GenScript has been a huge part of my investment career, and the ups and downs are indescribable. To sum it up in one sentence – life is so exciting!
In the past 10 years, my investment focus has gone through 12-15 years of hydropower plants – 15-18 years of blue chips in various industries (including real estate) – 19 years of biotechnology.
In 2019, we realized that the real estate business model has huge problems, and began to shift the investment focus to blue-chip + biotechnology. The basic strategy is, 50% low-value blue chips and 50% biotechnology. When the biotech industry plummets, it sells blue chips to buy biotech in batches, and when the biotech industry skyrockets, it sells the biotech to buy back the blue chip.
Stage 1: Pay attention and reload
The earliest I paid attention to GenScript was in 2017. At that time, it signed a multi-billion dollar licensing agreement with Johnson & Johnson. At that time, it rose to more than 30 and bought a little bit. The market later questioned it, and I personally feel that the stock price has increased significantly in the short term. It was sold later, and I did not continue to pay attention to it.
In June 2020, we saw the Phase 1 clinical data released by Legend/Johnson & Johnson at the ASCO conference, which was very amazing. We immediately did the relevant research and published the relevant article in Snowball (the most important domestic innovative drug to go overseas). Road: GenScript CAR-T’s end-line peak forecast and long-term growth logic webpage link ), in the article, we have predicted the legendary BCMA CARTY drug’s end-line peak sales of 2 billion US dollars and second-line and above 5 billion US dollars. This and Johnson & Johnson’s own forecasts now largely match.
At that time, we estimated that GenScript’s CRO was valued at more than 10 billion, and we only realized the value of its traditional CRO. Legendary equity was in the range of 15-30 billion, totaling about 20-40 billion. Of course, we can’t rule out the optimistic market value of 7-80 billion. . At that time, the market value of GenScript was about 20 billion yuan.
The second stage: heavy positions experience a plummet
Based on this judgment, we started to liquidate real estate stocks in June 2020 (in retrospect, this decision was really wise, everyone knows what happened to real estate stocks later), and bought GenScript at the initial purchase price At around 17-20, it began to fall, and we kept buying and bought a 20% position. Not long after the purchase, GenScript and Legend were suspended from trading. The announcement said that the company and its chairman were under investigation by the customs. Of course, they were frightened. Because the position was very heavy, they were worried about being punished by the customs, such as disqualification for import and export. This CRO business that mainly serves overseas is a fatal blow.
That night, the legend fell by 15%, but the announcement said that it has nothing to do with the company, that is, it has nothing to do with the legend, that’s okay, the legend is the core asset of GenScript. The next day when the Hong Kong stock market opened, GenScript fell by up to 25%. I was very panicked at the time. I asked my analyst to clear GenScript’s position for the first time. I usually trade stocks myself, but this time I didn’t know why. Why, I actually asked my analyst to clear the position, I guess I can’t bear to sell it. My analyst is also more honest and asked him to clear the position. He really sold it regardless of the cost. If it was me, even if I sold it, I would sell it in batches. I would think about it in the process of selling, and maybe I would not sell it. I came to the company in the morning and saw that GenScript was sold out. I thought about it in the afternoon, but I was still not reconciled, because I lost more than 30% of the heavy position, and then I thought, the legend announced that it has nothing to do with him, and the legendary CART was promoted by Johnson & Johnson in the United States, and it has nothing to do with GenScript, and it has nothing to do with China. It doesn’t matter, then the legend is no problem, the legend is no problem, even if other businesses of GenScript are damaged, the core is still there. And I don’t believe that a government can kill a star company because of an import and export problem.
Later, I decided to buy back GenScript. In the next few months, as the news became clear, it was defined as a personal problem. I kept buying in the range of 10-12 yuan, and bought up to 30% of the position.
The third stage: Nirvana, soaring into the sky
In this way, persist, suffer, buy, keep researching, and then post several research articles, such as web links . For more, go to “Joint Investment Research”. The CXO business of GenScript has also been studied, and it is believed that 10-20 billion is still worthwhile. At that time, GenScript’s equity market value after deducting Legend’s equity was basically only more than 5 billion.
