WTF Happened to Bind Therapeutics?
It’s hard to say just how many publicly traded stocks we’ve covered so far on Nanalyze, but we’d guess that around 40% of our articles involve a publicly traded stock that has some degree of exposure (or claimed exposure) to one or more emerging technologies. If we take out all the over the counter (OTC) garbage, we’ve probably covered somewhere around 180 publicly traded companies from across the globe. Of these, we’ve made investments in but a small handful.
The truth is that technology investing is extremely risky, even in a bull market. Take Bind Therapeutics (OTCMKTS:BINDQ) as an example. We first wrote about Bind back in August of 2014 with an article titled “Nano Drug Delivery IPO of Bind Therapeutics“. We liked the story they were telling (never invest in a story), and decided to pick up a small block of shares. Here is how well that position has performed:
Now we have to fill out some dumb form and then we may get a few dollars in the future after bankruptcy proceedings are complete. Why didn’t we sell sooner instead of getting to a point where our shares are nearly worthless? Well, we’d like to say that it’s because we’re investors, not speculators, and we only enter positions that we have complete conviction in so we hold to the bitter end or until the story changes. The truth is though, we weren’t paying attention to our Bind stock position because we were too busy writing great articles for our lovely readers, something that’s far more rewarding than capital appreciation. So, what the fcuk happened to Bind Therapeutics?
Initially everything looked good on the tin. After 20 years of research, two professors from MIT and Harvard launched Bind Therapeutics way back in 2006 and raised nearly $70 million by the time their IPO debuted on September 27, 2013. All that money was used to build a nanoengineering platform that could create programmable nano drug delivery devices called Accurins, which are nanoparticles that can evade the immune system, traffic to the site of the disease, selectively accumulate in diseased tissues and cells and then release encapsulated drugs at a prescribed rate. This sounds like a very compelling value proposition and the platform was protected by 16 issued U.S. patents and 50 U.S. patent applications.
At the time of the IPO, Bind had a solid pipeline with world class partners:
It’s hard to imagine that all of those partnerships could turn into fcuk all but that’s kind of what happened. In July of 2014, Bind issued a press release stating that Amgen would not be exercising their option to develop an Accurin using an Amgen therapeutic payload. The reason was that after a year and a half of development, “results were not sufficiently compelling”. Strike 1 for Bind. At this point in time, the share price showed no reason for concern: 
Fast forward to the end of 2014 and things still look great with Bind making up for the loss of Amgen by picking up an agreement with Merck (who eventually bought Bind’s assets after bankruptcy). They also presented “positive results” from the Phase 2 study for their lead program, BIND-014. The stock chart hints at something different though. We see the price breakdown in December followed by a massive trade in early January 2015. Still, there is no real reason to be concerned based on our original investment thesis. Most of the strong partnerships are still in place, and additional interest is being drummed up.
Throughout 2015 things still seem fairly optimistic. In June of 2015, Bind announces FDA authorization of a first-in-human clinical trial for Astrazeneca’s Accurin payload. A third quarter update given on November of 2015 gives nothing but positive news as seen below:
At this point in time the share price is about one-third of the IPO price at just under $5 per share but there still appears to be no real reason for concern. In fact, there shouldn’t be any reason not to pick up some more shares “while they are cheap“. Then, during the month of December 2015 the share price plummets losing half its value to settle around $2 a share. At this point in time, investors looking in from the outside have to be thinking that something is terribly wrong. The reason for the decline may be found in one of two SEC filings that can be found for the month of December (at this link):
The Company also announced that the KRAS mutant NSCLC arm will not advance to the second stage. Data from 23 patients in the ITT population and 14 patients from the Per-Protocol subset demonstrated a 6-week DCR of 17.4% and 28.6% and a 4% and 7% overall response rate (ORR) respectively, which did not meet the Company’s pre-specified gating criteria to continue enrolling patients. Patients currently enrolled in this cohort will continue to be followed for safety and efficacy.
Even now, is that single sentence enough to make us sell our shares? In retrospect, yes, because the share price slide is just too ominous. Biotech plays are volatile and complex, and as retail investors, we do not have the subject matter expertise to assess what this statement really means. At this point we should have sold our shares and walked away. Even though we would have lost a large chunk of our investment, at least we were able to walk away with something.
Of course that’s not what happened, and on May 2016, Bind declared bankruptcy bringing their share price under $1 for the very first time. At this point what you shouldn’t do is say “well, it’s just $100, let’s see what happens” because things can only go from bad to worse. As of now, our shares aren’t worth the transaction fee it will cost to sell them – and we need to fill out some form and hope to see a few bucks.
What lessons can we learn from this? At least the following:
- While we believe that investors should always have a long-term horizon, “set it and forget it” just isn’t advisable, especially for tech investments.
- Small cap technology plays should not occupy more than 5-10% of your overall portfolio. Fortunately, our 100-share holding had no meaningful impact on our overall portfolio performance.
- The “efficient market hypothesis” is a pretentious sounding term which simply means that a stock price should reflect all available information. This was the case with Bind, except it would appear that we were not privy to some of that information.
When it comes to tech investing, there is no sure thing. Larger plays like Illumina, Nvidia, or Softbank (all of which we’re holding) are much more likely to weather times of turmoil when the inevitable bear market comes knocking at our door. Even then, the majority of your portfolio should be in “safe” options like low-fee robo advisor Betterment. At least then you won’t find yourself filling out a form to try and get a small fraction of your original investment back.
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The underlying technology was just hype
Oftentimes the reason for failure isn’t quite as obvious as say, Theranos. As we always like to say, it doesn’t matter if it was a scam or incompetent management team, the end result is the same for the investor.