Looking ahead - Make sure you know what's cooking in biotech in 1H2012!

In order to take advantage of biotech stock/options trading, it is paramount to know which companies are the centre of attention within the biotech community. These companies tend to be the ones facing scrutiny by the FDA panel and those to be dealt FDA drug approval decision (PDUFA). With skyrocketing volatility, the stocks of these companies are perfect for trading. Mark these important dates down on your calendar as a start. Detailed analysis of each company and trading roadmap will follow as the date of each event approaches. Good luck and have a fulfilling and prosperous 2012!

Watchlist 2011-10-30

A few biotech stocks (with near term catalysts) that I will be watching:

Vivus Inc. (VVUS) - one of the most-watched biotech companies late last year with an obesity drug candidate, QNEXA, whose approval was DENIED by the FDA on 2010-10-29 based on birth defect and cardiovascular concerns.  We are expecting to hear FDA's acceptance of QNEXA's NDA resubmission (likey by tomorrow 2011-10-31).  A PDUFA action date will be assigned when this occurs and we may see a quick hike-n-slide play.

Pacira Pharmaceuticals (PCRX) - PCRX is expected to deliver a press release Monday morning to disclose the outcome of FDA's decision on EXPAREL, which had an PDUDA date of 2011-10-28 (last Friday).  It is widely speculated, based on rumors, that FDA has approved the drug.  We will see lots of trading actions tomorrow morning.  Unfortunately, no PCRX options are available for trading, making it less attractive for a slide play.

BioSante Pharmaceuticals (BPAX) - though the original November PDUFA date for Company's Bio-T-Gel  has been delayed to 2012-02-14, investors' appetites for this stock have not decreased.  In fact, BPAX hiked up 17% last week as more investors turned their attentions to the results of Libigel's pivotal trial data, to be announced some time in December.  Should the markets remain strong, another great week for BPAX should follow!

pSivida Corp. (PSDV) - PSDV has a PDUFA date next week (2011-11-12) for ILUVIEN.  Stock popped 12% on Friday.  Based on the high call/put option ratio, most investors are betting on ILUVIEN's approval.  This is an interesting stock to follow.

Staying active while seeking opportunities in Biotech

If you haven't noticed, I have posted significantly fewer number of articles since August (2011).  Why?!  Well (besides my newly arrived baby boy), plainly put, the landscape of biotech trading has changed drastically.  Many companies that people thought were great 'Hike' targets based on major catalyst events (PDUFA, clinical trial results, NDA filing/acceptance) never saw the 'Hike' that was highly anticipated and once foreseeable.  Correspondingly, the magnitude and predictability of 'Slide' have also been diminished.  As a result, it take a lot more patience and discipline to execute trades following what was once 'predictable' patterns.  Undoubtedly, it has been tough and head-scratching for many biotech enthusiasts for the past several months, but, moving forward, people should continue to remind themselves of the following principles which will, in my mind, sustain the viability and profitability of biotech stocks and options trading:


1) Biotech will ALWAYS thrive - big pharmas simply lack the focus, energy, and agility that small biotech companies possess to develop new therapies and innovative medical devices; licensing and acquisition by big pharma will still be the key theme in the coming years


2) Big news events in biotech will ALWAYS drive hype - major news networks, trading forums, and even social media (such as Twitter) continue to be valuable sources of information/misinformation that help stimulate the excitement about a particular event (e.g., drug approval), which in turn leads to volatile stock prices that traders can take advantage of

3) Biotech stocks/options will ALWAYS yield high percentage profit - I know this one is tricky and may not be as convincing in a tough market, but when the economy stabilizes, small cap biotech will be one of the first places where traders will pour their money back into.  Particularly with stock options, high percentage profit in a short time can easily be achieved (I remember when 100+% gains in a matter minutes were the norm just before the summer of this year).   


All in all, I will continue to seek opportunities in biotech and share them with you here.  However, I will be using Twitter as my primary trading news tool on a day-to-day basis.  There is a Twitter Feed column to the right of this blog where you can view my most recent tweets.  Note that I will also stay an active trader even when I don't see any good trades in biotech - I do this by trading broad market indices and a few tech companies.  Follow me on Twitter (@MichaelJuan01) for more trading updates.  As usual, good luck to you all!

BioSante Pharmaceuticals (BPAX) - Tapping into a billion dollar niche with female viagra

Company:  BioSante Pharmaceuticals (BPAX)

Product candidates:  LibiGel, Bio-T-Gel
Short term catalyst:  3 presentations at healthcare conferences (9/7, 9/12, 9/27); press release
Mid-term catalyst:  Bio-T-Gel PDUFA (11/14), LibiGel Phase III efficacy trial results update (4Q2011)
Long term catalyst:  LibiGel NDA filing (mid/end-2012)
52-week high:  $4.02
52-week low:  $1.30

TheStreet.com Interview with BioSante CEO


Cash Position
On Aug. 2, 2011, BPAX closed a $48 million public offering of common stock.  According to BPAX CEO, Stephen Simes, the proceeds of the $48 million underwritten financing together with the cash the company had before the transaction results in almost $80 million in cash.  This cash balance is sufficient to fund the LibiGel program and BioSante through the anticipated LibiGel new drug application (NDA) submission by the end of 2012, and in fact all the way through a potential FDA approval which could come in mid-2013.  This long runway was one of the key reasons for executing the transaction at this time.  Another reason for executing the transaction at that time was so that in the fourth quarter of this year when the company announce LibiGel efficacy data investors can concentrate on the quality of the data versus being concerned that BPAX would need to raise money.

More on LibiGel Trials
LibiGel (testosterone gel) is being developed for the treatment of female sexual dysfunction (FSD), hypoactive sexual desire (HSDD) in post-menopausal women.  BPAX has completed enrollment in two pivotal efficacy trials under SPA agreements with results expected during the fourth quarter of 2011.  In addition, the company has also completed enrollment  in a Phase III safety trial, which is expected to produce data supporting LibiGel's NDA submission anticipated to be made in 2012..

