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PHAT – Phase 3 PDUFA

January 11 @ 8:00 am - 5:00 pm

The PDUFA is the day that the FDA makes an official decision about whether a drug gets approval or not.  Generally speaking, if the company is gets the FDA approval, that is a positive thing for them.  However, receiving approval from the FDA is the same as receiving a letter that says “go find many millions of dollars to bring this to market or continue onto the next phase.” Companies find this funding via Offerings, which can really put selling pressure on a stock even after positive news.  That is why the “Event” traders for PDUFAs must have a LOT of knowledge about the companies, like their cash burn rate, cash per share, potential distribution partners, etc.

The other group of traders who really like PDUFA dates are the Runup Traders.  These are the people who “buy the rumor and sell the news,” which in this case would mean selling BEFORE the stock is halted on the PDUFA day.  These traders would look to capture any positive price action caused by an abundance of optimism in the market.  Monitoring the technicals at the 1 and 4 hour level would help a lot with this, as would knowing about any previously released data.

Subjectively, the Runup Period tends to be safer then the Event Trade because most companies don’t like to issue market-making PR before the big day.  Even if a company needs cash, if they believe in their product, they will want to wait for the approval to get the most money per share during the offering (to minimize the offering size).  However, a LOT of Runup Traders monitor these tickers for the rare occasion that something substantial causes their stock price to tank in the weeks leading up to the PDUFA.  As long as that substantial thing wasn’t an official early response by the FDA, major dips during the runup period can be opportunities to get in very cheap.

Remember, a lot of these companies produce no revenue.  So an ER in the weeks leading up to a PDUFA might show large losses but those losses are expected due to the nature of an R&D company.  It is always worth keeping the upcoming PDUFA plays on a watchlist and doing research if there’s a major price chance BEFORE the actual PDUFA.

Link to PR about Public Data and PDUFA date: https://seekingalpha.com/article/4555940-phathom-pharma-approved-drugs-upcoming-pdufa-smallish-addressable-market

Details

Date:
January 11
Time:
8:00 am - 5:00 pm