PRGO – Advisory Committee Meeting

An Advisory Committee Meeting is an interesting one.  On the one hand, it is an EVENT, that will definitely make traders speculate in the weeks prior.  So the Runup Traders, who like to “buy the rumor and sell the news,” will want to monitor the technicals, volume, and price action during the coveted runup period.  But unlike a PDUFA, where the FDA makes an official decision about approval or denial, the Ad Com simply makes a suggestion to the FDA, who then get to do whatever they want.  There have been plenty of examples when the FDA does the opposite of what the Ad Com suggests.  This is important because it suggests that an Ad Com decision is more of a rumor FUELER then a news event.  If the Ad Com comes out strongly in support of the drug, that makes the bullish rumors of pending FDA approval stronger.  But until the news comes, its all speculation.  Which brings me to…

…the Event Traders.  If the Ad Com votes strongly in favor of the drug, the Event traders who purchased immediately before the decision is announced probably have a great trade as well.  These traders look to exit as soon as the news is digested, and the combination of their exits and the exits of the Runup Traders can often have a short-term effect of dropping the price, regardless of the good, “rumor fueling,” news.  Runup Traders will want to be aware of the technicals and protect gains from the runup and event.  It is never “wrong” to protect profits and protecting profits doesn’t necessarily mean selling the whole position right away.  There are plenty of happy middle-grounds to consider.

The Afterglow Traders also have something here.  I mentioned above that the period between the Ad Com and the PDUFA date is a time of heavy rumors.  A positive Adcom would give Afterglow traders something to look for, especially if those pesky Event and Runup profit takers push the price down in the days just after the announcement.

When it comes to Advisory Committee Meetings, these can act as Catalysts for all 3 trade groups, and there are probably going to be people who buy in the Runup period, hold the Event, hold the Afterglow, and wait to sell the day before or day of the PDUFA announcement.  Each group of traders has something to monitor when it comes to Advisory Committee Meetings!