BinaryLeverage

BinaryLeverage
Contributor since: 2012
You have a fundamental error in your first sentence. The company did not report yesterday "that the Phase III clinical trials for its diltiazem cream (VEN 307) were successful". In actual fact, the company reported successful results from a couple of dermal safety studies and a pharmacokinetic study. These studies were required by the FDA for the eventual NDA. The phase III efficacy results were, if anything, delayed. Previously the company had given guidance for late Q3 or Q4 for those results. Now they have pushed that back to Q1 2014 and seem to have added sites in Europe to complete the enrollment.
The first sentence of the 2nd paragraph is also erroneous. There is existing competition. Rectiv (a nitroglycerin (GTN) ointment marketed by Aptalis) was approved by the FDA in 2011 and is available for the treatment of chronic anal fissure. In addition, doctors have the option to request pharmacists to compound diltiazem.
Your contention that surgery is currently the best option is also incorrect. Treatment of AF follows an algorithmic approach. 1st line is simple, lifestyle measures (diet, hygiene, stool softeners, etc). 2nd line is topical pharmaceuticals (GTN, diltazem, potentially Botox). Surgery is a last resort.
Could be.
I have never spoken with anyone there but it appears to be a well-run company. They have a solid onc. focus with decent products in reasonably attractive markets. Also seem to have good clinical development programs supporting their marketed products. The upcoming PDUFA date for Stivarga may move the price but probably not by that much. Q4/2012 results later this month will have more bearing on things I would think. Also Kyprolis clinical data later this year will have real impact on company's potential. One could certainly convince oneself that the price may find support in the high $60s/low $70s.
Every pharma company claims that building a world class oncology BU is a key part of their strategy so ONXX may be an attractive target. If Takeda was willing to buy Millennium seems likely that someone would look at ONXX.
Cool. Thanks for your response. Look forward to reading about more of your interesting ideas & backtests.
Nice work Varan. I am trying to replicate the results just for fun. Do you have any more detailed data? Monthly returns for one of the pair sets would be great.
Agreed - these companies are not usually on the radar of the institutions.
Thanks Michael - I think many readers thought that I had some sort of problem/agenda with a certain company. I am genuinely ambivalent about these stocks. This is purely an observational piece. In fact I am rooting for all of these stocks to take off before approval. Gives them more room to fall thereafter.
Thanks for reading - and for the comment. Like all strategies it does have an associated risk. I would not necessarily recommend this as a stand-alone strategy. When I first looked into it it was really to determine the best time to sell if one were holding through a news release. Given that, I am not sure it is as risky as many plays in the biotech arena given that the position is entered into after the news event and thus after the major price move - and most volatile period.
Something I wonder about is how many of the acutely agitated patients will actually be suitable candidates for this drug. As I understand it, the pivotal studies required patient consent and therefore selected for individuals who could be instructed in how to use the inhaler and who were motivated to comply.
Many of the patients I have seen with acute agitation presented in the ER in a paranoid, aggressive state or created chaos in hospital wards in the middle of the night throwing furniture through windows. There is just no way that Adasuve would be an option for patients like this.
The overall market also seems potentially very small. I read a study (admittedly it was a few years old) that claimed there were ~1M ER admissions for psychotic episodes per year in the US. Additional episodes may occur in different settings but the numbers are hardly overwhelming.
Perhaps. I did not short it today as it opened so poorly.
Thanks! I personally think that the XNPT window is passed. It is up significantly over the last week (~20% over the week) and is getting pretty close to the PDUFA date now. It may well continue to run but too risky for me.
As I understand it, the FDA cancelled RGEN's meeting because it has decided to issue a CRL on/before the June PDUFA date. The company expects a request for additional clinical data to support the NDA. Given that, if RGEN does end up in front of an advisory committee it will be based on a future NDA resubmission.
You are quite right. VVUS should in fact be a short on April 30th. Apologies for that - and thanks for picking it up.
Just thought it would be worth noting the result of this recommendation. The article was published on Feb 22nd. On that day PLX closed at $5.41. The lowest it has been since then was $5.34 on 3/2/12. On 5/2/12 it hit a high of $7.70 before falling off to its current level of ~$6.50. So potential returns of ~20-40% in 2.5 months.
