PFE was expecting a blockbuster. However, even though effective, Eucrisa (R) has not been very successful, due to poor tolerability (itching most probably due to Boron, unpleasant feel of the vehicle on the skin, etc) and sales are below 200m USD/y.
Enters ARQT, which has its own topical PDE4-Inhibitor Roflumilast cream/foam in advanced clinical studies for Plaque Psoriasis, Atopic dermatitis, Seborrheic dermatitis. Tolerability and efficacy (up to now) of Roflumilast are excellent, and I think this topical drug will ultimately garner the revenue PFE hoped for with the acquisition of ANAC (i.e sales of 1.5-2.5B/y). I expect ARQT to be a very promising long term winner. My average buying price is ca 29 USD/Sh and I have now accumulated a rather large position, which I might increase in the coming months.
6. I will not repeat my post from ca 3 weeks ago about companies which are involved the cell based development and development ecosystem and synthetic biology (pex BLI, TXG, TWST, Ginko Bioworks (private)) and computational driven drug discovery (pex SDGR). I would like to own them all, but currently have only a moderate-size position in SDGR (ca 79USD/share, Mc ca 5.5B) and a small position in BLI (89USD, MC 5.9B). These companies are almost prohibitively expensive, but -alas- I expect them to stay so for the foreseeable future, reason why I intend to build/extend positions on any weakness.
7. Last, but not least: My very large Rodney Dangerfield position in Corvus (CRVS ca 3.55 USD, MC ca 100m) did not change. There seems to be no investor interest at all in this stock, which I find remarkable, since it has not only several compounds in the clinic, but in addition a very promising drug with CPI-006, a polyclonal B-cell stimulator inducing high titres of AG-specific IgM- and IgG-antibodies, B-memory cells and AG-specific T effector cells. CPI-006 is all the more appealing now, with new variants of SARS-CoV2 spreading around the world, which might not respond to vaccination.
-Enough Blabla from my side!
-Remember those tried-and true Words of Wisdom: "When Dr John becomes logorrheic, there must be an imminent market-peak."
-Or, as a certain US-President uses to say: "Sad, so sad".
Hi Dr. John, I just wanted to stop in and see what your plan of action has been on a couple of stocks. Namely TSRO and AXDX. Are you adding, standing pat, selling any?
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