What’s the “Huge Flaw in the U.S. Government and Financial Markets” that pinpoints the “Magic Date” of January 29, 2017?

Agora's FDA Trader says this "flaw" pinpoints "Magic Dates" and offers "the easiest way I've ever seen to collect as much as $393,000 every 12 months." So what is it?

By Travis Johnson, Stock Gumshoe, December 7, 2016

Newsletter promoters LOVE dates — using a specific day in the calendar, preferably a day within the next month or two, gives a sense of urgency to an ad and makes you feel like you have to sign up RIGHT NOW to avoid missing out on the profits that can be made.

And Agora is certainly no stranger to this technique — their FDA Trader has used ads a few times in the past that hint at these “huge flaws” in the FDA that create “magic dates” … their latest version of this ad, with a “Magic Date” of January 29, is the one that’s getting our attention today.

Actually, it’s not just January 29 — that’s the date in the headline, but the email that leads in to this ad says there’s one coming up even sooner, on December 15. This is from the email from Laissez Faire Today, which was one of many other publishers (many also within the Agoraplex of related financial publishers) who pushed this promo:

“We’ve just been informed of a major U.S. government ‘disruption’ you need to know about.

“This may be the most alarming government disturbance I’ve seen in recent years.

“Luckily we’ve been given the exact date when it’s going to happen:

“Thursday, Dec. 15, 2016

“But that’s only the beginning…

“There are at least four other dates… where this government agency plans to completely upend the market.”

That’s some pretty inflammatory language — dates on which “this government agency plans to completely upend the market” … and, as you might expect, the truth is quite a bit smaller than that.

We’ll jump over to the ad itself now — the ad is signed by publisher Joe Shriefer over at Agora Financial, though the FDA Trader newsletter itself is still helmed by Ray Blanco, who has worked on most of Agora’s technology and biotech-focused newsletters for many years (so presumably he’s the one picking these “Magic Date” stocks).

And there’s all kinds of blather about the “intrigue” — which serves, of course, to make it seem like you couldn’t possibly understand this stuff or get access to the information unless you were wise enough to subscribe to their FDA Trader newsletter (which ain’t trivial, that will run you $2,000 a year)…

“The origin of the price spikes can be traced back to this ‘flaw’… a breakdown in the regulatory systems of a major U.S. government agency, located 11 miles outside of Washington D.C., in Silver Spring, Md.

“Bloomberg News investigated this agency’s sloppy regulatory practices, and came to the conclusion that it was creating a ‘…a rigged game’ that can ‘dramatically affect stock prices.'”

It will be wholly unsurprising to you, particularly given the name of this newsletter, when I confirm that yes, the agency they’re talking about is the Food and Drug Administration, and the “Magic Dates” they’re talking about are the PDUFA dates for new drugs in the FDA approval process.

If that made you say “huh?”, then have no fear — it’s not all that complex, and nor is it particularly “rigged,” at least in my opinion… it is a little bit inscrutable and hard to follow, like any bureaucratic process worthy of its triplicate forms, but that doesn’t mean you can’t figure it out on your own if you’re willing to do a little reading and thinking.

Here’s the shorthand: The FDA has to approve all new drugs, both for testing in humans (that’s what “clinical trials” are) and, if the drug makes it through the phases of clinical trials and shows itself to be worthy, for commercial production and sale (the clinical trials include usually at least Phase 1, 2 and 3 trials for new drugs before the drugmaker will apply for commercial/marketing approval, though sometimes those requirements are loosened and sometimes a drug will go through multiple variations of the clinical trials… the whole process from the first human subjects in the clinic to your doctor prescribing the drug can easily take ten years even if things go pretty well).

And the PDUFA dates are really a way to make the process of drug approval a little bit more predictable — PDUFA stands for Prescription Drug User Fee Act, which authorized the FDA to charge a fee to pharmaceutical companies who apply for new drug approvals. That fee was intended to be used to beef up the FDA’s capacity to review drugs, and so the carrot came with a “stick” — they get the money from the drug companies, but in return they have to aim to meet what are now called “PDUFA Dates” for a response to these new drug applications. The standard timeline is 10 months from new drug application (NDA) for an FDA response, though “fast track” drugs get a six month timeline.

Obviously the PDUFA date for a particular drug is very likely to be a financial catalyst for the company that is applying for FDA approval — if they get approval to market the drug in the US, yay! If they get rejected or get some other “go back and try harder” response from the FDA, darn!

Not all drugs are huge catalysts for the companies who are applying for approval, but, generally speaking, you can usually assume that a small biotech company with only a few drugs in development is going to see its stock rise or fall pretty substantially based on whether their drugs get approved by the FDA.