For anyone who is interested, I have published a follow up to this article over at my blog, BinaryLeverage.com - http://bit.ly/GDmfAU
PFE has been a terrible defensive stock in the past so I am not sure why it will be one of the best defensive plays in the future.
In the past 12 years it has consistently underperformed the market - and this was a period during which it was marketing the most successful drug in history (Lipitor) as well as the most recognised drug in history (Viagra).
It has a bloated, underachieving R&D department and seems to be completely misguided in its corporate development efforts - rebuilding a consumer health business now having sold its previous business to JNJ at a bargain price.
Revenue growth is almost impossible to achieve since the existing revenue is so large that there is nothing out there that can move the needle and make up for the Lipitor shortfall.
You can certainly invest in it for the dividend, but there are better options. Also, how is it paying the dividend? It has a ton of cash, but most of it is trapped overseas and PFE won't repatriate it because it thinks itself above paying tax.
Thanks for the feedback.
Thanks for the comment. I have some data on run-ups which I may try to pull together. Based on my data, they are less predictive of the post approval move than one might think. Looking at 100 day run-ups prior to approval the stock that made the largest 1-day down move had a relatively modest run up while the stock with the largest run up had one of the smaller collapses.
Thanks for the comment. I agree that this is not a revelatory approach - however I had never seen any objective analysis in its support. I was surprised by the consistency of the downward move following an approval over the last 15 months.
I would guess that the market is still concerned about the safety data that caused the initial drop ahead of the Ad Comm meeting. Thus the price has not appreciated despite the positive panel vote. I think this is a risky one and I personally would not hold through the PDUFA date.
Sorry for the ambiguity. Yes, this is purely back tested. As I mentioned, I am not suggesting or promoting this as any sort of strategy as it stands. I was merely looking for evidence that these events could be traded profitably. Also, as mentioned, I only used the closing prices. I agree that intra-day swings would definitely change the picture.
It's a valid question. I did not want people to interpret the post as a description of some sort of automated strategy. However, the rules were as follows (note these are prices at close not intraday):
- Go long at close 15 days ahead of the meeting date
- Initial targets are a 30% gain or a 5% loss
- If/when position is +5% start trailing stop loss at max gain -2%
ASTX has a PDUFA date set for tomorrow so the FDA should be ruling on Dacogen. Unfortunately at their recent Advisory meeting the committee voted 10-3 against approving Dacogen. The FDA will not go against the panel and approve despite a recommendation against it so I think Dacogen will be denied this time around. The company does have cash and a revenue stream so it is potentially attractive. The FDA denial should be mostly priced in so it may not move much to the downside - but I would expect some movement. When it levels off it will be even more attractive.
The 2nd half of April will certainly be an exciting time for VVUS - and hopefully a profitable time for long term followers such as yourself.
Thanks for the comment Horowitz.
I believe some analysts in the past have suggested that in the long run the European market may be more attractive for PLX than the US. I remember reading an opinion that the US would ultimately only make up 25% of PLX's revenue.
I imagine the reasoning behind this is the power of negotiating with single buyers for an entire country who will be very price conscious.
That being said, knocking off half the potential market for anything is never good so failing to get an approval from the FDA would definitely dampen my enthusiasm.
Regarding item 3 in your article, the following excerpt from ARNA's latest 10Q might give one pause...
"We believe that prolactin studies of both three months and shorter duration will be sufficient to test the hypothesis that lorcaserin causes mammary tumors in rats by increasing prolactin effects on the mammary gland. The FDA has expressed concern that the three-month duration may not be adequate to address issues it identified, which may necessitate longer duration studies"
Maybe I am missing something but this is how I assume it will work. On the day the dividend is paid the stock price will drop immediately by $15 - so you will gain $15/share in dividend but will lose the same amount in share value. Your $50 strike puts will be adjusted to $35 strike puts. So the only return will be any appreciation in the stock price between your purchasing and the close before the ex-div. date less the cost of the puts.