Free Post: March Performance Update
2025 "No Trades" Portfolio so far: -3.24% vs. XBI: -10.77%.
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On December 18, 2024 I wrote a free post called My 2025 “No Trades” Model Portfolio. The goal of this post was to create a long-only portfolio and attempt to smash the benchmark XBI index over the course of 2025 without making one trade.
Now actually it would have been better to publish that post on New Year’s Eve night and publish this one on the last night of March for true year-to-date performance.
But no one reads posts on NYE night or on the last night of the month so here we are!
It has been 103 days since I hit publish, so, how am I doing? And why?
My performance: -3.24%
XBI performance: -10.77%
Dollar value decreased from $999,988 to $967,601.
Honestly slightly frustrating to see year-to-date performance to tick into the red but there are still tons of catalysts ahead for this portfolio and the macro environment in biotech can’t get much worse (can it?!?!) so I’m confident for the rest of the year the delta between the portfolio performance and the benchmark index performance will continue to widen. I’m also confident I will end this year solidly positive.
So what has worked so far and what has not?
Going in order of best performance to worst performance:
VRNA: Verona has consistently been the best performer but now carries a lofty $5.33 billion valuation which scares me a little. The launch has been one of the best drug launches in recent memory and we will get an update at the next earnings call in early May. Just last Friday they renegotiated their term loan/royalty agreement basically repurchasing the royalty obligation and increasing their term loan amount at a reduced interest rate. It seems management is betting on themselves and that the launch momentum of OHTUVAYRE will continue. They continue to add to their patent estate to extend the length of their exclusivity period and are starting a Phase 2 trial soon in Non-Cystic Fibrosis bronchiectasis for a possible label expansion. But mostly this is a pure play bet on a new modality in COPD and the absolute massive addressable market size. So far, so good.
SWTX: SpringWorks was the subject of buyout rumors roughly six weeks ago but nothing has materialized and, despite some holding out hope, my base case is that the company will not be acquired. Acquisition was never my end game when I added it to this portfolio but it’s hard to argue the stock price would be where it is without those rumors. I still really like both of their assets OGSIEVO and GOMEKLI but I think there is a real chance of a decline when the tourists trading the stock give up on an acquisition. The way the company handled the situation was definitely weird when they just completely cancelled their conference call and haven’t done one since…so I suppose it could still happen but I’m getting skeptical. What the company really needs to do is just drive sales in both of their assets to show they are a diversified and growing company. If the right offer comes in then they can take it. I was also a little worried by the increase in OpEx last quarter - it would be nice if they could address that when they actually do have a conference call and give OpEx guidance on what to expect going forward. The big advantage of their second asset was supposed to be that it needed a limited sales force so OpEx should not be increasing too much. I guess an acquisition would be nice here because it would give the portfolio a bump back into the green. ☺️
KNSA: I mentioned the last two months that I regret choosing KNSA because it’s such a boring stock. They grow sales at a pretty decent rate but there’s just nothing to talk about. But it’s holding it’s value exceptionally well during this intense biotech decline - so I guess I can use it as a testament to the strength of having a majority of commercial-stage biotech companies in one’s portfolio! This is a real simple story and it’s nice to see that the market hasn’t completely lost its mind across the board.
DCTH: I am becoming less interested in DCTH as I become more interested in IDYA. Spoiler alert: Next Monday’s article will be about IDYA and uveal melanoma. I think the opportunity is really exciting there. To be clear DCTH and IDYA target patient populations that are not identical and there will always be a place for liver-directed therapies like DCTH’s in certain patients. I actually the stock could work decently from here as they start to run Phase 2s in other indications. But I definitely like IDYA a lot more especially as it continues to decline to insanely low levels close to their level of cash per share. More to come next week in much, much more detail!
ARQT: I am actually surprised that Arcutis isn’t in the Top 3 of best performing stocks in this portfolio because they may be having the best news year of any stock I follow and have a ton of catalysts going forward. They preannounced a great Q4 2024 revenue in January and then in February during their earnings call announced a better number still because the sales when calculated were even higher than they projected. They have now grown revenue QoQ by over 43% for three straight quarters. Insanity! Catalysts in 2025: Approval of the 0.3% foam product in Scalp Psoriasis in May, approval of the 0.15% cream in ages 2 to 5 years old Atopic Dermatitis patients in October, expanding patient access with further Medicaid state coverage and starting Medicare coverage, maturation of the Kowa partnership targeting Primary Care Providers and Pediatricians (which should be huge in Atopic Dermatitis), and Phase 1b data from their Alopecia Areata pipeline asset.
