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SQBlueSky is a financial research data and software company. We provide custom data feeds and APIs on insider trades and SEC filings. We also have online tools for hedge funds and audit firms to perform financial research. All analysis for any articles witten by SQBlueSky is done using the... More
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  • Top Three Free Must-Know Resources To Make Money From Biotech Stocks 0 comments
    Aug 16, 2012 4:21 PM | about stocks: ARNA, GILD

    Biotech and pharmaceutical stocks can be volatile, so investors need to do their due diligence and collect the proper information before investing in these companies. Luckily, there are a lot of free options for the diligent researcher to go to.

    Because FDA approval of a new drug a major event for a company, you can expect to see some fluctuation in the stock price around those events. Therefore, we suggest that the first place you stop for important information is the Food and Drug Administration (FDA).

    The FDA Website

    All drugs must be approved by the FDA before they reach a pharmacy shelf. Prior to approval, drugs go through extensive testing, clinical trials, and advisory committee reviews before obtaining final approval.

    There is a fairly overwhelming amount of information about drug approval on the FDA website, so to cut to the chase, here is a handy cheat-sheet in infographic form from the FDA.

    One of the most important steps in the drug approval process happens after the drug makes it through clinical trials: the advisory committee review. The pharmaceutical company has to submit all its test results and make a presentation to the committee. Meeting materials are usually available online to the public two business days before the advisory committee meeting.

    One example of this is Gilead Science GILD, which made a presentation about its upcoming HIV drug on May 11, 2012. All advisory committee meetings are open to the public in Washington, D.C., and these meetings are publicized on the Advisory Committee Calendar.

    These meetings can provide important strategic information for investors because sometimes, after the meeting is completed, and the committee provides positive feedback to the pharmaceutical company, the stock price will jump. For example, Arena ARNA met with the Advisory Committee on May 10, 2012 and its stock jumped after positive feedback from the committee.

    Company Website

    Company Press Releases on their website are a great source of information. On May 11, after the advisory committee provided positive feedback for Gilead Science's HIV drug, Quad, the company reported that they had set a target action date under the Prescription Drug User Fee Act (PDUFA) of August 27, 2012. The PDUFA date is the final drug approval date, and while it is not mandatory for the FDA to follow the advisory committee's decision, the FDA will usually approve the drug if committee provided positive feedback. While you can find the PDUFA date on the FDA website, but the company press releases are an easier source. In addition to the press release, you will also be able to find a company conference call dates, at which time the approval of specific drugs will be discussed. Stock research analysts from major brokerage wire houses like Merrill Lynch, JP Morgan and Goldman Sachs will be on the call, asking the management team questions that can provide valuable insight to the future of the company.

    SEC Filings on the SEC website

    Recent SEC filings can reveal detailed information that is not mentioned in the company's press release. For example, in light of a pending FDA approval, you may check the latest earnings statement for a company to get more insight into the financial health of the company. After releasing its 10-Q quarterly report on Aug 1, 2012, Gilead Science reached a 52-week high of $58.84 the next day.

    SEC filings also reveal corporate insider buying and selling. In a previous article, we dove deeper on corporate insider trading patters following FDA approval.

    All three resources mentioned here are free, and while you may have to wade through numerous pages to get to the ones you want to read, for the cost-conscious investor who is willing to do their due diligence, they provide a treasure trove of useful information about the biotech stocks that you are researching. In fact, many professional stock research analysts use the same information mentioned above to write their research reports. You can do the analysis, and make you own intelligent investment decisions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: quick-picks-lists Stocks: ARNA, GILD
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