March 26, 2013

$PVCT: @adamfeuerstein "says I'm in trouble," and "don't become obsessed w/ risky biotech stock"

Of course, he didn't say I'm in trouble. I'm trying to drive eyeballs to the blog :)

But he did write about obsession. I could be in trouble, however, because I am obsessed with a risky biotechnology stock. Written with a heaping dose of sarcasm, but not without a bit of "what am I missing" (although I ask myself this question with less and less frequency).

I encourage you to read his follow-up on the failure of Ziopharm Oncology (ZIOP) (palifosfamide), in which you will find his write-up on the short thesis for this company. Feuerstein also has written about the short theses for Clovis Oncology (CLVS) (CO-101) and Celsion (CLSN) (Thermodox). They are useful reads.

One of his key points, for those who are long a stock (and this is true in all trading and investing), is to understand the other side of the trade (or debate).

Near Las Vegas is Nellis Air Force Base, which is home to an aggressor squadron, the concept of which was made famous to most everyone not in the military by the Navy's aggressor squadron in the movie Top Gun (the Navy Fighter Weapons School at Naval Air Station Miramar).

What does the other side think? What's the rationale behind its strategy? Why does it think the way it thinks? Why does it act the way it does?

I think management understands there is little or nothing they can do about growing short interest without news. I also think they understand what the capital markets (broadly speaking) think about them, to the extent the markets even think about Provectus (which I think management also understands).

It is very easy to short this stock.

As a prospective short seller (aggressor squadron), what's not to like about a tiny biotechnology company in Phase 2 trials? Play the numbers (i.e., a high failure rate of these types of companies, as well as Phase 3 trial small biotechs) and in sum you should run a profitable trading book.

As a prospective short seller, what's not to like about tiny biotechnology company Provectus? No SPA after announcing FDA guidance regarding it on January 18, 2012. No news, thus bad news. Something's wrong. Upcoming financing. Inexperienced management. Management without a track record. Knoxville. Local agent with no proof of systemic benefit. Insufficient available information about the drug, the trials, etc. This merely is more rationale to short a company with a more likely failure outcome, per the probabilities.

What say you Viper? Jester?

It's also "very easy" to buy this stock, because there indeed is a lot to like about it (but, that's for another blog post). Right, Maverick?

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