Spectrum Pharmaceuticals (
SPPI) will hear from the US drug regulator on
Apr. 29, 2011 regarding its supplemental new drug application, or sNDA, for Fusilev's use in advanced metastatic colorectal cancer. Currently Fusilev is already approved for treatment of osteosarcoma (bone cancer) and methotrexate-related toxicity. However, this will be Spectrum Pharma's second try at getting Fusilev, a novel folate analog, approved for advanced colorectal cancer. Back in October 2009, FDA had issued a complete response letter to the California-based biotech citing that Fusilev (levoleucovorin) has not been demonstrated to be 'non-inferiror' to its closely associated form, leucovorin, or folinic acid, which is already being used in chemotherapy (
press release). Before the announcement, SPPI share price had gained a spectacular 463% between Jan, 2009 ($1.48) and Sept, 2009 ($8.33). The complete response letter brought SPPI down to the $3 - 5 range and kept it there until Dec. of 2010, when the stock began to soar again based on anticipation of Fusilev's approval. Since then, it had gained ~90%, surpassing the peak of 2009 before the issuance of the complete response letter.
Trading map
With the key PDUFA date nearing (Apr. 29, 2011), I believe the recent pullback (-6.7% since Apr. 6), resulting from early investors taking profit, creates a great entry point for late comers who hope to gain from the options market, which is much more volatile than trading actual stock shares. I will monitor SPPI closely in the next few days and look into buying
May $9 or $10 call options on one of the down days. At today's market close, May $9 and $10 call options were traded at $0.65 and $0.35, respectively.
What do you think the stock price will be post-approval? Trying to decide whether $9 or $10 May calls have more upside.
ReplyDeleteThe general consensus is $10-12 on approval. Personally, I think this is reasonable (~20-30% range). However, I would expect a quick sell-off after FDA's announcement as with most drug approval in biotech. My hike'n slide strategy is to profit from both ends, so look to buy some put options at post-approval peak.
ReplyDeleteMy May $9 call options are up 28.6% already ($0.70 --> $0.90).