Primary safety outcomes being evaluated are related to cardiovascular (CV) events such as CV death, myocardial infarction, and stroke with a lower than expected rate of 0.58% (22 CV events) observed to date and a 0.24% rate of breast cancer (nine cases).  BPAX has patent protection for LibiGel through mid-2022 and estimates over 4 million testosterone prescriptions are written off-label for the treatment of female sexual dysfunction (FSD), representing a potential market opportunity of $2 billion.

Summary of the background and rationale for development of LibiGel for the treatment of FSD, HSDD in post-menopausal women (based on BPAX's recent SEC 10-K Annual Report filing)
“Although generally thought of as being limited to men, testosterone also is important to women and its deficiency has been found to cause low libido or sex drive.  Studies have shown that testosterone therapy in women can boost sexual desire, sexual activity and pleasure, increase bone density, raise energy levels and improve mood.

According to a study published in the Journal of the American Medical Association (JAMA), 43% of American women between the ages of 18 to 59, or about 40 million women, experience some degree of impaired sexual function. Among the more than 1,400 women surveyed, 32% lacked interest in sex (low sexual desire).  Furthermore, according to a study published in the New England Journal of Medicine (NEJM), 43% of American women between the ages of 57 to 85 experience low sexual desire.

According to IMS data, two million testosterone prescriptions were written off-label for women by U.S. physicians in 2009 and according to independent primary market research, at least 2 million additional prescriptions of compounded testosterone were written off-label for women. Female sexual dysfunction is defined as a lack of sexual desire, arousal or pleasure. The majority of women with FSD are postmenopausal, experiencing symptoms due to hormonal changes that occur with aging or following surgical menopause.”

Trading Roadmap
Given the list of catalysts in the short, mid-, and long term (including PDUFA, clinical trail results, NDA filing), there is great potential that BPAX will see a 'Hike' ahead of the company's anticipated submission in 2Q2012.  Under normal circumstances, it would be safe and less risky to purchase call option contracts with an expiry date many months down the road.  However, with the increased volatility and unpredictability seen in the markets around the world at the moment, I would remain cautious in making such 'long term' trades with catalysts that are as far as 3 months away.  Currently, Dec 2.5 call options are traded at $.75.  With BPAX trading in the $3.60 -3.80 range just prior to the latest round of stock offer, this is a reasonable entry to me.  The 3 presentations by BPAX in September could potentially attract more investor attention and kick off the 'Hike'.  I will continue to monitor BPAX price in the coming weeks.  Good luck!  You are always welcome to follow me on Twitter (@MichaelJuan01) for trading updates.

About BioSante
About LibiGel
About Bio-T-Gel

UPDATE: Seattle Genetics' (SGEN) ADCETRIS receives accelerated approval for two indications

Friday's early approval announcement may have caught many by surprise (original PDUFA 8/30); hence the irregular price fluctuation at close. With the Aug options expiring today (technically tomorrow), there was not really any opportunity for a 'Slide' play. The Sept put options still carry a high time premium at this point, so I will look into these early next week (potentially another spike Monday morning) and decide what to do.  Since the approval was only the accelerated type and not the full version, SGEN will have to conduct a phase IV/confirmatory trial post marketing.  This was NOT what investors would have liked to hear, so a 'Slide' is quite likely.  I will keep an eye out for this next week! 

Recent market turmoil and the upcoming week (8/8 - 8/12)

What's happening?

We all know that job numbers aren't increasing as fast as they should, economic growth is overwhelmingly sluggish, and the stock market has just suffered its worst week since the recession.  Those of us, biotech investors, have seen once consistently profiting strategies being thrown out the window in these past two weeks.  Take a look at the incredible change in some of the highly 'promising' biotech stocks during 7/25 - 8/5 (2-wk period):

$CLSN: down 25.42%

$ANX: down 28.07%

$SGEN: down 22.72%

$BPAX: down 33.8%

$DEPO: down 32.2% 

Fueling the fire, S&P downgraded the US credit from the top AAA rating for the first in history on Friday (8/5). Middle East stock markets first reacted to this with a dramatic plunge in late Sunday morning (8/7), and it is said that the Asian markets will follow suit later in the day.  How will the US stock market react tomorrow morning?  Will another 500+ point drop occur?  Will the Fed intervene?  Is QE3 in place?  Have we reached the bottom yet (Alan Greenspan doesn't think so)?  Those are obvious questions that every investor thinks about as he/she rehearses the various scenarios of market reaction in this upcoming week.

What would I do?

While the latest financial news (i.e. S&P downgrade) could have huge impact on the market's already weakened confidence, I don't see this as the end of the world (yet) for a few reasons: 

1) S&P is not the only ratings agency (Moody's and Fitch still maintain US credit at AAA)

2) US treasuries are still among the safest investment instruments in relative terms despite downgrade 

3) Washington going to great lengths to discredit S&P in hopes to minimize downgrade impact

I foresee a broad sell-off as the market opens tomorrow, followed by stabilization, if not even a rally.  I've read/heard that many are gearing up to put their cash to work and I certainly agree that many stocks with near term catalysts, such as ones mentioned above, are heavily discounted right now.  Nevertheless, I will remain cautious before resuming full on buying mode (there are still many other factors, such as employment, political weakness, Euro debt, economic growth...etc. that add to instability).  I will do so only when I see at least 2-3 consecutive days of gains plus reversal of broad market sentiment; otherwise cash is still a valuable position!  As always, think wisely, evaluate cautiously, and act boldly - good luck! 