The tricky thing, for individual investors who don’t know a lot about the sector, is that there’s no official FDA calendar of PDUFA dates… and, to make matters a little more complicated, the PDUFA dates are targets, not definite response dates. Sometimes the FDA responds after the PDUFA date for whatever reason, often with an official postponement if the delay is meaningful, and quite often the FDA approves or rejects a new drug application well before the PDUFA date. That information is not really the FDA’s to publicize, it’s up to the companies who are applying for approval to publicize it if they wish to. Typically small biotech companies do make the PDUFA dates clear to their investors in their filings, since it’s very material information, but they don’t necessarily all report it in exactly the same way… so it’s a little hard to find.

Thankfully, as is often the case when information is a little hard to find, internet researchers and enthusiasts and entrepreneurs have built businesses around collecting those PDUFA dates — all it takes, after all, is some virtual shoe leather as you trot around to a few hundred active biotech companies and research their pipelines and read their filings and press releases and write the key catalyst dates on your calendar. Probably none of these services are complete or exhaustive, but one of our favorites around here is called BioPharmCatalyst, which keeps a general FDA catalyst calendar (including stuff like “phase 2 data expected” as well as the specific PDUFA dates).

And the other tricky thing when it comes to investing in companies who have FDA catalysts coming up, of course, is that the news is not always good… and, perhaps as important for investors, the news is not always surprising. Good news is good news, and FDA approvals are certainly better than rejections, but the thing that really moves a stock dramatically over any short time period is a surprise — the FDA approving a drug when investors were unsure about its fate, or rejecting a drug when everyone was expecting a ringing endorsement and approval.

So what are those stocks who have “Magic Dates” coming up soon? Well, from the sources I’ve checked the most likely candidates would be Dynavax (DVAX) on December 15, Cempra (CEMP) on December 27 (and 28), and Synergy Pharmaceuticals (SGYP) on January 29.

Dynavax is an example of one stock whose PDUFA date didn’t provide much help to short-term investors — the FDA has already responded and rejected their Heplisav vaccine (again), and they responded a month before their PDUFA deadline so investors got an ugly pre-Thanksgiving surprise when the stock fell from $11 to $4 on November 14. I don’t see any other likely PDUFA dates for mid-December, though that doesn’t mean there definitively isn’t one, so I have a sneaking suspicion that perhaps DVAX was on the FDA Trader list with the anticipation of that December 15 PDUFA response, but that they tried to take that December 15 reference out of the ad when the response came early (and ugly) but just forgot to change a couple things in the text. Most likely the ad was originally written before November 11, when the bad news came from the FDA.

So that’s not definitive, but definitely do NOT go buy DVAX because of that December 15 PDUFA date — it no longer means anything, the response has already come. Maybe their drug (it’s a vaccine, actually) gets a new life with a new partner who can help them invest in more trials to get more data (and perhaps help them handle the trials better, since this is the second time the FDA has told them they’re not providing enough information or the right information), and clearly investors have not given up all hope, but there’s no longer any chance that they’ll have FDA approval to sell the vaccine next week.

Cempra (CEMP) has also had a big FDA catalyst already, though those December 27 and 28 PDUFA dates still stand for their Solithera antibiotic (the two dates are for oral and IV formulations). The stock was heavily touted by a different newsletter, Ernie Tremblay’s Biotech Insider Alert, back in October as a play on the FDA advisory committee meetings about their drugs (AdComm meetings happen before the FDA responds, they essentially provide non-binding advice to the FDA), and that was a flop because the AdComm was more worried about adverse effects of the drug than investors had expected… so perhaps approval is still expected, but now with FDA attention on those side effects the concern is that approval will be limited and future applications of Solithera might be limited, which would give them less potential to expand Solithera sales over time even if they do get it approved for sale.

Neither of those really get the full attention of the ad, though — the one that gets the headline is the January 29 date… and the only PDUFA date I’ve seen for January 29 is for Plecanatide for Synergy Pharmaceuticals (SGYP). They’re seeking approval of this drug for chronic constipation, which is what the January 29 PDUFA response will address, though they’re also expected to have data out on Phase 3 trials for the same drug in “constipation predominant IBS” by the end of the year. SGYP has gotten a little bit of attention on the biotech discussion threads from time to time, with Dr. KSS calling attention to the challenges of that particular disease (with some skepticism about Synergy as the market cap closed in on a billion dollars) back in August here.

