BMY and LIAN PDUFA

In this case we have a very large company working with a small cap company on this study. The fact that a large company would partner with a smaller company often gives traders more to feel optimistic about during the “runup” period. As such, many traders hold the small cap partner for a period during the weeks leading up to the PDUFA date, attempting to capture the FOMO buyers who enter the play as the PDUFA date gets closer.

An important thing to note is that, unless already pre-arranged, either company can bail on the partnership after the PDUFA, and there are some scenarios where one of the partners has already agreed to terminate the partnership at the conclusion of the study, regardless of the result. So there is no guarantee that BMY will help with the next step (be it a new phase, marketing, applying for labelling, or providing sales reps), which inevitably will require funding.

If no partner exists, and the cash position of the company doesn’t cover the perceived increased costs, traders sometimes sell off a company even when they get approval. The traders who are playing the “runup” period often do not hold for news, since the FDA decision inevitably will create volatility.

However, another group of traders might chose to actually play the event announcement itself. If a trader knows that the company has cash on hand to avoid any further dilution (ideally this would be announced by the CEO during the runup period), and perhaps the trader has insight into what previously released data about the study actually means. Those traders might chose to play the event if all their boxes are checked, but they also might be quick sellers if the stock price does jump on the FDA’s announcement.

There are lots of ways to play this, the runup period would be approximately 3/01-4/27, the Announcement play would be 4/27-4/28. It is unknown if the event is expected premarket, during regular hours, or after hours. It is expected that the stock will halt prior to the news, and for a period of time after the news is made public.

It is suggested that traders elect to move this to their personal trading iCalendar and create multiple notifications: 1 approximately 45 days before the PDUFA, 1 a week before, and 1 a day before. That way, no matter how a trader might chose to play the catalyst, they are made aware of the decision dates before they occur!

Date source: https://www.biopharmcatalyst.com/calendars/pdufa-calendar