Reminder of near term catalysts:

$SGEN - PDUFA 8/30

$ANX - PDUFA 9/1

$CLSN - Phase III results in last Sept/Oct

$DEPO - Phase III results in Oct

$BPAX - PDUFA 11/14

Seattle Genetics (SGEN): transitioning from research to commercial with one of a kind drug

Summary 

• Company - Seattle Genetics (SGEN)
• Drug candidate - ADCETRIS (brentuximab vedotin)
• PDUFA - Aug 30, 2011
• July 14, 2011 - FDA advisory committee unanimously recommended accelerated approval of for TWO indications

ADCETRIS (brentuximab vedotin)

ADCETRIS is an antibody-drug conjugate (ADC) that targets CD30, a defining marker of Hodgkin lymphoma (HL).  CD30 is also expressed on other cancers, including anaplastic large cell lymphoma (ALCL).  ADCETRIS is comprised of an anti-CD30 monoclonal antibody linked to a potent cell-killing agent, monomethyl auristatin E (MMAE), using Seattle Genetics’ proprietary technology.  This technology enhances specific uptake of ADCETRIS into CD30-expressing tumor cells, inside which the MMAE is released, achieving a targeted cell-killing effect.

ADCETRIS has received orphan drug designation in the United States and Europe for both HL and ALCL. SGEN had also obtained Fast Track designation from the FDA for brentuximab vedotin in HL.

Worldwide development

Seattle Genetics is jointly developing brentuximab vedotin with Millennium: The Takeda Oncology Company under an agreement where Seattle Genetics has full commercialization rights to brentuximab vedotin in the United States and Canada, while Millennium has exclusive rights to commercialize the product candidate in all other countries.  In June 2011, the European Medicines Agency (EMA) accepted for review Millennium's Marketing Authorization Application (MAA) for brentuximab vedotin for the treatment of relapsed or refractory HL and relapsed or refractory systemic ALCL.

Just shy of a home run

On July 14, 2011, SGEN announced that the Oncologic Drugs Advisory Committee (ODAC) to the FDA voted 10-0 to recommend that the FDA grant accelerated approval of ADCETRIS for the treatment of patients with Hodgkin lymphoma who relapse after autologous stem cell transplant (ASCT).  In addition, ODAC voted 10-0 to recommend that the FDA grant accelerated approval of ADCETRIS for the treatment of patients with relapsed or refractory systemic anaplastic large cell lymphoma (ALCL).  The FDA is expected to act on the two Biologics License Applications (BLAs) for ADCETRIS by August 30, 2011 under the Prescription Drug User Fee Act (PDUFA). 

This is clearly positive news for the company to have complete endorsement from the panel, but the tricky part now is the fact that the company may need to conduct an additional confirmatory trial to support full approval of ADCETRIS.  The ADCETRIS BLAs were based primarily on data from a pivotal trial in relapsed or refractory Hodgkin lymphoma that was conducted under a Special Protocol Assessment with the FDA and from a phase II trial in relapsed or refractory systemic ALCL.  These smaller, single-arm trials with surrogate endpoints such as response rate rather than patient survival rate are sufficient for an accelerated approval which considerably shortens the time required prior to receiving FDA approval; however, in order for ADCETRIS to be granted full approval, SGEN will still need to conduct a phase 4 confirmatory trial to confirm that the surrogate endpoint in fact translates into prolonged patient survival.

Trading map

The only drawback of an accelerated approval is the time and money required to conduct a phase 4 trial.  Upon initial approval though, SGEN can immediately market ADCETRIS, which is predicted to experience rapid adoption by hematologists/oncologist as the first approved therapy in relapsed/refractory patients.  

Prior to the panel meeting, SGEN had seen a nice 'Hike' from $15 to a 52-week high of $21.41, a 43% climb in a period of two and a half months.  However, the concern around the additional trial SGEN needs to conduct as well as the broad market pessimism on US debt ceiling negotiation had dragged the stock down more than 18% since the advisory panel gathering.  With the PDUFA date being a month away (8/30), I believe that this is a reasonable entry point for another 'Hike' before the drug regulator decides on the fate of SGEN's drug.  The superior activity that ADCETRIS demonstrated in the clinical trials, the strong FDA interest in making this drug available to patients, and the potential runup SGEN had seen ($21.41) will spur enough hype to push SGEN back up to $19-20 ahead of the 8/30 PDUFA.  Given this estimate, Sept OTM $17.5 call options seem well priced at $.95.  I will look into adding to my existing position (IN at $.90) in the next few days pending complete resolution of the US debt issues (don't want to get caught by irrational sell-off) and SGEN's 2Q earnings report on 8/4 (may buy before; expect more news coverage to 'remind' investors about near term PDUFA).  Follow me on Twitter (@Michaeljuan01) for trading updates.  Good luck!  

  

2011-07-17 watchlist: companies with near term catalysts

1. $ANX (Adventrx Pharmaceuticals) 

• PDUFA 9/1
• Recent pullback
• Options available as of Friday, July 15
• Sept call options expire after PDUFA

2. $CLSN (Celsion Corporation)

• Interim data expected in third quarter, 2011 (Jul - Sept)
• Phase 3 trial (HEAT) under Special Protocol Assessment (SPA)
• ThermoDox granted FDA Organ Drug status
• Potential rolling NDA filing (Fast Track Designation) in 2011 pending upcoming interim results

3. $SGEN (Seattle Genetics)

• Company's late stage chemotherapy, Adcetris, received unanimous support (10-0) on Thursday from FDA advisory panel for accelerated approval in TWO indications: a) Hodgkin lymphoma who relapse after autologous stem cell transplant and b) elapsed or refractory systemic anaplastic large cell lymphoma (ALCL)
• Near term PDUFA 8/30 
• Over selling on Friday due to 'sell the news' market psychology 
• Potential short term 'Hike' to PDUFA

UPDATE: Mannkind (MNKD) slides following release of 'positive' data

As mentioned in my previous blog post, MNKD was a perfect short target due to its history of repetitive stock movement: false hype --> stock up --> faded interest --> stock down

Yesterday, I submitted an order for July $4.5 puts which got filled at a relatively high price, $.55.  About 24 hours later, I sold it for $.70 (27% profit) during MNKD's steepest drop this morning (10:06 am ET).  Once again, the 'Slide' strategy paid off in a very short time and this is why I continue to use it in most of my trades.  Congrats to those who also got a piece of this Mann'kind-ness'!

