The Plain-Sight Secret About Investing

I'm replaying this posting from April, 2021


99% of investors have no idea what the bet is that they're making. It's shocking.

"Elon Musk seems super smart, and he's had so much success in the past, and his future plans sound exciting. Tesla seems like an awfully good bet!"

No. Don't do that. The purchase of Tesla stock is not a bet on the company, like betting on a horse in a race. It's one level more sophisticated and abstract: you are betting on the underestimation of Tesla by other investors. That's the bet; the only bet. You're never betting on a company, you're betting against other investors' sentiment about that company. And those people are all aware of Musk's history, too. That's not privileged information.

Have you ever noticed that many people imagine that when they say the same old shit we've all heard a zillion times it has a special ring? "Now it's me saying it!" In everyday life, this daffy mental miscalculation is annoying. In the stock market, it pays for the 1%'s Lear jets.

This is, oddly, terrifically difficult for nearly everyone to grok. Small time "retail" investors misunderstand because they're naive (naïveté is the single greatest impediment to clarity). Day traders, who grok this in theory, lose touch with it amid the bustle of their manic and complicated trading (complexity is the second greatest impediment to clarity). And professional financiers, who understand this better than any of us, are distracted by their smug self-confidence (ego is the third greatest impediment to clarity).

Most of all, it's a framing problem. If you're an addicted gambler (as most investors are, at all three levels), you do not possess a lithe perspective (see this for how addiction is a framing problem). You are rigid and stuck. You are compelled to see things like a horse track, and can't find the calm latitude to reframe to a more sophisticated, subtle, abstract perspective. Your attention remains riveted to "GO TEAM,” in all-caps. 

We all have an opinion as to whether Amazon still has room to grow, or if Tesla can maintain profits with big automakers getting into electric. Opinions are like assholes; we all have one. And yours may even be correct. But that's not enough. Because your bet is not on Amazon or Tesla, but against titans infinitely smarter and better informed than you. They effectively set the price, and that price already reflects their (smart) consensus opinion. And there's not a single thought in your head that's ahead of them. So you will not only not win against them; they will, over time, eat your lunch.

So don't read annual reports. Don't try to be a smarty. All info is already baked in to the price by people way smarter than you (if you assume no one's smarter than you, then I have good news: your impending poverty will divest you of that delusion). Again: You're not betting on a company, you're betting against the market's estimation of that company. It's not a proposition of predicting business success.

So why would anyone bet against billionaire geniuses and their office towers stocked full of MIT educated analysts? Wouldn't that be crazy?

Yes. Yes it would. Which is why people should invest in index mutual funds, which rise (and, alas, sink) with the market, often bringing even better success than the outcomes for individual twitchy billionaire geniuses (because the latter are limited by ego and an addict’s perspective).

The only exception is if you have some sort of an edge. Which 99.9999% of the time you won't.

Patience is a potent edge. The billionaire geniuses need to be constantly hitting home runs. They can't patiently wait stuff out. They're twitchy. That's why my strategy of buying Apple in its downturns has worked. I can park my money for a year, and those guys can't. Neither can day traders, who are equally twitchy. So, often, it's only sad little me buying on downturns and selling on peaks, while everyone else spazzes out, flocks irrationally, and goes foolishly the wrong way. They’re pursuing bazooka home runs this quarter while I’m content with 25% gains next year. I gobble up discarded crumbs.

Specialized knowledge can also be an edge. A friend runs a genetics lab, and told me TXG's technology would one day be ubiquitous. He could hardly wait to have it, himself. I bought at $54, and it's now $188. Of course, it might just as easily have crashed. Maybe the CEO is a dork. An edge is not a superpower, it's just a way to marginally de-shmuck oneself. Billionaire geniuses also know people running genetics labs. Mostly, I got lucky. But a little luckier than if I'd flown blind, trusting my own puny acumen.

Years ago, I wrote breathlessly about SIGA, a company with an entirely effective (and no side-effects) smallpox cure. It’s a bio-terror countermeasure (it works on weaponized versions), and it also works on cowpox and monkey pox, which are both still out there. I'm still hanging on to half my shares, and at $7 I've made out decently with my $2 investment, though it's sat listlessly for so many years that it's no jackpot. This year I expect at least one big foreign government sale, and/or a sale to US gov with a different formulation, which should hopefully pop the stock back to $12-15. At that point, I'll sell (there's time pressure: their patent on the drug actually runs out in a few years - insert bug-eyed/astonished emoji - and soon I'll be so old that I'd only enjoy a jackpot by gold-plating my walker), and it will amount to good profit despite the ridiculous time lag. In this case, my patience was my edge, then my stubbornness was my edge, then my religious faith was my edge, and, at this point, my stupidity is my edge. All these things are unavailable to billionaire geniuses. I stay in my lane.

It’s hard to understand this maxim, and harder still to live by it. And it’s almost impossible to find an edge for yourself, and harder still to maximize that edge without being clouded by ego or by addictive glee over successes. 

I seem to be at that latter stage. I’ve been beating the market (I bought in low to CRIS, PRKR, BCRX, and the aforementioned TXG and SIGA, in addition to cultivating Apple’s periodic lulls). But it’s more than likely a blip, like flipping “heads” a few times more than likely. So I’m keeping my outlay prudently low. 

SIGA PS

Memo to whoever bought a million dollars worth of SIGA this morning (maybe just an odd coincidence), I'd urge you to sell whenever it bumps up. It's done so twice, and I held on both times, and, per the old expression, got slaughtered like a pig. Twice.

This will never be a Pfizer. Never an established company with brisk and enduring business. It's an incredibly narrow play, and it will continue to happen - insofar as anything happens - in fits and starts, i.e. "events". And it looks like the First World is way more complacent about the danger of weaponized smallpox than expected (a mere handful of countries stockpiles the drug, TPOXX, despite its socko properties), and while there's every reason to think monkey and other animal poxes are cured by TPOXX, this starcrossed company can't ever seem to get anything done, e.g. testing on monkeypox effectiveness (delays of which are evidently driving the CDC as crazy as they're driving me).

I do suspect there will be at least one more hurrah....though perhaps not all the way up to $26 again. But, man, will this ever test your patience....


Update: Monkeypox now surging in Congo, too.

Investment Updates

When Covid hit, cruise ship stocks fell to pennies on the dollar. It was assumed by otherwise smart people that no one would ever get on a cruise ship again. Figuring this was hogwash, I bought a bunch of shares of the leading cruise company, Royal Caribbean, at $37/share. It's now up to $119, within easy reach of its pre-COVID high of $133.

I bear firmly in mind that I'm not out-smarting anyone. The moment one imagines oneself smarter than the geniuses will be recalled as the initiation point of one's inexorable ruin. I don't imagine for a second that I'm the only one who saw this play. I'm just one of the very few who played it.