So there you have it … there’s no “Magic,” but all biotech and pharmaceutical stocks have catalysts that are expected to move the share price, usually driven either by clinical trial results coming out (which tend to not be forecast for specific dates, but for “mid-2017” or “by the end of July”), or by FDA PDUFA response dates (which are specific dates, but aren’t officially published by the FDA … and which are targets, no guaranteed response dates). It’s important to know about those dates, but it’s more important to have an understanding of the companies and the drugs they’re working on… and, as we’ve seen from so many heavily teased biotech ideas over the years, it’s important to remember that the reason the FDA has a review process, and the reason it takes (at least) months for the response to companies who apply for permission to market a new drug, is that drugs are really being studied by FDA scientists and regulators to see whether they’re safe and effective enough to be sold… sometimes these drugs aren’t safe and effective enough, and sometimes they get rejected or sent back to do more research.

Investors love catalysts, and it’s easy to see why. They’re fun and provide a clear win/loss point, kind of like pulling the slot machine handle or turning over your cards to see whether you or the house walks out wins the game — they give us something to anticipate, they give us a time period to focus on, and if you’re fortunate they can provide short-term profits if you predict the market response well. But “catalyst” doesn’t mean “something that makes everything better,” it means “something that precipitates a change” — and since we’re talking about money and investing, that usually means “something that causes the value of a company or the price of a stock to change.” Sometimes, as we’ve already seen with Cempra and Dynavax to at least some degree, that change is bad.

Does that mean the consistent trader who follows Ray Blanco’s FDA predictions will lose in the end? I have no idea what his win rate might be on these PDUFA dates, we haven’t heard much from FDA Trader subscribers of late about whether they’re generally pleased or not about the quality of the stock picking… but the dates themselves are not magic, and you don’t have to subscribe to his letter to learn them.

Have any thoughts on Synergy’s upcoming PDUFA date and their odds of success? Have other favorite PDUFA dates on your calendar? Let us know with a comment below, or you can join longtime reader SoGIam on his Biotech Catalyst Calendar discussion thread where he and some other readers have been tracking these upcoming dates. Thanks for reading!


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rocketman
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rocketman

Dr. KSS had a comment about $SGYP back in August and it wasn’t that positive:

http://www.stockgumshoe.com/2016/08/ten-common-biotech-investing-mistakes/comment-page-3/#comment-4896403

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bikesouth
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bikesouth

Lower tier pharma & bio are such a gamble. Do the one in ten winners overcome the other nine losers?

Gr8Full!
Member

Bikesouth these #biotechnology and healthcare articles by #ZKSS may be of interest to you and others: http://www.stockgumshoe.com/author/dr-kss-md-phd/ as well as the articles by “Doc” Gumshoe: http://www.stockgumshoe.com/author/mjorrin/ The latter articles are not directly investment related but provide a wealth of information regarding healthcare and pharma #Best2All~ Ben

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backoffice
Member

Sometimes they do and sometimes they don’t. The big problem is watching them, One day you get good news and the stock takes off, they the following day bad news wipes out your gains and then some. It’s not for everyone

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takeprofits
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As a senior citizen who ended up in hospital with pneumonia 2 years ago the article by Ernie Tremblay about no new antibotics having come on the market in the last 30 years; his “fear mongering” about bacteria becoming resistant to current antibiotics because of over prescription it caught my attention even though I do not normally rver invest in biotechs because I do not trust the pharmaceutical industry. His clues made it east to track down the N. Carolina Co. developing a powerful new antibiotic 16X more powerful than current antibiotics as CEMPRA as Travis just noted relative to… Read more »

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X911MAN
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X911MAN

FDA Trader has a 60 day money back trial.

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Normally Dubious
Member

yeah….dont they all. And then after 60 days, if you object, instead they give you another 60 days free.

smaihar
Member
smaihar

I would not touch anything from Erin Tremblay. When I started trading in August I bought his pick EARS only to lose huge in that. It was only after that I found stockgumshoe and nothing can beat Dr. KSS picks 😀

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jameshmwebb
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jameshmwebb

Great work, Travis, as usual. Thanks.

merubin53
Irregular
merubin53

I made the mistake of falling for this “magic date” pitch about a year and a half ago. Suffice to say that Mr. Tremblay is an utter disaster. In my entire lamented time as a subscriber (at a discounted rate, fortunately), the ONLY pick he made that paid off was on Tesaro, which as I recall was not even a PDUFA “pick”. Rather telling that all of his examples of triumphant prescience are from 2011-3013 . . . who knows, maybe he actually knew what he was talking about back then. Run, do not walk, from this service.

TraderHorne
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TraderHorne

Excellent review by our Gumshoe. I took up the teaser’s idea last year, I understood the idea to be profiting from the rise in price (caused by buyers expecting a successful outcome) and selling immediately before the PDUFA date, so whether it was a success or failure didn’t matter. This has worked fairly well for me, except for CEMPRA where I forgot to sell in time!