Follow me on Twitter (@michaeljuan01) for trading updates. 

Mannkind (MNKD): 'positive' data showing kindness to investors

Summary

• MNKD climbed 8.5% in AH after press release
• Press release contained irrelevant data from past trial
• Two clinical trials requested by FDA (target completion end of 2012)
• Great trading opportunity (short MNKD)

Brief recap

• Last minute change in insulin inhaler device by Mannkind from Gen1 (Medtone) to Gen2 (Dreamboat)
• Bioequivalence data (conducted in vitro) dismissed by the FDA
• FDA has NEVER expressed that Gen1 was approvable based on safety and efficacy
• Second CRL clearly requested TWO additional clinical trials to be conducted (i.e. harsh CRL)
• Requested clinical trials will NOT be completed until end of next year (2012)

What's the fuss about Mannkind?

The Valentia, California-based biotech, which has been trading in the $3.8 - $4 range, jumped 8.5% to $4.33 in after hours trading on Friday, as investors regained confidence in Mannkind's insulin device after the company presented 'new data' at the 71st Annual Scientific Session of the American Diabetes Association, one of the largest gatherings in the diabetes field.  This is a perfect trading opportunity because MNKD's share price is known to be highly volatile and there appears to be a predictable pattern in which MNKD moves.  The recent example of volatility can bee seen back in late April and early May.  On April 26, words circulated that the insulin device-developing biotech was going to announce regulatory updates on May 9 during 1Q earnings report and the stock jumped 16% in the next 2 days.  Remember, this was not usually a significant catalyst (no new data, no FDA decision) that would prompt  any major stock movement, and yet MNKD was up 16%!  Before long, MNKD dropped back down to its previous trading range, erasing almost all of the gain resulted from the hype (down 13%) when Alfred Mann, CEO of Mannkind, revealed the highly anticipated regulatory update, which simply stated that Mannkind was working on finalizing the protocols for the upcoming clinical trials.     

Relevancy (or lack it it) of the new data on patients' perception of insulin therapy

First of all, Mannkind was not completely forthcoming in its press release about the study results.  The company made it sound as if a new trial was conducted and new data were collected when the results were merely an analysis of a trial already completed last year.  This 16-week trial was designed to have primary and secondary endpoints.  Results of the primary endpoints, which show that Afrezza is clearly non-inferior to standard therapy insulin lispro combined with basal insulin in reducing HbA1c levels in patients with inadequately controlled type 1 diabetes (7% < HbA1c less-than or equal to 9%) were already presented last year prior to FDA's issuance of the CRL.  This meant that the agency had already reviewed and taken into account these results when ruling against Afrezza's approval earlier this year.  My first reaction when seeing Mannkind presenting results of the secondary endpoints was 'why is this even relevant?!'.  If the FDA did not like the results of the primary endpoints, it certainly won't change its mind based on secondary endpoints analysis, which itself also presented weak conclusions.  

Take a look at the results of the secondary endpoint analysis included in MNKD's PR on Friday: 

In the 16-week, randomized, multicenter study, adults with type 1 diabetes used Afrezza plus insulin glargine [Afrezza group] (n=61), or insulin lispro plus insulin glargine [standard insulin therapy group] (n=65).

Treatment satisfaction improved from baseline to Week 16 in both treatment groups (p<0.05), with no significant between-group differences in change. Perceptions of insulin therapy, (overall and three subscales: convenience, comfort, and ease of regimen adherence) improved from baseline to Week 16 in the [Afrezza group] (all p<0.01), and comfort improved in the insulin lispro group (p<0.05).  Overall perceptions of insulin therapy, convenience, comfort, and ease of regimen adherence improved more in the [Afrezza group] than in the [standard insulin therapy group] (all p<0.05).

To me, the first part of the result (highlighted in green) contradicts the end of the paragraph (highlighted in red).  What is the relevancy in differentiating 'treatment satisfaction' from 'overall perceptions' anyways?  If patients were satisfied with the treatment, how could they have perceived the therapy negatively?  Similarly, if one did not perceive the treatment positively, could he/she have been satisfied with the treatment?  If one really wanted to look at treatment satisfaction and overall perception separately, does it matter then how one perceives the treatment, if one is already satisfy with it?  This is a total last effort by Mannkind to 'convince' the misinformed investors that the company still has a shot at gaining FDA's favor after two failures.  Putting this irrelevant piece of data aside, the fact of the matter is that the FDA, in its second CRL to Mannkind, clearly requested TWO additional clinical trials to demonstrate successful bridging of Mannkind's Gen1 (Medtone) and Gen2 (Dreamboat) device in humans.  Based on a Reuters report, Mannkind does not expect to complete these trials until the end of next year (2012).  So, are you still excited about Mannkind's Friday PR?  I'm not!

Trading roadmap

Above is my long way of saying, I am SHORT MNKD.  Briefly, I will be purchasing puts against MNKD - likely July $4.5 puts (trading at $.52 at Friday's close).  I expect a tiny uptick in MNKD on Monday morning before selling takes place.  My target is for MNKD to fall to $3.8 or even $3.6 in the next 2 weeks.  I will be posting my trades - feel free to follow me on Twitter (@michaeljuan01).  Good luck!

UPDATE: Acura Pharmaceuticals (ACUR) gains approval from FDA but not from investors

ACUR drops heavily on drug approval?!