Why? Because I'm not a professional money guy under insane pressure to show huge results each and every quarter. Nor am I a spastic day trader chasing home run returns this week. My superpower, for the nth time, is patience. When I bought in Spring, 2020, I had no idea when the snapback would occur, which meant parking my money for uncertain lengths of time, incurring opportunity costs. Very few people will do this. Only shitty small-timers. SSTs!

Unpressured, non-greedy, and not maniacally enthralled with my own savvy, I could mulishly let the investment simmer for a few years. And I did, scoring a 221% profit. That's less impressive given the 3.5 years of waiting, but it's more than good enough for a SST like me.

I'd let some of that investment ride, but I know nothing about cruise ships. It may reach $133 or even $1330, but I would not be plying my patience advantage, and raw ignorant hope is no investment strategy. So I'll sell here.


In other investment news...

Monkeypox is on the ups again in Asia (here and here). The disease is survivable, but it's an ugly affair that can leave you scarred. SIGA has made frustratingly little advancement in positioning its indisputably safe and effective smallpox drug for treatment, though doctors in the know have full faith in it. Here is the CDC nearly breaking decorum to wink, nod, and strain to convince practitioners to use SIGA's drug for monkeypox despite its sorrowful lack of approvals.

I recently predicted that Apple would obviously go to $200. Almost there! But if you bought this year, I'd urge holding for the long term gain (i.e. lower tax bill)....even if it means waiting for the cycle to repeat itself. Apple never fails to take random silly dives, but it also never fails to recover and shoot beyond before the next random silly dive.

Aging Out of Fun

Two postings back, I described how I've spent the past two or three years immersed exclusively in a comical number of tasks I hate and am terrible at.

At several junctures, I paused to wonder, with amused exasperation, whether I'd died and gone to hell. It seemed so strange  to be trapped in a confluence of my very worst aversions, phobias and ignorances. "Jim’s Greatest Shits"!

I made out well. I got it all done - I lived straight through it! - and, honestly, it feels lke a miracle. On someone's score sheet somewhere, I "won". But, looking ahead, there's no rest for the weary. I still need to complete a move, which is my second worst phobia after the dreaded Boxes.

Like most NYC musicians, I moved dozens of times in my 20s and 30s, in and out of a series of crap rental apartments owned by raving lunatics, often with very little notice. Gentrification kept sweeping me out of outer boroughs neighborhoods, as if I were a pestilence. I have recurring nightmares about moving.

Also, I need to learn Portuguese. I'm not good at languages, and my Spanish "contaminates" my Portuguese, and people there detest Portuñol (pigeon Portuguese/Español), and I could really use less social headwind, thanksverymuch.

Special bonus fiasco: I missed selling my SIGA shares at their $26 peak, and they're down to $14 and sinking fast (I believe they'll rise back some, but never again to $26; I'm so well-trained re: "hanging on" with this stock that, after 16 years, I almost can't imagine unloading them).

So, going forward, at least for the short term, it's just more more aversions, phobias and ignorances. Jane, stop this crazy thing!

But I had a eureka. I realized what’s happening!

By the time you're 50, you've dipped so deeply into the bucket of stuff you're good at and enjoy that there's not much left! Having consumed all the green, red, and brown M&M's, all that remains are those goddam yellows (totally unrelated, see "Leff's Law of Green M&Ms").

I have a friend who's spent his life avoiding his family's real estate business. He hates real estate. He's built up a whole other enterprise, without nepotistic assistance, to avoid getting ensnared in real estate. But now, with his real estate mini-mogul father pushing 85 and unable to keep plates spinning, my friend is forced to dive deeply and protractedly into, yup, real estate. Jesus. But that’s the chunk that remained. It was spring-loaded all along! Who knew that Michael Corleone is all of us?

This makes for interesting commencement address advice: at some point, all that will be left is the stuff you hate and suck at. That will be your diet. Be ready for this!

But let's consider a step further…

It always struck me as peculiar that comfort zones retract with age. We grow less, do less, stretch less, tolerate less, are less. We become increasingly conservative and complacent. I feel this process playing out within myself, and I rage, rage against it by deliberately placing myself outside my comfort zone.

In fact, hmmm, that's why I'm decluttering and selling a house, and going through boxes, and moving to Portugal. Those are not normal activities for 60 year-olds. Most keep cluttering ad infinitum and certainly never move to some other country, like some vagabond. They hunker down for the duration and let the kids declutter and sell the house after they croak (which will be the kids' big first taste of the cycle I'm describing!).

And if they for some reason (e.g. impending civil war) do move to Portugal, they won't learn the language; won't take steps to avoid social headwind. They'll find whatever comfort they can, and hunker down in that nest of complacency.

Out of a perfectly understandable aversion to doing stuff they hate and are bad at, they tolerate suboptimal results and mounting tedium. And clutter. And boxes. Even maybe civil war. They essentially collapse. This behavior is hard to fathom if you’re observing as a 25 year old, starry-eyed about an enormous exciting world full of glittering trophies to grab at.

I don't judge the complacently collapsed! I get it! When taking any remaining step forward requires full-on broaching of phobias, aversions, and ignorances, it's no wonder old people are so averse to change and growth!


Here's why it's actually sort of okay, when you finally reach this point, to occupy yourself with things you hate and are bad at:

By the time you're 35, parental instinct kicks in (even if you don't have kids). You become less concerned with getting your way than with keeping plates spinning. You become a plate spinner.

As years pass, plates aspun, you notice it hardly matters whether it's your favorite plate, or just some stupid plate, or even an appalling one. They're all just fodder. It's about the spinning, not the plates, themselves. And there's genuine satisfaction in learning to spin less familiar plates...even if they're unappealling (which they will be, 'cuz the appealing ones - having become much more familiar - practically spin themselves!).

There's a generational issue, however. My real-estate-hating friend and I share a stoic tolerance for suboptimality. I'm not sure the current younger generation - helicopter-parented, bursting with entitlement, and seemingly incapable of suffering silently - can fill such a role. I'm far less stoic than my parents, who were far less stoic than theirs, etc. Have we reached a tipping point? Or am I just falling (as all old folks do) into the fallacy that society's perpetually disintegrating? Time will tell!

Follow-up posting totally contradicting all of this.

SIGA at $21

"Investing is a vehicle whereby money is transferred from the impatient to the patient."

~~ Warren Buffett

SIGA Latest

If, at my urging, you bought shares in SIGA many years ago at $2-4, you're welcome (it's now around $14), and I'm sorry (that it took so long).

I can't possibly mind-dump all my thoughts, speculations, anticipations, and caveats at this point, but I owe some update. Here it is, for those who aren't watching every move:

From here, it will most likely either double or else very gradually waft back down to 8s/9s/10s.

If it would kill you to sell at $14 when $20s or $30s are quite possible, maybe hang on. If you've been holding shares so long that it's like a twenty dollar bill left in an old jacket pocket, maybe let it ride and see what happens.

Otherwise, selling here wouldn't be so bad. But wait a few days, as W.H.O. is likely to declare a "public health emergency of international concern", which should be good for a moderate rise.