By 2021, the matter of the customs investigation will gradually become clear, and the company’s announcement will be characterized as a personal incident, and it is a past event. The specific reason is unknown. However, GenScript’s risk was lifted, and the stock price slowly recovered, reaching 17 or 8 yuan, and basically turned around. In May, it was suddenly revealed that Gao Ling spent 1 billion US dollars, and Trinity invested in GenScript’s parent company, Boom and Legend, especially Boom Bio, which was valued at 10 billion yuan. The value of CDMO was discovered, and the stock price surged to more than 40 in July. .
In just half a year, it has basically tripled from the lowest point. I also earned twice the price of my holdings.
Based on value discovery and financing of $10, plus Legend is basically sure to go public, our valuation of GenScript has risen to 40-80 billion.
Above 30, I have started to sell one after another, and at 40 only the base position is left. About half of the position was cleared.
At that time, we were too optimistic about biotechnology and the market was in a state of excitement. In fact, many companies had reached a final price. For example, the letter reached an astonishing 150 billion, but we still thought that there was still room, and we were too greedy, and there was no first mate to clear the warehouse. . GenScript still retains about 20% of its position.
The fourth stage: plummets again, doubles again
The remaining base positions of biotechnology, combined with several companies, totaled 4-50% of the positions, which later caused huge losses. Beginning in the second half of 2021, the US dollar will raise interest rates, the global biotech bubble has burst, and domestic innovative drugs have been blocked from going overseas. Also cut in half. The loss of assets is very large, and the highest is cut down. I have basically gone through the most difficult period in my 10-year investment career, and it has really been like a year.
In the first half of 2022, GenScript/Legend experienced clinical data being questioned, the biotech bubble burst, clinical data questioned (of course, this is a common occurrence in the past few years), China concept stocks were delisted, and Legend was approved for extension. Rui’s stock price has dropped from 40 to around 20. Of course, we are reducing the position between the continuous buy-back in the decline. After that, Shengke rebounded after the slump. The stock price of GenScript’s high-quality enterprises rose from 20 to more than 30. Of course, during the rising process, I reduced some positions that I had added before. The plan is to sell out the positions other than the base position by 40.
After the value discovery of CDMO, the injection of $1 billion by high-level leaders and the real growth of the business, our valuation of GenScript’s CXO has increased to 20-40 billion. In extreme cases, only mature CROs are considered, plus 4 billion in cash is worth 10 billion no matter what.
During this period, I experienced sleepless nights waiting for the approval of the legendary CART, and also experienced the helplessness of rising and falling after being approved, as well as worries about the delisting rumors of Chinese stocks. What was more wrong was that when Zhonggai was delisted, most of the legends were replaced by GenScript. Later, I figured out that the legends would not be delisted and were not afraid of delisting, but I never found a chance to buy them back. Otherwise, 2022 will already be in a state of substantial profitability, of course, this is another story.
When GenScript fell to 20, after deducting Legend’s equity, the corresponding CXO valuation was about 15 billion, which was still far from 10 billion, so the addition was not enough. The plan is to hold more than 30% of the CXO’s valuation below 100, 5 billion When you look at it, the super heavy warehouse is more than 50%. But it turned its head up before it arrived. So in fact, I didn’t buy enough, and I didn’t earn much.
The fifth stage: plummeting again, rebounding
From July to October of this year, the biotechnology company has pulled back again, and the legendary CART sold poorly in the second quarter (at least the market thinks so), and there may be other reasons. Anyway, I don’t know what’s wrong with it. GenScript fell from more than 30 to a minimum of 14. During this period, the decline of Legendary was relatively small. In addition, Johnson & Johnson repeatedly emphasized that the peak value of CART was more than US$5 billion. In fact, the valuation range of Legendary was basically determined in the range of 8 billion to 12 billion, and it was basically 5 billion. is the worst-case estimate. GenScript’s 14 yuan basically corresponds to the CXO’s valuation of only 5 billion. There was once an opportunity to make a big profit, and I didn’t cherish it before me. I knew it had skyrocketed, and I regretted it too much. If God gave me another chance, I must re-stock it. So I bought a 40% position on GenScript on 14-15. The plan is 12 yuan, that is, GenScript is excluding the value of the legendary equity, that is, 5 billion * 0.52 = 2.5 billion US dollars, about 20 billion yuan, and when the CXO valuation is zero, it will clear the Sichuan investment that I have treasured for 10 years and buy it. It’s a pity that it didn’t give me a chance. From the lowest 13 yuan, it has nearly doubled.