EOLS: Evolus is another company on a great news tear over the last three months with very little of that reflected in the stock. Next month is the launch of their filler line in the U.S. - they have been running a pilot program so I’m eager to hear management commentary on the call of what they learned. This is a top performing sales force finally being handed a differentiated product AND the opportunity to sell bundled discounts for their full product suite. Not to mention this is still the absolute cheapest commercial company I cover (2.2x NTM P/S!) and has been growing 30%+ YoY consistently for five years now in a fiercely competitive neurotoxin market.
PODD: Not much to say about Insulet as it’s probably fairly valued currently and the only large cap on the list. My son is still using the product and getting great results. Happy customer but hard to recommend the stock with so many bargains out there!
CELC: I did a comprehensive write-up of CELC here ahead of data. One of my favorite pieces, I encourage you to read it! Data could literally come any day now over the next few months. Hopefully not tomorrow by the time you read this but they do have their earnings call on Monday March 31 so maybe they will provide granularity on timing, if not the actual data. I’m nervous here because I’m kind of going out on a limb being optimistic here when so many are pessimistic but have to take a few risks.
EWTX: I did a comprehensive write-up of EWTX’s Becker Muscular Dystrophy program here ahead of a regulatory update. Again - I encourage you to read it! 😉 Their hypertrophic cardiomyopathy program will have data on Wednesday morning, I expect it will be a major stock moving event. Nothing to say here for now until we see that data.
SRRK: Scholar Rock is starting to look appealing strictly as a straightforward long into their SMA launch but the stock has been selling off ahead of their Phase 2 obesity GLP-1 combo study. I think a lot of the negativity has been that there is no real bar for success given the likely lack of statistical significance and that any ambiguous data has been getting sold hard by the market who sees no catalyst in the following ~4 months for the company following data. That’s the conventional thinking along with the long-held dogma that you short nearly all commercial launches. But by the end of this year I think this stock will have bottomed out and will start a multi-year march higher, assuming their drug is approved, which it should be.
AVDL: I’m still in a holding pattern with Avadel waiting to see any signs of life from the company or even optimistic language when they hold their next conference call in May. It might be still too early to see progress from the internal changes they made but I hope they can point to something so they can show they are on the right track.
APLS: I’m kind of floored Apellis stock is still trading at this depressed multiple (3.5x NTM P/S) but I’m willing to wait it out. I will absolutely love love love the stock in November when EMPAVELI is approved in C3G and IC-MPGN. SYFOVRE in Geographic Atrophy market is going to have some erratic growth patterns but I still think it’s a multi-billion peak sales product. However, I believe EMPAVELI is going to be a rocket ship straight up when it gets launched into new indications at the end of this year. Once the company has two blockbuster products the value to other investors will be undeniable. For now - I wait.
CGEM: What can I say? This hasn’t been fun waiting for their Q4 2025 catalyst. Catalyst deserts are real and painful! Still struggling to find a ton of value on the oncology side but this is basically a pure play bet on CD19 T-Cell Engagers in autoimmune diseases…I still think it’s a promising modality until the data proves otherwise and the assets are buried in the desert. Another waiting game but a lot more high risk/reward than something like Apellis. I can’t blame people who got tired of waiting or who want to avoid volatile binary plays with the biotech market already so depressed.
VYNE: I still think VYNE has intriguing assets but the problem is with such a paltry market cap and tough fundraising environment I really worry even with great data they will have trouble securing good financing terms to extend their runway. We are living in pretty crazy times and this is emblematic of that fact. Regrettably I feel I was a little early here given the macro headlines - this is not a time where people desire to own a nano-cap with multiple assets in Phase 2. But maybe it will work out in 2025. Right now, the name of the game is for them not to dilute too much and secure enough money to get through Phase 3. And positive data, of course.
NRIX: Man, this company has really been getting beat down. I think it’s a combination of their asset and Beigene’s having no differentiation, worries about more Chinese assets flowing into oncology, lack of catalysts aside from two incremental updates each year, and a management team that is not very promotional. Maybe Phase 3 alignment with regulators and a plan to get into pivotal trials will get some eyeballs back here. There is absolutely no urgency to own it. Incredible science but hard to model who will prevail in a BTK market that is almost always winner-take-all. Probably a more dangerous long than it looks on the face of it but the upside is also massive here with the stock down almost half in three months.
Thank you for reading and, again, I don’t want to put the hard sell on but I’d encourage you to subscribe to the paid tier!
Content I have coming up in the next month:
A write-up on Ideaya Oncology (IDYA), Cardiff Oncology (CRDF), and a multi-part article on Crinetics (CRNX). In addition to any extra articles that might come up based on breaking news in my coverage universe. Hope to see you there!
Thank you for reading,
Matt