If it does pop up to $20s or $30s, know that I will sell every last share the moment the needle slows down.

Finally, no, the monkeypox pandemic wasn't an unforeseen outcome. I've always considered TPOXX's effectiveness with animal poxes a strong fallback in case govs failed to take the smallpox bioterror threat seriously. I'm not sure the latter is true, either; it's all just moving glacially.

SIGA Follow-Up Thoughts

It’s beginning to look like the monkeypox outbreak may (or may not) be a limited edge-case sort of situation. If it can be quickly contained, SIGA's stock will not hold anywhere near its current $15.

It could still rise some Monday morning due to pent-up exuberance, but at some point the hammer (i.e. the big $$$) will forcefully descend, and long-suffering SIGA investors who didn't get out will find themselves once again becalmed amid single digits.

If, however, this turns out to be a new mutation, and thus an ongoing and expanding threat, then selling at this point would be a horrible move. SIGA's rise over the past few days has been enjoyable but by no means meteoric. I'd describe it as restrained. It has much higher to go if this turns out to be a serious and burgeoning outbreak.

The good news is that even if they do contain it quickly, SIGA should benefit from its greatly enhanced visibility (no one even knew there WAS a smallpox cure until this week!). But in that event, I'd still have preferred to have taken my profit and bought a bunch of AAPL, TXG, and CRIS.

If you bought SIGA eons ago, and are fed up, and it wouldn't destroy you to watch it shoot up like crazy after you've sold, here's my advice: create a limit sell order right now for $14.50 or $15. A bit lower if you're even more fed up.

Or, at very least, watch the action closely Monday morning, poised to sell. But bear in mind that even if it rockets upon market opening (I suspect it won't), the hammer might be poised to drop at any moment, and, once it does, you will be the zillionth person in line to get your sell order processed. Staying in front of things with a limit sell order (which, alas, risks losing out) is your best hope for locking in a price in the teens if this thing drops. Once fate shows its cards, it will be far too late to make a move, even if your finger's on the button.

It depends how bad you need the money. If you bought a few shares on a lark, and you're not straining to make a mortgage payment, let it ride. But don't holler at me if it quickly falls back to $7 for another bunch of years.

Stock Mutterings

Sorry for the lack of links to my previous write-ups on these topics. The Slog's search box is your friend!


I've never felt more morbidly ashamed than the last two days spent feasting my eyes on the news of an incipient monkeypox crisis. It's been, perversely, fantastic for my shares of SIGA, a company I invested in (at circa $2.50) in a previous century, which has developed, approved, and begun selling a highly-effective anti-viral (not a vaccine) for smallpox and other poxes (the EU approved it for monkeypox). My first thought is that I don't like being in a position to profit from misfortune. But my second thought is that I helped bring a drug to market that will make this impending crisis far less harmful. But I'm trying to keep my delight levels duly low.

So Apple's falling back down again. Once it bottoms out (the lower the better!), buy it. Even if you're scared it might go lower. Even if it goes lower (you needn’t nail the nadir). Even if analysts predict further drop (analysts always predict further dropping when a stock drops and further rising when it rises; that's their clever little trick). Even if the market's falling apart and you imagine no bright day will ever come. That's the suppressive perspective that keeps people irrationally unable to spot the opportunity of fantastic value at firesale prices. One day AAPL will drop and fail to ever snap back, but you will not lose all your money. Apple will not go to zero. They have enough cash on hand to stop making iPhones and iPads and Macs and just go buy Goldman Sachs and Starbucks....and still have $17B leftover in case they want to start an airline or whatever.

I bought TXG at $50, where it was severely undervalued, and it rose to $200. Now it's back to $50, and nothing fundamental has changed. This isn't some speculative play; they are doing substantial business, and are well-known as a serious player in their field. All that said, TXG is nowhere near the solidity of Apple. But Apple doesn't have the potential of quadrupling (at least not anytime soon).

Still more undervalued, and still less solid, CRIS shouldn't be priced anywhere near its current 75¢. The only explanation is "market's down and biotechs are really down". That's not a substantive rationale (note that there were some trivial testing issues which might have justified a 5-10% haircut). If you have a few bucks lying around you'd like to use to take a speculative flyer (and wouldn't mind losing all, because, again, this is NOT Apple, and it COULD go to zero), CRIS would be a fine choice. Even if its peak of $15.60 (where I should have sold) was fluffy, the stock is pretty clearly worth seven-ish, which makes it a hell of an enticing bargain here. Though I could be wrong. Like with Parker.

I'd be surprised if Parker ever revives. I can't be angry at Andrew Tobias for recomending it; he's right more often than than he's wrong. But I still haven't sold. Maybe if I finally sell my SIGA shares and need to take a loss to offset the gain for tax purposes....

To review:

AAPL at $138 offers an extremely tempting opportunity for a 45% gain at absurdly low risk (by "risk", I mean the chance of losing money). That's an extraordinary proposition, and I can't understand why everyone wouldn't jump at it. The stock may dip lower before it turns around, but not even the gloomiest bear would imagine it won't eventually reach $200. It's just a matter of time (hopefully it will happen about a year from now, making it a long term capital gain!).

TXG offers a very good opportunity for a 4x gain without tons of risk...though it might take a while (remember: patience is the little guy's investment super power).

Even a smidge of moderately positive news might elevate CRIS from the populous slurry of biotechs parked and awaiting grandeur. If so, a 10x gain would be pretty easy (the $7s aren’t exactly gangbuster territory). With bigger news, which I don't expect anytime soon, sky's potentially the limit.

SIGA Prospects

If any of you are still holding shares of SIGA (the Smallpox/Animalpox/Weaponized-Smallpox wonder antiviral - not vaccine - which I first recommended at $3.50, and shot to $15, pulled back to the $2s and is now hovering in the $7s), here's an update:


SIGA will never be, like, Pfizer. There will never be a brisk, broad-revenue trade in smallpox antivirals. There’s likely some boffo revenue ahead, but I’d be astonished if there were more than a dozen individual events in all. Probably way less.

So it’s a game of baked-in expectations, "selling the news" (e.g. FDA approval a few weeks ago didn’t do much for us, though it did rise in anticipation), and tons of shorting and other manipulation. All of which continue to spook the bejesus out of me.

I’ve decided that all that matters is having new revenue on horizon. Not benchmarks, not news, not investor exuberance, but hard revenue. When such prospects appear, the stock price rises in expectation, then usually snaps back fast after they're fulfilled - if (and only if) there’s nothing new on horizon. The reason we’ve remained in $6s/7s so long lately is the large government (BARDA) contract that’s been on horizon for several months. Once that's awarded, if there are no tangible new revenue events ahead, look out!

So, again: scary.

The good news re: that new BARDA contract is that SIGA seems sure to score (though who knows what shenanigans may ensue, with Congressmen still permitted to short stocks). Pricing is still uncertain. But, per above, if there’s nothing else serious brewing at the time of that award announcement, it may be be very hard to exit anywhere near peak. A fast up-and-down. So it might not be dumb to set a limit sell order at $10-15.

