Editor’s Note: I’m deviating from the usual Wealth Daily weekend wrap-up to present you with what I consider one of the best investing strategies around today: trading FDA decisions.
Enjoy,
Ian Cooper
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Very few things have such an impact on biotech stocks.
FDA decisions are among the biggest factors, but given the FDA’s unpredictable nature, there’s still no such thing as a sure trade.
Yet it really doesn’t matter what the FDA says.
What does matter is being in the know and being in the right place at the right time.
Most of us who use the FDA calendar and Phase III trial dates know one thing: The price of a biotech and pharmaceutical company will go up as the date in questions draws closer.
And if you want to maximize your potential return, have any pending dates in hand at least one to three months in advance. (I should note that in some instances, you can buy a stock days in advance using conference dates.)
In the case of our recent Dendreon (DNDN) trade, which produced 65% and 71% gains, we were able to profit within a day or two of a presentation at the ASCO Genitourinary Cancers Symposium. Buying ahead of this conference — where speculators anticipated an explosive upside move — resulted in quick gains.
You see, as an FDA decision date, Phase III result date, or conference nears and people expect to hear good news, crowds of speculators and traders start coming in to buy the stock, sending the stock up.
Intermune (ITMN) is a good example of this; it began popping in December 2009 ahead of FDA news:
This happens over and over again with many biotechs and pharmaceuticals. The only key is having the information in as far in advance as you can.
We also know that FDA approvals, rejections, even Phase III study results can make or break any pharmaceutical company. There have been instances where a company has lost 90% of its value… and there have been instances where a company rises 800% in a single day.
But again, the key is to profiting is having the decision dates months in advance… and being well hedged. If we’re trading an FDA date months in advance, we’ll play a call option as speculators rush in.
If we’re trading that same decision weeks in advance, we’ll hedge the bet with a put and a call, oftentimes successfully betting that one side will significantly outperform the other.
While we’re doing our due diligence with trades two to three months out, we’ve put together a list of some biotech companies facing decisions that’ll send stock prices to the moon or kill them off. Fortunately, with options, it doesn’t matter what happens. You can profit either way.
Options Trading Pit, for one, was able to profit from some of these FDA decisions and meetings by having "early bird" information.
We’ve already banked 65% and 71% gains ahead of Dendreon’s updated data from its Phase III Provenge study at the ASCO Genitourinary Cancers Symposium — but we can still profit ahead of the company’s May 2010 PDUFA.
Intermune (ITMN) may have popped $8 last week, but we could see further upside today as an FDA advisory panel meets to discuss pirfenidone for the treatment of idiopathic pulmonary fibrosis. If you had this information in December 2009, you could have bought calls prior to increased volatility ahead of this and rode the underlying stock from a low of about $10.50 to more than $21.
On March 12, we’re awaiting FDA approval for exenatide once weekly for diabetes. Amylin Pharmaceuticals (AMLN) and Alkermes (ALKS) are the stocks to watch ahead of this decision.
March 21 is the FDA approval decision date for Somaxon’s (SOMX) Silenor for insomnia.
March 24 is the FDA approval decision date for Salix’s (SLXP) Xifaxan for hepatic encephalopathy.
By March 29, we should have word on the FDA’s ruling on Cephalon’s (CEPH) Nuvigil for the treatment of jet lag disorder.
And while there’s no date set on Genvec’s (GNVC) TNFerade drug for the treatment of pancreatic cancer, keep an eye on the stock going forward. The company is conducting an analysis of a Phase III study comparing the effect on overall survival of the drug. Any positive news from this Phase III study could send the stock screaming north.
By March 30, Seprecator (SEPR) will see FDA action on Stedesa as adjunctive therapy in treatment of partial-onset seizures in adults with epilepsy.
By May 1, Bristol Myers (BMY) will see FDA action on Belatecept for prophylaxis of organ rejection and preservation of a functioning allograft in adult patients receiving renal transplants.
As for other longer-dated trades, while this one doesn’t have options, be sure to watch it: Biodel’s (BIOD) diabetes drug candidate VIAject is now being reviewed by the FDA. A regulatory decision is due on October 30, 2010.
This is only a taste of the many FDA, Phase III, and conference dates that we have on our radar. The early bird gets the worm when it comes to profits in this sector.
To learn more about how to get in on my newest Options Trading Pit FDA trades… including crucial FDA conference and Phase III info… click here.
Stay Ahead of the Curve,
Ian L. Cooper
Wealth Daily
P.S. In the coming weeks, look for a new special report I’ll be issuing on a very unique way to profit off of FDA decisions. I’ve discovered what some might call an "insider’s edge" when it comes to knowing when and how to get in on companies awaiting key rulings on their products. And no matter which way the FDA rules, I’ll show you how to make money. In fact, I’ve already zeroed in on one firm that could double your money by the end of April. Stay tuned…
P.P.S. In case you missed any of the week’s top-read articles from Wealth Daily and our sister publications, you can catch up on them now:
An Overview of the Alzheimer Drug Market: A Pro’s Take on the Future of Pharm
In light of a failed Phase III drug trial last week, Wealth Daily Publisher Brian Hicks brings readers an overview of the Alzheimer pharmaceutical market.
Biotech Stocks: Where Things are Just Starting to Heat Up
An American bio-pharma firm owns the breakthrough that could soon render millions of annual deaths from disease a thing of the past. WD reveals to readers the name of the company creating the vaccine that could turn your $5,000 investment into an easy $500K return.
The GDP-21 Profit Algorithm: How to Make 57x your Money Before April 30
Wealth Daily reports on how shares of well-positioned resource firms in countries with rising Gross Domestic Products go up many times more than the corresponding increases in GDP.
Profiting From Foreclosure Stocks: Two Simple Ways to Capitalize
Editor Ian Cooper explores the current foreclosure situation facing the U.S. and gives readers two very easy ways to profit from the trend.
The Gold Fire Sale: How to Buy Gold at 4.4% of today’s Spot Price
Wealth Daily reports on the outlandish $50.61/ounce price of gold… And how it’s all thanks to one of North America’s greatest gold secrets.
Birth of the Supergrid: 9 Nations and 20 Companies Plan Europe’s Clean Power Future
Editor Sam Hopkins uncovers the investing opportunities in burgeoning plans to develop a pan-European power grid.
The Global Energy Race: The Countries Keeping Their Energy Dollars
Energy & Capital Editor Nick Hodge discusses the battle plan of developing countries in today’s energy war…
The Best Stock to Own in the Next Oil Boom: 4 Reasons the Price of Oil Will Continue to Rise
Energy and Capital Editor Christian DeHaemer explains to readers the four reasons the price of oil is going to keep moving up, and the one stock you want to own to profit from it…
How to Rebuild America: The New Road to Energy Sustainability
In his report "How to Rebuild America," Editor Chris Nelder writes a letter to Congress on behalf of the American people, asking for a real energy plan…