Acura Pharmaceuticals' (ACUR) abuse-deterrent analgesic, Qxecta (previously known as Acurox), was granted marketing approval by the FDA last Friday evening (6/17).  Since the approval was somewhat of a surprise to a lot of investors (myself NOT included - see first ACUR post), shares gapped up from Friday's close of $3.87 to Monday's open of $6.44, reaching a peak of $6.80 (52-week high).  However, it did not take long for ACUR to come crashing back down, bleeding 34% on the same day that the stock jumped on approval.  Today, the loss continued for ACUR, which declined another 9.33% to settle at $4.08; remember the post-approval peak was $6.80!!!  While many are astonished by the turnout of the stock movement, this was in fact an expected fate of small cap biotechs following an FDA approval (e.g. OPTR, SPPI, BMTI (panel)).

How I traded

As mentioned in my series of posts prior to ACUR's PDUFA, one of the most consistently profitable trading strategies that I frequently utilized to trade biotech catalyst events, including PUDFA, was Post-approval 'Slide'.  Anticipating a quick slide in ACUR based on this strategy, I purchased put option contracts shortly after Monday's open while ACUR first jumped.  The major sell-off in ACUR quickly boosted the price of these put options, gaining 77% in 2 days (July $5 puts: IN $.65, OUT $1.15).  Throughout this time, I was posting comments and trading updates on Twitter, providing ideas for those also interested in biotech stocks and options trading.  I will continue to do this - feel free to follow me on Twitter (@michaeljuan01) for biotech trading ideas.

Congratulations to all who also profited from the Post-approval 'Slide' strategy!!!    

Weekly watchlist (6/20): ACUR and PTIE

The coming week will be full of biotech catalysts: ACUR (post-approval trading), FCSC (PDUFA 6/22), LCI (PDUFA 6/23), PTIE (6/23).  I will be focusing primarily on ACUR and PTIE (Pain Therapeutics) as these two companies are working on very similar products and hence are a matched pair (i.e. stock price of the two companies are inter-dependent and highly correlative with each other).  I believe, if traded skillfully and carefully, this matched pair can do really well this week.

Trading roadmap
Acura Pharmaceuticals received FDA's approval late Friday (6/17) for the marketing right of its oxycodone immediate release tablet, Qxecta, for relief of moderate-to-severe pain (read background).  This will likely lead a surge in Acura's stock (ACUR) tomorrow morning when trading begins (pre-market actions are also expected to be extremely active for ACUR).  While a drop in ACUR from the post-approval peak is inevitable and widely expected, the mere fact that PTIE (ACUR's direct competitor) has a high probability of receiving a CRL on Thursday might sustain ACUR's price at a relatively high level.  In fact, if PTIE's drug is indeed rejected, another jump in ACUR may take place.  This makes my favorite 'post-approval slide' strategy a bit less simple.  However, I am going to rely on the irrationality of the market to estimate the price movement of ACUR and PTIE in this coming week.  Here is what I plan to do:

1) Buy ACUR July $7.5 puts
With hype building around ACUR, as news of drug approval had the weekend to disseminate, I am raising my ACUR target slightly from my previous estimate to $5 - 5.80 (30 - 50% jump from Friday's closing price of $3.87).  Since ACUR will unlikely cross $7.5, buying the $7.5 puts at a reasonable price (i.e. < $2.5) will be the safest play in my mind .  

2) Buy PTIE July $5.5 calls
This is an unconventional play and hence carries some risks.  As mentioned above, ACUR and PTIE are a matched pair.  Therefore, while ACUR surges tomorrow, a mini sell-off (5-10%) in PTIE may occur.  In my mind, with a PDUFA catalyst scheduled in 3 days (counting from Monday), experienced traders will quite possibly step right back in after the sell-off and induce a run up in PTIE before Thursday, making the dip a perfect entry point (reasonable price for July $5.5 calls < $3.5).  Since I also think the outcome of PTIE's drug candidate (Remoxy) will be a CRL or a delay due to potential manufacturing issues (see below), I do NOT plan to hold these calls through the PDUFA.  The possibility of manufacturing issues was mentioned in Remoxy's sub-licensee, Pfizer's, Q1 2011 earnings call.  Below is an excerpt of the call transcript:

"In terms of anticipated regulatory decisions later this year, the PDUFA date for REMOXY is currently set for June 23, 2011. At this point, we are working to address the specific issue in the manufacturing section of the application as well as to understanding any potential implications for FDA'S recent class-wide REMS, announcement for extended-release opioids. These issues could delay the timing of approval or the launch of REMOXY."

Follow me on Twitter (@michaeljuan01) for trading updates.  Good luck!

  

UPDATE: FDA approves Acura Pharmaceuticals' (ACUR) abuse-deterrent pain killer, Qxecta

Acura Pharmaceuticals was given the stamp of *approval by the US drug regulator on its novel abuse-deterrent pain killer late Friday (read background).  The drug is a co-development product by Acura Pharma and Pfizer and will be sold under the new trade name, Qxecta (previously referred to as Acurox).

Trading roadmap 

Given the broadly unexpected downtrend in ACUR's stock price prior to the PDUFA, lots of investors grew increasingly skeptical about the outcome of Qxecta's review by the FDA and initiated short positions to bet against ACUR's drug approval.  Hence, without hearing any news from the Palatine, Il-based biotech, many were forced to hold their short positions into this weekend and these people will have to cover these positions on Monday.  This, along with the drug approval news, will cause a temporarily spike in share price, which I expect to fade very rapidly.  I will take the opportunity to purchase July $5 or $7.5 (if available) put options while ACUR shoots up on Monday.  Remember, the price of put options goes in opposite direction of the share price, so put options will likely be CHEAP around the post-approval peak.  

Follow me on Twitter for trading updates (@michaeljuan01).  Good luck everyone!!!

*Thanks Gekkowire for sharing his personal correspondence with the FDA.  