Aside from the BARDA award, here’s potential revenue:

Benchmark payments
More revenue gets released from their old BARDA contract as they hit certain benchmarks, e.g. FDA approval (which just happened)

Replenishment contracts
Like all drugs, this expires and must be restockpiled

These two are healthy but not huge, and I believe they’re largely baked in (a third is alternative formulations, a realm I don't completely understand, and consider a mere "kicker"). That leaves, in terms of future revenue, a few faith-based prospects:

Foreign Orders
SIGA investors have been waiting for foreign orders (including W.H.O.) for years. It’s true that foreign govs may have been awaiting the signal of FDA approval, but that’s come and gone with no foreign news. OTOH, SIGA’s notoriously tight-lipped, so we may hear nothing until a sale actually gets booked. I'm not banking on this, and the market clearly is not, either. Yes, South Korea and Israel and many more would be smart to stockpile this drug. Similarly, Betamax was a way smarter format than VCR.

Pipeline
Diehard SIGA investors still hold hopes re: the pipeline of in-progress drug candidates. SIGA had years and years and years to work on these while its smallpox drug was caught in legal/legislative quagmires, and they had the money for it, too (from the big BARDA order), but nothing happened. In fact, several years ago they tried to sell the entire pipeline outright...but nobody went for it, which I took as a bad sign (though there was one sleepy licensing deal we haven’t heard much about). In my mind, the pipeline should be entirely disregarded.

Acquisition
Idunno. If big pharma wanted SIGA’s drug or tech, they could have bought the company cheap a couple years ago. Which doesn’t mean it’s out of the question now that the legal cloud’s finally been dispelled. But I’m not banking on it (and I’m not sure it would bring us a huge premium, anyway).

If something juicy appears on horizon before the BARDA award announcement, that could keep the price up for a while. If not, I’ll expect a fast up/down upon that announcement, followed by an uncertain, becalmed wait for something new. I don’t want to be holding this stock in that scenario. So I’ve set a limit sell order, and will raise or cancel it if I hear anything new/exciting before contract is announced.


Here's my previous update from May.

Stock Update: Apple and SIGA

As previously discussed, I've been more or less living on Apple's stock swings for the past few years. My strategy is simple: buy low and sell high. I deem this safe, because I'm confident Apple will not be perma-crushed by some fritzy antenna or wobbly case. And I deem "high" and "low" to be relatively easy calls because the company's too big to be super volatile. There's only a macro-volatility, whereby it periodically dips 25% and then returns to a new high - over and over and over and over again. Even a plebe like me can profit from that.

As I wrote in that link, people go wrong by assuming "buy low and sell high" means "buy at the very bottom and sell at the very top." They do stupid greedy things in pursuit of this impossibility. The last time Apple's stock plummeted, I bought around $115, and it eventually sunk further still, to the 90s. Fine. I did not curse or wail. And, as the stock recovered, I sold most of my shares in the $160s, missing out there as well (it's currently in the mid $180s). It's ok. I'm not greedy. My non-greediness is an investment superpower. I revel in it.

I'll sell my remaining shares around $200, if the price seems to settle there. And next time the price dips by over 25%, I'll buy a ton more as soon as it seems to settle. Yah, "seems to settle" is a fallacy; any foothold in this realm is strictly imaginary. So I may miss top and bottom. But I sure won't miss "high" or "low".

I realize I'm betting against Warren Buffett, who's been buying at the high end of the price curve, in violation of his own value investing rule. But my thinking is different from Mr. Buffett's. He's apparently figured out that Apple is a very fine company with a solid future. I take that for granted. I bet on Apple's dips because I have the assurance that even when it's plunging like a stone, it's never existential. Most investors - with twitchy short-term objectives - hate to be caught holding a stock whose price is dropping. But I don't feel that fear, because I know that when short sellers and their minions periodically frighten investors, none of it can ever jeopardize the company's future, so I don't move with the herd. I wait. And since I don't like to pay taxes on short term capital gains, that patience only increases my profit.


Meanwhile, it looks like SIGA will get FDA approval this fall. That may open the gates to foreign orders. Or it might not. There's also another government contract around the corner, and this is the news that brought the stock back to the mid $6 range.

I see things very differently from most SIGA investors. They see a rich and prosperous future of US and international sales, corporate sales, alternative formulations and applications (e.g. animal poxes), and stock replenishment. I think they're missing what's really going on with this stock.

SIGA will never be a "real" company, with rich and diverse revenue streams. Rather, it's a three or four or five trick pony. The new US gov contract may well come to pass, and they may get a foreign contract or two at some point. Perhaps some other icing. But it won't be Pfizer. No ongoing, dependable brisk revenue, just long parched becalmings between unpredictable one-off outcomes. The stock chart will perennially alternate between lengthy drifts and momentary spikes, and unless you're tapped directly into the trading system with mega-twitchy algorithms, you'll never catch a peak. And this ain't Apple, so those who tenaciously hold on will miss out.

Hopefully FDA approval will come around the same time as the new US gov contract is awarded. That might create some actual exuberance for this stock, in which case the whole formula could change. But as of now, I plan to sell and run the moment this contract's awarded and the stock moves. Because the moment we put that award in our rear view mirror, SIGA is looking at yet another parched horizon, with nary a buck firmly in sight. And there's nothing the stock market hates more than no-hard-evidence-of-next-shiny-prospect.

SIGA Back From the Dead

I sold off most of my shares of SIGA years ago. The company produced a cure - not a vaccine - for all pox viruses, including weaponized varieties. There are no side effects and the government has already begun stockpiling it. But the history has been almost unbelievably star-crossed, with lawsuits and political shenanigans and reputation sabotage. I bought in at $3 and saw it shoot to $15 before it settled in for a multi-year slumber in the $1s and $2s.

I learned, expensively, that great science and a desperately-needed product with no real competition doesn't necessarily translate to stock market jackpot. Here is my first posting (of many), from June, 2008.

I did hold onto some shares as a long shot. If any of you bought along with me, and held on, congrats: the price touched $5.75 today. A new contract solicitation from the government has been created and will soon be posted, and it looks like there will finally be FDA approval this year (which might unlock foreign sales). They have also finally clawed their way back to the threshold for NASDAQ re-listing. That's a confluence of three pretty happy prospects, and while I'm way too bitter to pronounce the outlook "rosy", the worst appears to be over.

The one advantage we regular people have over super-fast, super-tapped-in, computer-enhanced traders is that we can wait years and years. We don't need to be constantly hitting home runs to sweeten our balance sheets. And, who knows, this long wait may pay off sooner rather than later.

SIGA: Why Change Perspective Now?

A few people have written in to ask why I chose this moment to reverse my sentiment on SIGA. Was there some trigger?

No, there wasn't a trigger. In fact, the absense of triggers was my biggest problem with this investment.

