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!