Lessons Learning

I AM NOT A FINANCIAL ADVISER! This is my attempt to better understand the cause/effect relationship of FDA Advisory Committee (AdComm) meetings on BioTech/Pharm stocks. The is for my own education, not to serve to advise or recommend any path for others. If looking for advice look elsewhere. If trying to understand the same stuff I’m trying to understand, please draw your own conclusions… mine are nuts, and would likely put you in the poor house.

I’ll update this list of generic observations as I go… there will lots of stupid notions listed here, but hopefully they’ll disappear as I pay the price for the education.

Skim the Meeting Materials as soon as they come out and find the Recommendation-, Conclusion-, Endpoint- and Risk Assessment-oriented sections… they often don’t have consistent names, so be ready to skim. Weigh the likelihood of Approval Recommendation based not only on achieved Trial End Points, but safety and confidence of the results.

FDA Final Approval may have another delightful bump, if it occurs… but it is not guaranteed to be Approved simply based on the Ad Comm recommendation.

As with any trade, it would be wise to avoid instruments that trade on thin volume (read: EPGNY). Some baseline at 300K, some 1M, some higher. My lightest current position averages 300K, which feels pretty darned thin to me at the moment.

For Approval Recommendations, I am personally encouraged to sell on the first candle after the first red candle on a two-minute chart and not screw around waiting for another bump… Yes: this will occur during “Amateur Hour”. No: this does not bother me.

For Approval Recommendations, I am personally tempted to short from the exit point identified above, to cover at 10% beneath the observable High from minutes before. This is a refinement of the “cover 20%” suggested by the CHTP AdComm. “Tempted” does not mean “likely to do so”… I will observe more to gauge the consistency of market behavior.

Based on CHTP and MNKD, the most favorable outcomes are realized from interpreting the summary/meeting prep docs and ignoring what anyone says about them that you have not observed yourself. People love to talk about how stupid people are when they think [any ole drug/device] will pass, until they do pass, and that’s when you realize 140% gains in after-hours and go on to cover your new shorts for another 40% over the next five days. No: I still have not shorted the win yet, but gosh am I tempted. I’ll look for trial Endpoints being satisfied but a general sense that Shorts want to scare me, and buy the heck out of that 2-3 days prior to AdComm, especially if I see the post-Materials drop that I saw in CHTP and MNKD.

The following are some observations that have been “generic-ified” from previous experiences… I’ll either post smaller changes for both gains and losses or provide a range:

From Rejection Recommendations

  • Best results (if the hope was an approval) would have been to have bought two trading days before the AdComm
  • There was a 5.26% drop from the Close of the Materials Release date to the Close after we had access to the info.
  • A negative reaction to Materials, for which the ultimate AdCOmm recommends Approval, is a force multiplier for the degree of “success”. If “we” hated it (drop after release) and it “wins”, it “wins” big… of course.
  • The first trading day post-vote High was 2.1% higher than the Open.
  • The first trading day post-vote Low was 3.281% lower than the Open.
  • The first trading day post-vote Close was 1.14% higher than the Open.
  • The fifth trading day post-vote Close was 1.69 (5.838%) higher than the first trading day Open.
  • The five-day High was 6.639% higher than the five-day Open, and occurred on the fourth trading.
  • The five-day Low was 3.282% lower than the five-day Open, and occurred on the first trading day. In other words: bad news is very fast to be reflected in the price.

From Approval Recommendations

  • Best results would have been to have bought 2-3 trading days before the AdComm
  • There was a 29.178% drop from the Close of the Materials Release date to the Close after we had access to the info, or 6.31% – 7.115% to Close on the day-of when released during trading hours for “successful” outcomes.
  • There was a 4.867% bump on the Close of the Materials Release date from the prior Close for “unsuccessful” outcomes.
  • The first trading day post-vote High was 0.3% – 8.394% higher than the Open.
  • The first trading day post-vote Low was 3.057% – 25.7% lower than the Open.
  • The first trading day post-vote Close was 1.612% – 24% lower than the Open.
  • The five-day High was 0.347% – 8.394% higher than the five-day Open, and occurred on the first trading day.
  • The five-day Low was 8.616% – 22.968% lower than the five-day Open, and occurred on the second or fifth trading day (one exception was 13.596% on the fifth trading day, and was an “unsuccessful” outcome).
  • The actual HIGH was shortly after the Open in After-Hours trading on the afternoon of the vote… After-hours is a pretty terrific exit point when available.

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