At the current position, GenScript is about 40% higher than my average purchase price in 2020, but the profit of this stock (GenScript/Legend) should be more than 2 times.
Stage 6: To be continued
Continue to hold, and have already lightened up a small part, the most important thing is to drop the bag.
Diagram of the entire investment process:
latest valuation
GenScript’s CRO has a profit of about 400 million this year, with a valuation of 10 billion; CDMO, this year’s revenue is about 1 billion yuan, orders are more than 200 million US dollars, the valuation is 10 billion, and it belongs to GenScript 8 billion, 20 billion in the long run, and other businesses (Actually very promising in the long run) 5-10 billion. Legend is reasonable 80-120, optimistic more than 15 billion US dollars, extreme 5 billion US dollars, GenScript holds 50% of the shares, holding type, with a 20% discount. Then the range is: 40-80 billion, more than 80 billion optimistic, 20 billion extremely pessimistic. That is, between 12-40. 12 full warehouse, 40 consider wet warehouse.
GenScript’s entire investment and trading process is basically a typical case of my investment philosophy and trading strategy over the years.
The basic investment philosophy remains the same: in-depth research, value investing, and long-term investing.
Before investing, we did in-depth research and figured out the value range of the company (this is actually more critical, I can’t judge its future and value for most companies). For example: GenScript’s value lies in the initial valuation of CXO of 10-20 billion, to a reasonable 20-40 billion after CDMO value discovery and financing. The legend is 5-12 billion US dollars, corresponding to 2-5 billion US dollars in revenue, 5 times ps. For excellent companies, maintain the base position for a long time, invest for a long time, and enjoy the value of the company’s growth, unless there is an extremely overestimated situation.
There are multiple layers to a trading strategy
First, I don’t predict the rise and fall of the market. I think the market is unpredictable. I only buy and sell in batches within a certain range based on my own research on the value of the company. For example, GenScript’s initial valuation of 20-40 billion, to CDMO value discovery and financing, is a reasonable valuation of 40-80 billion. Heavy positions below the lower limit, clear positions above the upper limit, and flexible control of positions within the interval.
The second is a rotation between blue chips that underestimate certainty and resilient (high risk) high growth biotechs. When the biotech industry plummeted, it sold blue chips to buy biotech, but after the biotech boom, it was safe to buy back the blue chips. Blue chips guarantee certainty and dividends, and there are still bullets in extreme times, and Shengke provides excess returns.
The third is arbitrage between the same asset. For example, Sichuan Investment and SDIC, Sichuan Investment and convertible bonds, arbitrage between GenScript and Legend, for example, the reasonable valuation of GenScript’s CXO is 20-40 billion, after deducting Legend’s equity, GenScript’s CXO is valued Below 20 billion heavyweight GenScript, 40 billion was exchanged for legend, and both were held during the 20-40 billion period. GenScript’s extreme valuation is 10 billion. Below this market value, it is basically possible to exchange all Legends for GenScript. However, the operation needs to consider the liquidity gap between the US and Hong Kong stocks, as well as the discount of the holding company. This arbitrage is more difficult to do.
GenScript is a company that is very suitable for my trading strategy. “Bottom down, unlimited up”, it has huge growth potential, whether it is GCT business or legend, there are infinite possibilities. Its valuable anchor, that is, the legendary valuation has a bottom, the $5 billion CART has been listed globally, and the company itself has a mature CRO cash flow business; it has huge fluctuations, and the volatility of biotechnology is the essence, and the liquidity of Hong Kong stocks fluctuates. , and the optimistic premium and pessimistic discount of the controlling stake will also bring volatility. According to my trading strategy, if there is volatility, there will be room for profit. bigger.
It is planned that GenScript/Legend will continue to hold for a long time, operate with bands, arbitrage at an opportune moment, and liquidate positions in bubbles.
This is a million-dollar article for those who are destined to! Everyone is welcome. To borrow the words of some liars, your reward is the driving force for my continuous output. $GenScript (01548)$ $Legendary (LEGN)$ $ Cinda (01801)$
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