Acura Pharmaceuticals (ACUR) - FDA decision on Acurox approval to be announced today

ACUR stock has suffered some serious blows in the past 10 days, as 1) early investors pulled out and booked profit and 2) many began to doubt the approval of ACUR's abuse-deterrent pain killer, Acurox (previously met with regulatory obstacles).  We will soon find out the final outcome.  If a complete response letter (CRL) is issued, then expect ACUR to drop to $2 - 2.5.  If approval is announced, then expect ACUR to surge to $5 - 5.2 (25 - 30% pop from $4).

My plan is simple:

On REJECTION, I will simply move on without losing a penny.

On APPROVAL, I will purchase CHEAP July $5 or $7.5 puts in anticipation of a quick sell-off (remember, Friday's approvals almost always don't end well; **OPTR)

Follow me on Twitter (@Michaeljuan01) for trading updates.  Good luck!  

Acura Pharmaceuticals (ACUR) - could abuse-deterrent pain killer deter investors?

Summary 

Company - Acura Pharmaceuticals (ACUR)

Drug candidate - Acurox

PDUFA - June 17, 2011

July 2009 - FDA issued CRL

April 2010 - FDA advisory panel voted 19 to 1 against Acurox approval

June 18, 2011 - PDUFA (?)

Poll by Gekkowire

64% approval

28% CRL

8% delay

Acurox® (oxycodone HCl) Tablets

Acurox® is an immediate release opioid analgesic (pain killer), oxycodone, tablet with a proposed indication for relief of moderate-to-severe pain and is designed with proprietary formulations to deter common methods of misuse and abuse by IV injection and nasal snorting.  Acurox® Tablets are being developed in strengths of 5 mg and 7.5 mg.

Third time's a charm?!

Acurox' road to marketing is not without regulatory hurdles.  The original version of Acurox, one including niacin, was initially rejected by the FDA in July 2009 due to concerns over the claimed deterrent benefits of the experimental drug.  Then, in April 2010, a similar issue was raised by the FDA advisory panel members, who voted 19 to 1 against recommending Acurox for approval due to insufficient data supporting niacin's benefit and efficacy in deterring prospective abusers.  Interestingly, despite the skepticism surrounding the use of niacin, the panel members generally favored the injection and snorting deterrent advantages of Acurox's formulation.  In fact, some members even felt like Acurox was readily approvable if the niacin component of the drug was removed.  During the meeting, it was brought up that introducing an additional side effect - flushing - to a pain killer through the addition of niacin may decrease patient compliance and eventually raise medical cost unnecessarily, as patients delay the prescribed treatment.  Based on the feedback and comments received from the panel meeting, Acura Pharmaceuticals decided to give it a third try with a new, niacin-free version of Acurox, which was granted priority review status in February 2011.  The Palatine, Il-based biotech recently published the following statement on its website:

"In addition to filing acceptance and assignment of a priority review classification, the FDA’s filing communication letter to Pfizer (Acura Pharma's partner) also includes preliminary comments about potential review issues relating to the intranasal abuse liability study included in the Acurox® Tablets NDA.  The preliminary notice of potential review issues is not indicative of deficiencies that may be identified during the FDA’s review of the NDA.  No assurance can be given that any issues raised as part of the FDA’s review of the Acurox® Tablets NDA (including the potential review issues in the FDA’s filing communication letter) will be addressed to the FDA’s satisfaction or that the Acurox® Tablets NDA will be approved by the FDA."

Trading map

The price target on Acurox approval ranges from ~$6 to 10.  Although, I, like 64% of the traders, am optimistic about Acurox approval, personally think the $10 target is too ambitious given that we are only 9 trading sessions away from the PDUFA.  Since ACUR had already run up from the $3 level in March of this year to the more recent $5 level, it is more likely that approval has already been priced in with limited upside remaining.  I believe that ACUR may run up to ~$5.50 before the PDUFA action date (June 17), followed by a slight pop to $5.70 before a major sell-off.  Given this outlook, I plan to use the post-approval slide strategy to purchase cheap put options during the narrow window immediately after the approval announcement, expecting a quick drop in share price (the 'post-approval slide').  For reference, the July $5 puts are trading at just under a dollar, $0.99.  However, I will wait until the approval announcement before I buy, as the price will likely be lower at that time.  Follow me on Twitter (@Michaeljuan01) for trading updates.  Good luck!  

  

UPDATE: Obesity drug developer (OREX) crashed after regulatory update

In today’s conference call, Orexigen Therapeutics (OREX) revealed FDA’s request of a new 2-year, ~16,000-patient clinical trial, assessing Contrave’s (Orexigen’s experimental obesity drug) cardiovascular risks.  Management did not signal moving forward with conducting this additional study in the US and suggested that Contrave’s development of Contrave may only continue in foreign markets outside of the US.  This essentially marked the end of Contrave’s marketing path in the US and Orexigen’s stock (OREX), which had rallied more than 16% 2 days ago on news of the regulatory update, was punished heavily, tumbling more than 30% in early trading.  Meanwhile, put options holders pocketed overnight 100%+ profit (e.g. June $3.5 puts @ 1.4 from 0.6 (133% gain)) from OREX’s falling share price.  Congrats to those successfully spotted the downside trading opportunity of Orexigen!    

Orexigen (OREX) - updates on diet pill development creates chubby trading opportunity

Orexigen (OREX) was 1 of the 3 companies racing to obtain FDA's approval for the first new diet pill in more than a decade.  The company's obesity drug, Contrave (a bupropion and naltrexone combo drug), eventually received a Complete Response Letter (CRL) from the US drug regulator on Feb 1 of this year due to safety concerns.  The news sent the stock down more than 70%, which in turn boosted the price of my put options ~300% overnight.  At the time, I devised 3 option strategies with various levels of risk for all types of investors who all profited from OREX's anticipated fall.