For years, SIGA faced a series of nightmarish adversities and adversaries - all unrelated to their perfectly safe and effective cure for the scariest of bio-terror threats. It was clearly an investment to sit on until things worked themselves out. So I grew accustomed, over the years, to stoically waiting.

As I learned from my experience running Chowhound (which slogged for years), it can be devilishly hard, amid a long grind, to find an apt "let go" point. Stoic slogging is a steady state that, by definition, lacks dramatic triggers. This makes it surprisingly easy to ride a stock all the way down to zero. It doesn't feel like a plummet; it feels like a lobster feels in a very gradually heated pot of water. At first you feel sleepy, then, before you know it, you're cooked.

Grinds never offer clear break-away points. You just hope you'll notice when you reach a time where you no longer ought to stick around. It's tough because that moment passes silently!

In SIGA's case, I freshly considered the cumulative effects of all the factors, and I fully digested the import of the November quarterly report where they announced the dismantling of R&D and their intention to be acquired. And, most importantly, it dawned on me that, so long as FDA remained stalled (making foreign orders unlikely), the long-promised follow-up contract was absolutely everything.

Distracted by other factors, I hadn't fully realized how significant it was that, two years later, this contract had failed to materialize. In light of the political forces at work, I registered it as fatal. With this in mind, it makes sense for SIGA to have put itself on the selling block.

If there had been obvious interest by big pharma in the two months since, it might have been worth holding on for the acquisition boost. But I've heard nada. And I can no longer justify holding on. For the first time, I can see a possibility that the stock could eventually grind down to zero. And as disappointed as I am at $3.70 (with a stock that climbed above $15 a couple years ago), it's a helluva lot better than zero. Hence my exit.

Selling SIGA

"Nothing is more suicidal than a rational investment strategy in an irrational world."
~John Maynard Keynes

The genome for fabricating smallpox virus is out there. And it's believed that North Korea, Syria, and perhaps others have stockpiles of weaponized-up-the-wazoo, super-virulent smallpox. And vaccine does not protect against weaponized smallpox, so we're all totally vulnerable

Bioterror is one of our greatest dangers, and smallpox is one of the most dangerous agents. SIGA's drug, ST-246 is effective against weaponized varieties, as well as prospective natural world threats such as cowpox and monkeypox. Plus it cures vaccinia, the smallpox-like malady which afflicts a fraction of those receiving any sort of vaccine (ST-246 has been used against vaccinia in several real-life cases with miraculous results, e.g. this amazing story reported by the NY Times). And the next wave of miracle drugs under development includes tons of vaccines (sorry, Ms. McCarthy), so we'll be needing a cure for vaccinia (nothing can match ST-246's safety and effectiveness).

The US government was set to buy over a billion dollars worth of ST-246 for its strategic stockpile, but a competitor, Pharmathene Chimerix, kept gaming the process until a compromise was worked out: the gov would buy a few hundred million dollars worth from SIGA, and the vast remainder would be contracted afterwards, giving Pharmathene Chimerix a better shot (since government health officials prefer back-up and redundancy, I assumed both drugs would be stockpiled, for a win/win).

What's more, the stockpiles would need to be periodically replaced with fresh product (i.e. perpetual revenue stream). Plus: upon FDA approval, ST-246 would be snapped up by other governments and international health agencies for their own stockpiles. The problem with getting FDA approval is that smallpox drugs can't be tested directly. We're not going to infect humans with smallpox, so we test primates and other animals (sorry, PETA). But the procedure-bound FDA has no precedent for approving animal-tested drugs. Progress seemed likely, though, when, a couple years ago, the agency held a major conference to work on the issue.

Additionally, an exciting pipeline of drugs under development presented a possible "kicker" for SIGA's bright future.

I bought SIGA - and recommended it to you - at $2.87 back in 2008, long before anyone had heard of it. And it blasted over $15. But then problems appeared:

• After that one conference, we've heard nothing from FDA on animal-testing (and other alternative pathways for approving drugs for diseases untestable in humans).

• A silly lawsuit hit SIGA with a jaw-dropping verdict, awarding away half its profits on ST-246 to litigant Pharmathene. But half a huge windfall would still be a great thing for SIGA. And the appeals court found the basis for that judgement to have been rectally extracted. But the case is stalled while the original (very very slow) judge devises some new mechanism to put the screws to SIGA.

• While the aforementioned competitor, Pharmathene Chimerix (whose drug is less easily proven), managed to gum things up for SIGA for years, the best drug seemed poised to eventually win. But then "activist shorts" (investors who bet against a stock, then go out and try to tank its price by menacing the company in the real world) had some success in unleashing a process resulting in major media (e.g. the LA Times) and politicians (e.g. Democrat Sen. Claire McCaskill and Republican Darrell Issa) ranting against the prospect of spending tax dollars to stockpile a cure for an eradicated disease. I don't know for a fact that the parties perpetrating this well-synchronized outpouring of phony outrage were short on SIGA, but it's either that or they're complete morons, and I suspect greed here rather than stupidity. SIGA has always been a titanically shorted stock, even when its prospects were brightest.

• As the law suit grinds on and on, the plaintiff has delighted in citing optimistic SIGA press releases and investor conferences in order to inflate their expected share of profits to the various judges. So SIGA's gone into stealth mode, hardly saying a thing. As a result of the possum-playing, its stock price bottomed out.


As SIGA hit these snags (which I analyzed over the course of a long series of Slog postings), I figured it was just a matter of waiting for each to pass. The better drug would win, the batshit-crazy lawsuit would work out, and the shorts who drove SIGA's price from $15 down to $2 would take their profits and move on to fresh victims.

But the combined assaults proved a crippling combination. And then some deeply troubling indications arose:

1.The (large) remainder of the original government contract has never gone back on offer. We waited and waited, but it seems to have gone "poof".
Could the government possibly have changed its mind, declining to stockpile a cure when smallpox is such a titanic threat? Well, consider that one small, primitive, cheap atom bomb exploded in the atmosphere over the NYC/DC metropolis would decimate the power grid for months. And while we could update the grid so it's less of a set of interdependent dominos, our leaders have not lifted a finger to do so.

Just because a threat is unthinkable and a solution's at hand doesn't ensure anything. My guess is that the trumped-up media outrage over stockpiling a drug for "an eradicated disease" was sufficient to cool the government's heels. No politician one wants to get caught funding a boondoggle, and scientific reality has little to do with it. And the problem is that no other revenue is immediately on the horizon...at least until FDA approves.

2. We've heard nothing about SIGA's drug pipeline in years.
This couldn't have been due to the aforementioned possum-playing, because the lawsuit pertains only to ST-246, not to other drugs. And in early November, SIGA's CEO announced that its R&D department would be closed (under the euphemism of "an optimization program to sharpen focus and increase efficiencies within its operations").

3. As part of that same announcement, the CEO announced that they were trying to sell the company. And it hasn't sold yet.
If SIGA gets bought, it'd presumably be at a premium (i.e. good for stockholders). But the market for a pharmaceutical company isn't like the market for, say, lawnmowers. There are a very small number of potential buyers. And if none of them have bitten yet (admittedly, they might be in negotiations and we simply don't know), takeover will be highly unlikely.

