This is a quickie for you, I came across it and don’t want to write up a full look at the company but I thought some of you would like the teaser solution.
The ad’s from Agora Financial’s FDA Trader, which has been touting this “magic calendar” idea of investing in stocks around (mostly) PDUFA dates and other FDA and clinical trial-related news releases. And no, the calendar isn’t “magic” — nor is it exact — but there are dozens of such services now because FDA reviews and approvals are on more of a defined schedule following the passage of PDUFA a few years back, and a growing cadre of both free and paid services and websites track those dates. Because the FDA doesn’t — at least not in a way that’s geared toward informing the public about which dates are about to hit.
PDUFA dates are reported by companies in press releases or conference calls, often, and they are deadlines by which FDA response is expected — roughly 10 months after a submission in most cases. A response could come earlier, and often comes a few weeks earlier than the date, and on occasion they miss the deadline.
And, of course, if you think you know exactly what the FDA response will be on any particular new drug application (NDA)… well, good for you. But please don’t bet your mortgage payment on it. People have made and lost huge amounts of money by speculating on stocks with upcoming PDUFA dates, and the people who lost money were pretty sure they were right, too. Surprises can come on anything, even a relatively innocuous looking aesthetic injection.
But with that said, which stock has Paul Mampilly labeled a “buy” here for that May 13, 2015 PDUFA date? Here’s some from the latest ad:
“Why You Need to Circle This Date Right Now: May 13, 2015
“If you’re getting your car fixed on May 13, 2015, cancel it. A birthday party to go to? Send a card. Going on vacation? Bring your laptop or phone — and for Pete’s sake, make sure you can access your online brokerage account…
“This date first appeared on the ‘magic’ calendar on July 10, 2014.
“And it needs to be on yours TODAY….
“Why? Paul’s marked this stock as an official ‘Buy.’ He believes this stock is about to go on an epic 4-week run that could get you as much as 50% returns, very quickly…”
And a few more clues:
“This company’s market capitalization right now is about $832 million. If this drug goes through the FDA approval process… this PDUFA date can single-handedly give you at least 50% gains….”
And a bit that I expect will make Dr. KSS mad:
“The key to success in trading biotech stocks is NOT medical knowledge. I have zero medical training, yet my returns beat the pants off most scientists and doctors…
“All you really need to make money is know-how — and the specific dates to get in and [get] out…”
There are hundreds of biotech hedge funds and advisory services catering to institutional investors. If all you had to do was know the dates, they and every other biotech investor with a little time on his hands would be doing spectacularly well (well, maybe recently they have — but even the big biotech indices doubled over the last two years, you don’t always get such a tailwind)… I don’t know how to put this strenuously enough, but everyone can know these dates with a modicum of effort. There are even some folks who collect the data and share it for free, like the guy who started BioPharmCatalyst and its FDA Calendar.
Now, maybe Mampilly really has a particularly effective way of trading around these dates. I don’t know, but I’m skeptical that many such strategies can survive if you throw a couple thousand subscribers at them — if he sees historical chart patterns around PDUFA dates and then tells 2,000 investors, who each have $5,000 to use in a speculation, about that pattern… guess what happens?
Maybe his readers won’t impact this particular stock quite as much, because it’s somewhat larger than a lot of the more speculative biotech stocks we hear about all the time, but shall we at least tell you the name of the stock?
OK, this is — going just by the market cap and the PDUFA dates — the aesthetic biotech KYTHERA Biopharmaceuticals (KYTH), which is trying to rid the world of the horror of the double chin.
I have done the same thing, by the way — my solution is called “the beard” and I’ve been using it, no royalties due or doctor visits required, for 25 years. I know, it doesn’t work for everyone. Women particularly seem to resist this aesthetic innovation.
I don’t know much else about Kythera, but they do expect word from the FDA on ATX-101 in the Spring and those dates match (the PR from Kythera back in July is here). They have broader ambitions for their technology and expertise, but this first application is basically a purified acid that naturally occurs in the body and that helps to break down fat — apparently their localized injections can apply this acid to just a small area, break down a lot of the fat, and help the body reshape the contours of that second chin. According to their recent investor presentation, it looks pretty impressive — I have no idea whether this is a big market or the drug will be a big hit if it is approved, but they haven’t reported anything scary about it that indicates it won’t be approved or that it has been flagged for big safety issues that I’ve seen.
The stock has been in a trading range, seemingly attracted to the $35 neighborhood, ever since the PDUFA date was announced on July 10 — recently it has come down a bit, so it’s no longer an $832 million company but it was right around there last week.
So with that I’ll leave you to it — don’t know anything else about them, other than that they had a successful IPO in 2012 and sold more shares in late 2013 that boosted their cash level, and they now have close to $100 million in net cash and should presumably be in decent shape and not in need of funding immediately (as long as the FDA doesn’t send them back to the drawing board or reject their drug). The CEO is presenting at the JP Morgan healthcare conference next week, so that may bring some more attention, but beyond that I don’t know of any expected catalysts “in the next few weeks.” Seems on the surface like another logical company for Allergan to buy someday, but you never know.
Dr. KSS mentioned the company briefly in his first column for the Irregulars back in March, and they’ve come up from time to time in those discussions among our biotech enthusiasts, but that’s about all I know about the company. Over to you, biotech investors, let us know what you think…