Taking (partial) profits

Today is why we take partial profits, while letting the rest ride.

Sinovac Biotech (SVA) dropped $2 down to the $9's. A friend I helped sold out yesterday at the peak at $11.25--most of us sold out in the $9's Friday. Not bad given we bought in the $4's barely more than a month ago.

It is impossible to buy at the absolute low and sell at the absolute high--no one has a crystal ball (although my friend's fortuitous exit was near the peak). However, we can buy lower and sell higher. Now that we're playing with house money, we can focus on other opportunities without getting emotionally attached with one winner.

Having said that, this swine flu play is hardly over. Those of us who got in back in May are REALLY doing well, waiting for more breakouts to the upside--again, with house money.

On a related note, SVA received a commitment of orders from South Korea today, in addition to receiving approval for their flu vaccine from the Chinese State Food and Drug Administration (SFDA) yesterday.

http://finance.yahoo.com/news/Sinovac-Announces-Supply-prnews-1032672347.html?x=0&.v=24

Shares of SVA surge

Sinovac shares soared over 50% this morning, as the Chinese State Food and Drug Administration (SFDA) approved its swine flu vaccine.

http://finance.yahoo.com/news/Chinese-biotech-Sinovac-gets-apf-212124857.html?x=0&.v=1

My investment thesis a few weeks ago was that they would receive an order for several million doses from the city of Beijing alone, with more to come from other provinces. Since then, they have received a commitment for 10 million doses from Mexico, as well as distribution rights for the Philippines.

The Chinese domestic population alone provides a huge market, and since Sinovac has already run human clinical trials demonstrating safety and efficacy for their flu vacccines, more orders should arrive from other countries, especially in neighboring Asia.

Disclosure: I am long SVA shares, and took a profit of over 100% on 25% of my original holdings.

Swine flu portfolio rally

Shares of BCRX, NVAX, SVA, HEB, and APT all increased double-digit percentages today. I keep expecting the overall market to roll over and have protective puts in place--hence, the hedges keep eroding in value. But I am not complaining, given triple digit gains on the aforementioned stocks.

Exit strategies for longs need to be in place. But after polling several experts in the field, the swine flu will be worse than general public expectations. Also, very few understand the five vaccines and the anti-virals available, either approved or under Emergency Use Authorization review. Unless, of course, they've been reading these blogs for a few months (pardon the temporary lapse in modesty).

The most recent update is that egg-based vaccines won't be available until October, due to lower than expected yields. With a 21-day duration between doses, and one more week thereafter before immunogenicity kicks in, most students and young adults won't be immunized until November at the earliest. As noted before, with schools already in session, the swine flu will peak in October, rendering many vaccines useless among the targeted population.

Anti-virals will have to step in, even though Tamiflu has tolerability as well as efficacy issues due to resistance. Inhaled Relenza has limitations, so intravenously administered Peramivir has BCRX longs excited about an imminent EUA stockpiling order.

Good luck to all longs, and good luck to those who will become infected with the novel H1N1 virus.

Disclosure: Long shares in BCRX, NVAX, SVA, HEB, and APT.

APT and SVA

I opened up a position in APT a week and a half ago, as they make a particularly effective N-95 protection mask against communicable diseases.

http://finance.yahoo.com/news/Swine-Flu-Masks-Prevention-or-indie-3995316474.html?x=0&.v=1

Based on the SARS scare, shares shot up for two quarters. This pandemic flu, while not having nearly the high death rates as SARS, is spreading much faster than other pandemics, hence triggering my buy order.

SVA is a Chinese vaccine and hepatitis drug manufacturer. It is already profitable, unlike its US counterparts still in the clinical stage. The Chinese domestic market is huge, and SVA should be able to secure a larger order than the projected one for 10 million doses (5 million people). Even at that conservative number, and estimate of $5 per dose, revenue projects to $50 million annually. This places a buy out offer price of $250 million, which yields a price per share of $6, based on 43 million outstanding shares. At a current price of $4.99, shareholders get the rest of the company (hepatitis drugs) for free. Add in the distribution deal for the Philippines, and other potential orders from other Asian countries, and SVA has some serious upside.

Disclosure: I have long positions in APT and SVA.