Lack of acquisition interest would confirm a sentiment that no further revenue is forthcoming. Again, the follow-up contract has never been heard from, FDA remains a black hole, and the closure of the R&D department seems to presage a long, grinding run-down (i.e. very very bad for stockholders).

The shuttered R&D work was terrific science, but it was the kind of tough-slog early-ish development which requires a financially healthy company with a multi-decade time frame. In spite of bright prospects, there was nothing poised to come online fast enough to replace ST-246 as lead product.

In other words: checkmate.


A few tepid positives remain: the company may yet sell, which would help the stock price a bit. And, earlier this month, a patent was assigned SIGA for its arenavirus (e.g. lassa fever and hemorrhagic fever) drug, based on previous work before the R&D shut-down. This may have caused the modest uptick this week. And, hey, FDA might miraculously un-jam and the government may change its mind about protecting us from smallpox. Finally, while I'd rather lose my entire investment than wish for it, if bad guys were to unleash smallpox somewhere in the world, you can bet the farm that SIGA would garner gigantic juicy orders galore within days. We eagerly throw money at out-of-barn horses.

But I doubt any of those things, at least in the near-to-mid term. And, since development's halted, that arenavirus patent is nothing more than a minor kicker in the event of a sale. And there may be no sale.

Also, the lawsuit may resolve favorably. But to be intellectually consistent, I must admit that just as half a huge windfall would constitute a great result, retaining 100% of revenues from a drug with no revenue stream won't help much (though the stock price would pop, at least for a while, upon announcement of such a decision).

One other tepid enticement: SIGA hasn't recorded any of the very substantial revenue it's already received from the government...and the stock price certainly hasn't taken any of it into account. But there's an equal and opposite repellant to that enticement: majority investor/shadowy puppeteer* Ron Perelman may have clever ideas for those funds.

* -When I last checked, SIGA CEO Eric Rose made more salary as a VP of Perelman's holding company than as head of SIGA.


In conclusion

To this day, I can't spot any error in my original thesis for investing in SIGA, aside from an over reliance on rationality (per the Keynes quote up top). The drug is safe, effective, and sorely needed, and there's nothing as good out there. No one rational would deny these things. I feel quite certain that I'll never find a brighter, smarter investment ever again. But after all these years, I'm selling....for a damaging loss (I originally bought at $2.87, but a lot more at $5-8).

We live in a country where powerful people can, simply to protect a bet, destroy a company, even if it harms our readiness for a horrendous prospect like smallpox contagion. I won't go on and on about this, as my windy sanctimony would be unseemly given that I, like those short-sellers, stood to personally benefit from my side bet. But side bettors ought to remain on sidelines (you certainly won't see me unleashing smallpox virus in order to goose the market). And it's particularly insane that we allow our leaders to bet against the interests of the country they purport to lead. We hold baseball players to a higher standard than that!

Regardless of what actually happened to SIGA and its contracts, and how the plume of fake outrage was fabricated around a proper and necessary biosecurity contract, the fact is that it's legal for members of Congress to short stocks. Given that they possess the power to crush companies they've bet against, this needs to change.

SIGA: The Parasite's Dilemma

In my posting earlier today, I described a worst-case scenario:

Judge Parsons, groping for safe ground (he doesn't want to be reversed twice on the same case), may resort to the original terms SIGA and Pharmathene had been negotiating those many years ago. They would have assigned the drug to Pharmathene, who'd pay SIGA a small licensing fee of 8-12%. The problem is that Pharmathene never did any of the many things required to earn this control of the drug. And it's impossible to roll back the clock and determine where Pharmathene would be right now, money-wise, if they had (and thus determine their "injury"). It's hardly fair for SIGA to lose nearly all revenue from a drug whose development, marketing, and risk was footed entirely by them.

For those reasons, I don't think it will happen like that. But there are other factors to consider if Judge Parsons did go that route.

If control of ST-246 were taken away from SIGA and given to Pharmathene, SIGA's lucrative contract to produce ST-246 for the government would be null and void, forcing Pharmathene to:

1. gain the government's trust (Pharmathene has no successful scientific track record, just a long history of the sort of hyperbolic public touting which rubs health authorities and homeland security bureaucrats the wrong way),

2. pursue a contract of their own (after a long bidding period and extensive negotiations, which could take years...and be subject to the sort of protests that plagued SIGA's award), and

3. establish the rigorous and expensive corporate and scientific security measures required by BARDA of its contractors (which have already been completed by SIGA).

Also lost would be SIGA's connections (with other nations, with WHO, and with scientific bodies) with respect to ST-246.

The loss in value, connections, and marketing - as well as the substantial time delay and added uncertainty - would make this a distasteful scenario even from Pharmathene's perspective. I'd imagine they'd prefer a parasitic relationship, effortlessly sucking off their share. That's what the original decision ordered, and my speculation is that this is how it will wind up (though, hopefully, at a more modest profit split).

SIGA: The Judge's Paradox

The holiday weekend gives us lots of time to ponder the Sphinx-like appeal decision. As I wrote on Saturday, Judge Parson, who found expectation damages impossible to assess, has been ordered to assess expectation damages. So where will he go?

The last time Judge Parsons felt sufficiently exasperated to split a baby, he literally split the baby, arbitrarily awarding 50% of net profits of ST-246 to Pharmathene. But the rationale for that split has been kicked out from under him. The principle of promissory estoppel allows a judge to impose an arbitrary, speculative, Solomonic solution, but the Supreme Court ruled that promissory estoppel doesn't apply here. So this time the judge must be non-speculative in awarding damages. But this is a judge who's gone on record saying that expectation damages would be too speculative to award.

This sounds like good news for SIGA, but the philosophy major in me quakes. One of the first lessons in logic is that when premises are contradictory, any conclusion's as good as any other (including, famously, "The moon is made of green cheese"). In other words, literally anything could come out of this situation.

Judge Parsons, groping for safe ground (he doesn't want to be reversed twice on the same case), may resort to the original terms SIGA and Pharmathene had been negotiating those many years ago. They would have assigned the drug to Pharmathene, who'd pay SIGA a small licensing fee of 8-12%. The problem is that Pharmathene never did any of the many things required to earn this control of the drug. And it's impossible to roll back the clock and determine where Pharmathene would be right now, money-wise, if they had (and thus determine their "injury"). It's hardly fair for SIGA to lose nearly all revenue from a drug whose development, marketing, and risk was footed entirely by them.

SIGA investors may take comfort in Judge Parsons previous declaration this term sheet oughtn't apply in present day. But, then again, he also declared that there's no non-speculative way to assess expectation damages. Judge Parsons is down a rabbit hole, and anyone who tells you they can predict the outcome is lying.

