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Eliminating Cellulite

“How many millionaires do you know who have become wealthy by investing in savings accounts?

I rest my case."

- Robert G. Allen

The Portfolio

We are about to cross a milestone as the portfolio closes in on a 20% year-to-date gain. Our blog portfolio continues to perform well and volatility in the portfolio remains low vs the overall market. Year-To-Date the portfolio is up +19.99%. Our benchmark index, the S&P 500 is up a phenomenal 18.32% YTD. If you've been able to stay in an index fund through the ups and downs of this years market I applaud you. Volatility has been high, but an 18.32% return is fantastic.

If you're an investor looking for diversification and growth, and you'd like to know more about the way I build a portfolio; please feel free to email me.

We're going to eliminate cellulite

Actually, BioSpecifics Technologies (BSTC), one of our portfolio holdings is taking on cellulite. Today BSTC dropped below $50 a share, so I doubled down on our investment and bought another 100 shares at $49.50 per share; which also lowered our cost basis to $53.63.

In February BSTC reached a high of $71.62 and has been on a steady decline. Recently the stock dropped below our cost basis, but not enough for me to pull the trigger and add shares. I was watching that $50 level and finally got a good shot at it today. Those of you who watched closer might have picked up some shares at $49 today.

So why would I buy more shares of a company that continues to disappoint? Because we're long term investors. While the stock action has been a bore in 2019, important development has been taking place. This company is highly likely to survive this year and remain in the portfolio next year, primarily due to a single indication for the companies one drug, XIAFLEX for cellulite.

Biospecifics Technologies makes one drug, Xiaflex. Xiaflex is an injectable collagenase for various indications and is marketed in the United States and internationally. Most people are familiar with Botox, the cosmetic collagenase sold by Allergan. XIAFLEX has been focused on medical applications. The company currently sells injectable collagenase for the treatment of Dupuytren's contracture and Peyronie's disease under the XIAFLEX or Xiapex brands. It also is developing injectable collagenase to treat frozen shoulder, cellulite, canine lipoma, lateral hip fat, plantar fibromatosis, and human lipoma, as well as uterine fibroids. In addition, the company engages in the development of other clinical indications for which collagenase injection has been tested, such as keloids, hypertrophic scars, scarred tendons, glaucoma, herniated intervertebral discs, and as an adjunct to vitrectomy.


XIAFLEX has been in development for the treatment of cellulite, a new indication on top of the two indications for which its already FDA approved. Recently the company released Phase 3 data that showed all endpoints were met with no adverse events. The next step is to submit for a Biologic License Application (BLA) to the FDA. Endo Pharmaceuticals has global marketing rights for the product for the treatment of cellulite and expects to submit a BLA in the second half of 2019 and a potential commercial launch is expected in the second half of 2020.

Cellulite Treatment Market size is expected to grow significantly from 2019 to 2026. The global cellulite treatment market was valued at around $619 million dollars in 2017, and is anticipated to reach $1.4 billion dollars by 2026. This includes all treatment types, but XIAFLEX is a game changer for many women due to the non-invasive aspects of this treatment.

Once approved, this will be the first FDA approved treatment for cellulite.

A Good Business

BioSpecifics is one of those great, boring companies that I like owning. Some people like to invest because they find it exciting, I prefer that investments progress at a calmer pace toward remarkable returns, akin to watching grass grow.

BioSpecifics is partnered with Endo for CCH (marketed in the U.S. under the trade name XIAFLEX) and Endo continues to manage the research and development of XIAFLEX and CCH for their licensed indications. Endo expects mid-to-high teens percentage range growth for XIAFLEX revenue in 2019.

Under the terms of the partnership agreement, BioSpecifics is eligible for future low double-digit royalties as a percentage of worldwide net sales (independent of clinical indication, territory and sales volume), additional mark-up on cost of goods sold (COGS) in U.S. and sales made in any other country where Endo sells the product directly or through affiliate sub-licensees and modest milestones for additional indications and regulatory submissions worldwide. Currently licensed rights cover the indications of Dupuytren's contracture, Peyronie's disease, frozen shoulder, cellulite, lateral hip fat, plantar fibromatosis and human and canine lipomas.

In short, BSTC develops the product and Endo pays all the bills, markets XIAFLEX for the approved indications and pays BSTC a royalty plus a markup on manufactured product. It's a win-win for both companies, and it's a highly efficient business model that gets great healthcare products to the customer. FDA administration, sales and marketing are all tasks that are just as specialized as developing and manufacturing a drug. These two companies have mastered the synergy of their respective skill sets.

At roughly half the market cap of Endo, BioSpecifics trades at a market multiple, turned in a $3.00 EPS for the TTM, has zero debt, is profitable, has a gross profit margin at nearly 79%, and a quick ratio of 64.0 clearly indicating they can cover any short term cash needs. The one analyst that tracks the company expects the stock to reach $90 per share over the next twelve months. My own estimate is something more like $65-$70 per share.

Biospecifics Technologies is one of those rare times when investing in the company that's behind another company is the better investment. It's like owning the hardware store that sells picks and shovels to gold miners. Once XIAFLEX for cellulite is released I would expect Endo shares to rally as well, but I like the long term opportunity for BSTC better.

Bought 100 shares @ $49.50, total shares owned = 200

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,



Keep Me Honest

  1. S&P 500 declines to 2,350 or more (1-3-2019)

  2. Healthcare and Biotech sectors outperform (1-3-2019)

  3. S&P reaches 3,000 by year end (1-11-2019)

  4. CSCO reaches $60/share (1-18-2019)

  5. VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)

  6. CVS reaches $91.50 (2-27-2019)

  7. Bull market takes another leg up (4-7-2019)

  8. The Fed will lower rates 1-2 times (5-13-2019)

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When a good stock you own drops 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your research.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:


I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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