The diet pill-developing company will be holding a conference call before regular hour trading this Friday (June 3), discussing plans to further Contrave's development.  This announcement encouraged investors to jump in, helping OREX to surge more than 18% by market closing today.  I believe this is a perfect opportunity to play the downside of OREX by purchasing put options.  Back in February, FDA requested Orexigen to conduct additional clinical trials, of sufficient size and duration, to properly assess Contrave's safety.  This is NOT an easy and quick request to fulfill - it may take 2-3 years or even longer to complete the requested human study, which may or may not yield positive results.  Here is a great analysis of OREX's CRL.  Based on FDA's guidance, I believe OREX will NOT provide any exciting/useful information that will sustain the pre-conference call hype.  I will be looking into buying June or July $3.5 puts, expecting OREX to drop down to the $2.80 level after the conference call.

Follow me on Twitter (@Michaeljuan01) for trading updates.

UPDATE: Optimer's antibiotic received FDA approval on Fri. What a ride since then!!!

Finally, Optimer Pharma's (OPTR) antibiotic drug candidate, fidaxomicin, was approved by the US drug regulator.  Because of the unique timing of the announcement, being very late on a Friday just before the Memorial Day long weekend, a 'strange' trading pattern had immediately followed the drug approval.

Optimer Pharmaceuticals (OPTR): clock ticks as FDA decision nears. Could it be today?

Optimer (OPTR) hitting new 52-week high on decision day
Optimer Pharmaceuticals' (OPTR) shares have once again experienced wild swings in the past few days ahead of FDA's decision on the marketing right of the company's antibiotic candidate, fidaxomicin.  A new 52-week high of $13.40 was reached just now as the investment community expects to hear positive news today.  Optimer's CEO is upbeat about the potential approval and ready to ramp up the sales forces for the product launch.  According to his recent interview, the drug, being the first new therapy for C. diff infection in 25 years, will have its own category and become universally endorsed.  What investors are most concerned with now is the labeling of fidaxomicin post approval, an issue that may play a significant role in the upside potential of OPTR after the news release.

Options strategy
I used some of the money earned during OPTR's run-up or pre-PDUFA 'Hike' to set up the following options play:

The way these options have been arranged allows me to walk away with no less money than I begin with (i.e. $6205) REGARDLESS of FDA's decision.  It is set up such that my calls are fully hedged and my profit will range from $6275 (rejection) to $9585 (approval, high aim).  Remember, this is ALL profit for me because I am using the money earned from the run-up (basically riding 'free' through PDUFA).  Hopefully, a decision will be announced sometime before the market closes today so everyone can have a stress-free long weekend.  Good luck!

UPDATE: Optimer Pharmaceuticals (OPTR) - how I plan to trade in the next 2 days before FDA's approval decision

Optimer Pharmaceuticals (OPTR) has a PDUFA on May 30, but since May 30 is a US holiday, the FDA is expected to announce their ruling on the marketing approval of OPTR's fidaxomicin either on FRI May 27 or TUE May 31.  At this point, the consensus among investors is that the news will be out this FRI.  Assuming this is correct, we are merely 2 trading sessions away from potentially hearing fidaxomicin's approval by the FDA!


Fidaxomicin is a novel antibiotic for C. difficile infection (read here and here).  


Today's trend

OPTR has been hovering around $14 for the past few days.  Today, the stock finally broke through $14 and reached a 52-week high of $14.20, at which time a lot of traders offloaded their shares to lessen their risk profile ahead of Friday.  This caused OPTR to drop sharply from the peak down to $13.79.  During the downtrend, I sent out a tweet with the following message - "should see another $OPTR pop later today".  Indeed, from that point on OPTR started climbing back up and eventually touching $14.07 at 12:06 p.m. PT.  This second intraday peak stayed around for 6 minutes, an interval during which I sold all of my June $17.5 calls (67% profit) and half of my $15 calls (100% profit) (see my tweet).  I still believe that OPTR's drug will receive FDA's approval and that there is another $1-2 upside, but I wanted to lower the risk of not being able to sell my large position immediately after news release (especially the $17.5 calls), and this was the basis of my trade today.


Trading map
There are 4 strategies I may use to trade OPTR between tomorrow and FRI (or TUE):    
1) Sell the rest of my $15 calls IF OPTR pops above $14.5
2) Sell the rest of my $15 calls and buy back cheap $15 calls IF a bear raid happens on FRI*
3) Sell the rest of my $15 calls post approval IF/WHEN approval is announced
4) Buy puts with a strike closest to the post-approval peak EXPECTING a post-approval drop (the 'Slide')


*This is a little tricky because one needs to make the assumption that a bear raid will occur (my feeling, based on what happened to a few other companies including SPPI, is that there is a ~70% chance that a bear raid may take place)


I may use one or a combination of the above strategies, which I think will maximize the profit from trading OPTR.  


Follow me on Twitter (@michaeljuan01) for instant updates.


Disclaimer: At times when I am unable to send out 'instant' updates, I will try to tweet my trades ASAP!  

Optimer Pharmaceuticals (OPTR) - odds of fidaxomicin approval based on previous record

Unanimous support - approval odds?
Optimer pharmaceuticals (OPTR) has a PDUFA action date on May 30.  Its investigational antibiotic, fidaxomicin, already had full support from the FDA advisory panel.  How likely will it be approved?  Let's look.  

Below is a quick list of companies whose drug candidates were unanimously recommended by the FDA advisory panel for approval during 2010-2011.  The panel meeting dates, vote results, and final FDA decisions are provided.   