When lost in paradox, it's always smart to seek solid ground. In that spirit, I offer a few highly pragmatic observations:

1. Half an Enormous Jackpot is Still Huge
In the end, I'm figuring the worst-case downside remains something like where we're at today: Pharmathene getting roughly half the net profits from this drug. At trial, Pharmathene estimated the drug's potential as $4 Billion, and I don't think that's far off. And SIGA can do very well, indeed, with $2B.

2.Cloud Be Gone!
SIGA's stock is priced irrationally, even with a 50/50 split. That's mostly due to the legal cloud, which is hopefully near an end. At this point, I'm more eager for an end to this litigation than I am for an optimal result.

3. Pipeline
When last we heard, SIGA was going great guns with its dengue drug. Dengue Fever is a huge real-world problem, so potential profits greatly exceed those for smallpox. SIGA had been working on other promising early-stage drugs, too, plus they have a great antiviral discovery and development platform. And it's important to remember that this lawsuit affects only the smallpox drug, ST-246.

While there are high-flying biotech stocks whose entire portfolios are at the early stages of SIGA's pipeline, the market currently values SIGA's pipeline at precisely zero.

4. Ignore the Ticker
SIGA and Pharmathene stock may, over the next few weeks, go absolutely crazy. But none of that, in my opinion, will be predictive of anything. Again, Judge Parsons is down a rabbit hole, and anyone who tells you they can predict the outcome is lying.

5. New Law
This was not the decision I was expecting, obviously (though it may yet turn out favorable for SIGA). I hadn't anticipated that the Delaware Supreme court would make new law.


FWIW: There was no actual bad faith in this case. What happened is that former SIGA CEO Donald Drapkin was best friends with SIGA mega-investor Ron Perelman. When their relationship soured, Drapkin was treated egregiously, and he lashed back via his testimony in this case (the merger negotiation was under his management, so he was a key witness). The combination of an axe-grinding witness and shameless lying by Pharmathene's counsel was enough to skew the finding of facts and turn the judge violently against SIGA.

SIGA's Appeal

The Delaware Supreme Court has spoken. The original decision, with its bizarre "split the baby" solution ordering a 50/50 profit split for SIGA's drug, ST-246, has been reversed. The original judge, Parsons, has been ordered to start over and assign only expectation damages (which, if I understand correctly, would need to reflect ST-246's position back in the 1990's, as an unproven drug with no government contract on the horizon).

And here is Judge Parson's previous explanation (from his written decision) of why SIGA should pay no expectation damages at all:

Having carefully reviewed the testimony and reports of PharmAthene’s experts, including especially Baliban, I find that PharmAthene’s claims for expectation damages in the form of a specific sum of money representing the present value of the future profits it would have received absent SIGA’s breach is speculative and too uncertain, contingent, and conjectural.

Therefore, I decline to award such relief. The evidence adduced at trial proved that numerous uncertainties exist regarding the marketability of ST-246 and that it remains possible that it will not generate any profits at all. These uncertainties relate to, among other things, regulatory matters, questions of demand, price, competition, and the parties’ marketing competency. Moreover, when it comes to expert evidence, reliability is of the essence.

In appraisal proceedings, for example, this Court often accepts discounted cash flow (DCF) calculations prepared by experts, but also “repeatedly has recognized that the reliability of a DCF analysis depends on the reliability of the inputs to the model.”

Similarly with breach of contract claims to recover lost profits, “[r]eliability of the lost profits projections is essential in making a determination of lost profits.”

The huge fluctuations in Baliban’s estimated damages (in the hundreds of millions of dollars) based on changes to a few variables in his analysis confirm that it would be unduly speculative to attempt to fix a specific sum of money as representative of PharmAthene’s expectation damages.

I'm sure Judge Parsons will still manage to inflict some level of punishment. But he is seemingly boxed in by his own prior statement.

And, in any event, the market's irrationally and sharply undervaluing SIGA even at the very worst case scenario (i.e. even if the original decision stood). ST-246 is that biotech rarity: a fully developed drug whose remarkable safety and efficacy is challenged by no one. There's a big contract in hand, currently being delivered upon. Pharmathene valued ST-246 at $4B during trial. And this lengthy legal cloud is finally unwinding.

So I continue to look to the big picture: important and powerful people are clearly paying attention to SIGA - both in a positive way (their board keeps getting more impressive, having recently added a former Pfizer CEO) and negative (lawsuits, accusations, shorting frenzies). If there wasn't big substance and potential, none of this drama would be happening.

I.e. lots of people angling for a piece of a prospective pie is a big "tell" that there's prospective pie.

SIGA: The Wait Winds Down

Andrew Tobias published the following thoughts from me last week (his influence may have contributed to the recent run-up), and I just realized I ought to put it up here, as well, in case any of you own a few shares.

A friend who’s also a SIGA investor tells me that an investment analysis firm hired a distinguished Delaware (retired) judge to look over SIGA’s supreme court appeal and to share his findings for their big-wig investors. The judge agrees that the lower court decision (which “split the baby,” awarding the plaintiff half the future revenue from SIGA’s smallpox drug) was overreaching. He’s confident that SIGA will be on the hook for a much, much, much lower amount (that’s been my expectation, as well). This came to light late on February 6th.

I listened to the oral argument before the Delaware Supreme Court last month, and one judge seemed overtly skeptical of the ruling against SIGA. It turns out that he’s the most powerful and respected judge in the state. This corroborates the likeliness that the Court will drastically lower the penalty.

SIGA has been playing possum throughout this legal dispute, doing everything possible to keep a low profile. That’s why we’re at $3 (even if the ruling stood, and SIGA lost half the billions in profits from their drug, they’d still be worth far more than $3). The Delaware Supreme Court prides itself on turning around decisions within 90-120 days (usually 90) of oral argument, so that puts a likely decision around mid-April.

Meanwhile, biological weapons, including smallpox, are very much in the news, particularly weaponized smallpox (thought to be held by Iran, North Korea, and Syria), which vaccines do NOT address, but which SIGA’s drug very likely does (depending on how novel the weaponization techniques are….i.e. if it’s anything like pox, SIGA’s drug is good).

It made curiously little news, but Israel has flown inside Syria’s borders to attack chemical and biological weapons stores. So smallpox is a big, big deal, and Israel has publicly included SIGA in its war scenario planning for several years. I expect an order there.

Also meanwhile, the FDA approved a drug called raxibacumab against anthrax, based solely on animal testing. This has been the hold-up for SIGA with FDA — it’s not possible to test smallpox on humans, so you must resort to monkeys, and that’s not standard for FDA. But it appears FDA has finally accepted the standard, which is very good news. (Either way, though, SIGA doesn’t require FDA approval to keep selling to the government for their emergency stockpile, and the government has explicitly stated its attention to acquire billions of dollars worth of this drug.)

I think it’s quite likely this could turn out well, although it could take time to shake out: the decision may remand back to the lower court to finalize, plus it will take time for SIGA to regain momentum and re-attract skittish investors. But I’m quite confident.

SIGA's Frozen Winter

For background, see my first posting on SIGA, and the zillions of follow-ups

Oral arguments in SIGA's appeal will begin in early January. The soonest we'll hear a verdict is June. Meanwhile, SIGA will continue to play possum. The company that's suing, Pharmathene, has precious little going for it besides this lawsuit, so its stock price is closely linked to SIGA's. And so SIGA has taken steps to keep its stock price as low as possible (via insider selling, dismal conference calls, no press releases, no pipeline announcements, no foreign sales action, and a very relaxed timetable re: delivery of current contract to BARDA...which pushes back payments). Hence this ridiculously low price, which keeps Pharmathene starved and much more amenable to settlement and much cheaper to buy out.

In the absurdly long view, nothing's changed. Smallpox is still the worst bioterror threat, and there's still nothing to rival the safety and effectiveness of SIGA's drug. And their R&D staff may be making great quiet headway with the pipeline - we wouldn't hear a peep if they were. And there are reasons to think the fake political cloud has cleared (it had been whipped up by a competitor, Chimerix, and its lobbyist, McKenna, Long, and Aldrigde, but there's been a regime change at Chimerix, they no longer seem to be using ML&A, and they appear to have abandoned their government-alienating strategy of continual SIGA harassment). So, within the glacial slowness, amid the stark silence, and under a stock price chart evoking Edward Munch's "The Scream", everything's weirdly good to go, once the legal cloud's eliminated. Except, that is, for my aggravation level and yours.

I believe SIGA will be successful in its appeal. If so, we stand a chance of an eventual stock price of $30-50. If not, Pharmathene will keep 50% of profits from the smallpox drug, and we could see $15-25 (higher if there's success with the pipeline, which is untouched by the lawsuit). Hell, if the pipeline's entirely a dud, the appeal fails, and the smallpox drug fails to pick up foreign orders but just continues to sell to the US government (including the portion of the original contract not yet awarded), we're still worth at least $10! So the current stock price is a tremendous opportunity for investors with saintly patience (as plentiful as snakes in Hawaii?).

But what to do meanwhile? Unless there's a settlement with or buyout of Pharmathene, we won't see any stock action until June 2013 at the earliest (appeals in this system almost always take six months or more). So one strategy would be to sell and reenter next spring. But a settlement/buyout could be announced at any time, changing everything. So while I haven't yet replaced the shares I sold for tax balancing last winter, I'll hold onto my current SIGA investment, and buy some more next May.

Meanwhile, as always, it's best to disregard the day-to-day low volume ups and downs. And I'll continue to have little to say - but don't read desperation in my silence. Just patient waiting....

SIGA Gets $36 Million

Note to readers bored senseless by all the SIGA talk: this will be the last such posting for a while. News has been particularly eventful, so I felt obliged to update, but this will be my last until anything dramatic happens. On the other hand, this would be a good point to buy a few dozen/hundred shares for yourself (it won't budge the stock price, so I'm not being self-serving!). There's an excellent chance this stock will septuple within a year or two or three, and having "skin in the game" will make my SIGA postings a lot more interesting for you! But only invest money you can afford to lose...

The first $36M payment is in from the government. So despite all the misinformation, the contract's on, and the company won't need to dilute the stock to remain fully operational.

Someone obviously leaked this news on Friday, hence the stock's mild drive-up. It should have been sharper, but, as I keep saying, don't expect news or "prospects" to do much at this point. Nothing great will happen until the company confirms revenue from multiple sources (and the lawsuit's resolved) a year or two or three from now. The good news is that, short of bankruptcy, it's very difficult to imagine how SIGA would fail to attract multiple revenue sources...even if the bad judicial decision stands on appeal, and even if Chimerix loosens up the primate rule and manages to get a piece of the pie for their inferior drug.

What may happen, however, is another round of propaganda and huffy political nonsense. But that's all about short term shorting, not long term reality. This is the only completely safe and effective drug for pox, including weaponized varieties. Foreign orders (Israel? EU? India? WHO?) await a step or two from FDA. And even assuming Chimerix has their hooks into that agency, eventually we'll emerge from that process, and anyone worried about terrorism will be ready to buy.

Again, it will take time (so your investment may be "dead money" for a while). And the bad guys may drop more shoes. And "stuff happens". But it's been years since I screamed "BUY!" at you. And now's the time. If smart investing means finding extremely undervalued gems poorly understood by the market (stock-hounding!), with known, surmountable downsides, then this is really as good as it gets. This should be a $10 stock right now under the most pessimistic of assessments. And it seems destined for $20 and well beyond.

You're on your own for a while re: SIGA news. If it cycles down, don't panic. If it gears up, don't exult. Give it a couple years for best results. That's my outlook until further notice!

SIGA: Off the Mat!

Three pieces of blessed reassurance to report on SIGA today.

There've been times when I've wished SIGA CEO Eric Rose would spin and tout more. Or, at least some. But he's not that sort of CEO. As a discreet, low-profile, well-respected science geek, he's the sort of fellow ideally suited for patiently dealing with governmental bureaucrats and scientists. Since SIGA is funded by and sells to the government, that's essential. But his diffidence has allowed louder voices with greater chutzpah and shameless misinformation to run roughshod, with nary a peep from Rose.

Until now. Yesterday, he posted this glorious rebuttal to the insane, gut ignorant press/political assault of the past few weeks. And the fact that he's so not a spin-meister, and so devoted to steak rather than sizzle, makes it all the more powerful and persuasive. Plain facts, amply footnoted. Finally!

Also terrific was the performance of SIGA board member (and Bush administration Homeland Security advisor) Fran Townsend on Anderson Cooper's show last night. She deftly sliced through the gobs of bullshit being proffered by yet another reporter attempting to trump up a scandal from absolutely nothing. If you're a SIGA investor, don't miss it:



Also, some quieter news.

A study shows that application of ST-246, as expected, creates resistance in smallpox virus, making the drug less effective (this is true of all antivirals and antibiotics). However, the resistant varieties are much less virulent. This is really good news for three reasons:

1. ST-246 is easy to create in a lab (the patent is public), but the bad guys can't whip some up and use it to develop a super resistant strain. This makes ST-246 an extra valuable bioterror counteragent.

2. Chimerix can't (yet?) say the same about their drug

3. This opens a pathway to a safer pox vaccine to replace existing stockpiles, which have side effects and can't be used in immunocompromised patients and others (about 4% of the population overall). It's yet another use for this drug.

Finally: when SIGA receives the $40M downpayment due on their contract with BARDA, it will prove to markets that 1. the contract is good, and 2. there will be no need for a secondary offering (because they'll be flush with cash). I don't expect the price to shoot up hugely (that won't happen until multiple revenue sources are achieved and the legal cloud is removed), but it should help some.

I wrote the following paragraph at Wednesday's stock price, but it applies now, as well:

This is a good time to buy. We're at least a year or two from meteoric success, but it's a lot cheaper to buy at $1.85 [or even $2.30!] than at $3 or $4 in a few months. That said, I certainly can't promise it won't drop further. But I'm still quite confident, long term.