AstraZeneca plc (AZN) 12/2/10, 10-0 for approval, approved (4/7/11)

Bayer AG (BAYRY.PK) 1/21/11, 16-0 for approval, approved (3/15/11)

Valeant Pharmaceuticals International (VRX), 8/25/10, 13-0 for approval, CRL (12/1/10)

Thera technologies (TH.TO) 6/10/10, 16-0 for approval, approved (11/11/10)

Boehringer Ingelheim (non-public), 10/6/10, 9-0 for approval, approved (10/19/10)

HRA Pharma (non-public), 6/16/10, 11-0 for approval, approved (8/13/10)

5/6 companies with full panel support
ultimately received approval

As you may already discern, 5 out 6 (83%) of these companies, whose experimental drugs were collectively agreed upon by the members of the FDA advisory committee as being safe and effective for patients, ultimately gained an approval from the US drug regulator.  Will OPTR be added to the list of successful companies granted a drug approval on May 30?  While the FDA is well known for being extremely unpredictable in its rulings, often evaluating multiple factors such as labelling, REMS, safety, and efficacy altogether, I believe OPTR does have a 83% chance of seeing FDA's nod with its experimental antibiotic, fidaxomicin.  Therefore expect people to buy the dips any time between now and May 30.  


My June $15 calls are up 88% and $17.5 calls up 34% so far and I plan to hold them through until next week.  

Disclosure: June $15 and $17.5 calls

REVIEW: Biomimetic Therapeutics (BMTI) sliding on lukewarm panel review

Biomimetic Therapeutics received a 'not-completely-negative' panel review

Last week Biomimetic Therapeutics (BMTI), developer of the Augment bone graft, saw a wild roller coaster ride in its share price ahead of the FDA advisory panel.  Biomimetic's Augment product was approved for sale in Canada in Nov 2009.  Augment bone graft is indicated for use in orthopaedic surgery in replacement of an autograft.  The company is currently seeking US FDA approval for Augment.  The wild swing of BMTI began with the release of a concerning FDA document last Tuesday (2 days before the scheduled FDA panel meeting), questioning the design of BMTI's clinical study, which was ineffective in providing meaningful data to support Augment's safety and efficacy as an alternative to autograft in hindfoot and ankle fusion procedures.  Following the release of this document, BMTI plunged almost 35%, as fearful investors immediately equated the negative sentiment to the possibility of  a negative panel review.  However, there have been cases in the past where the panel ignored FDA's document and voted in favor of the product candidate's approval.  Mela Sciences (MELA) was one of them (bouncing back 110% immediately after panel meeting).  On the morning after BMTI's drop due to the FDA's comment, I sent out a tweet (May 11), pointing out that BMTI might bounce back like Mela Sciences (MELA) did if BMTI were to receive a 'not-completely-negative' panel review.  This was exactly what happened 2 days later - the FDA advisory panel voted 10-8 in favour of Augment's benefit over risk.  Based on this and the beaten down share price before the panel, it was widely anticipated that BMTI would surge on Friday, May 13 (a day after BMTI's trading halt due to panel meeting) in pre-market and in early trading. 

Which options to buy? - some number crunching

My trading experience tells me that if one goes against what everyone else is doing, 9 out of 10 times he will be rewarded!  Since most people were scrambling to BUY BMTI on 'positive' news, what I did was SELL.  Purchasing put options, contracts that give one the right but not the obligation to sell the underlying equity at the strike, is a tremendously versatile strategy that takes advantage of a falling stock price (read more on options).  Did I expect the BMTI to fall?  ABSOLUTELY!!!  Investor overreaction almost always causes a rising stock price to overshoot its 'fair market value', a phenomenon that is only resolved by a quick pullback (i.e. fall in share price).  The above strategy could be tremendously profitable, but the most difficult part is to predict the peak of the overshoot.  Only with a correct estimate of the peak can investors purchase the closest out-of-the-money put options at a CHEAP price (before everyone else does) to reap high % gains.  My estimate was as follows:

Average pop following positive news: 10-30% (depending on company, drug, previous run-up… etc.)

BMTI share price pre-FDA document release: $13.40

BMTI share price at the end of Wed (before the halt today): $9.20

% drop: 32% (will likely be re-gained fully)

Estimated % surge tomorrow: 32% + 10-12% (BMTI-specific pop) = 42-44%

Estimated PEAK before share price drop: $9.20 x 1.42 or 1.44 = $13.06-$13.25

Keep in mind that I tend to keep my estimate conservative.  In other words, I try to assume the highest % surge when arriving at the target peak of $13.06 - $13.25.  This will prevent me from taking a loss should the price goes much higher than my estimate.  If the price is much higher than my estimate, then it might never come down to my strike (minus premium) and my put options will expire worthless.  On the other hand, the worse that could have happened with my conservative estimate was to miss a trade (much much more preferable to losing money).

Profiting from a falling stock - how did I do it?

'The morning after' is the best part of trading biotech stocks.  With a major catalyst (e.g. PDUFA, PDA panel, clinical results) taking place the previous day, there is alway a ton of opportunity to be had the next day - especially in the morning!  Watching the stock closely in pre-market trading, I sensed that there was NOT going to be a huge run-up after the opening bell because BMTI had only gained less than 7% (this was far from my anticipation of a 42-44% pop).  The absence of an extreme price jump arose from 1) loss of investors' confidence due to FDA's harsh comment, 2) mediocre panel support, and 3) negative outlook and a potential long wait until Augment approval.  As trading began, BMTI immediately dropped from the high 9's down to the high 8's before settling at around $9.  By that time, I sent out a tweet disclosing my order for May $8 puts at $0.35 (avg fill @ $0.34).  I could have gone for the $9 puts but I felt like the price was too high and the % gain would not have been as great compared to the $8 puts if BMTI continued to bleed.  Since there was not going to be any upcoming catalyst for BMTI, I figured the $8 puts were safe and profitable.  It turned out I was right.  The 'slide' occurred in a catastrophic fashion - more than 18% of BMTI's peak value was lost in 2 trading sessions since Friday's open.  As a result, my $8 puts grew from $0.34 to $0.60, representing a 76.5% profit in TWO trading days.  


Check out my Profit.ly updates and follow me on Twitter (@michaeljuan01) to see my next investment targets!