Trading Strategy Question

Stuebi · June 21st, 2009, 04:09 PM

I am new to trading biotech and pharma stocks. I work in healthcare and my company does not allow us to own stocks we do business with to avoid conflicts of interest, so I have stayed away from the industry as a whole, but I finally started looking into companies we don't deal with. I bought into ACUR after seeing it suggested on the other forum and did some DD, definitely a product I believe in and believe has serious potential for a number of reasons, none of which are relevant to this post though.

With all that said, I am trying to decide how to trade this stock (bought at $8.65 - too high, I know). My assumptions were that upward pressure would build as volume increased leading up to the FDA approval date. I had planned on selling of up to half of my holdings a couple of days prior to the approval date to mitigate any potential downside risk if it is not approved. In the event it's approved, I will sell hopefully for a big gain and then play the waves.

Any thoughts/critiques on this strategy? How do you trade biotechs and pharma stocks near FDA approval dates? Any information would be helpful going forward, thanks.

Vic Van · June 21st, 2009, 04:37 PM

Hi
Perfect - I do it all the time but I sell 100%. Ok so I miss the big one, the huge climb. But FDA approval can be hard and almost impossible. Sure we seen alot lately so everyone gone mad for it, but best play is get that big green

However i had it backfire heavy twice. One with FDA drug and once where there was a date given, for a yes / no on a merger

Both times around 5 days before the date, somehow, news comes out early, before that date. Both times the sp dropped 50% and DID NOT want to hold it, jusy play the hype.
So always be careful

But no that tactic is a great play. Also a great play is buying shares in your area of expertise, and hell, you are our inhouse expert it seems!!

CHeers

---------- Post added at 09:37 PM ---------- Previous post was at 09:29 PM ----------

The only thing is on the stock you picked its near its 52 week high - so I tend to play those on lower share prices, even penny sized ones, that small time investors can ramp up easily . "pumps" basically being small stocks that get highly pushed and hyped up. Hence this may not ramp up hard due to the sheer size, but then hopefully, downside is also limited for you too (not that I know anything about this one)

One good play if you dont want to do this is always buy a spread. Pick say 7 FDA approval plays, set stops of -20% (at low prices way before date). Then leave them. You may lose a few 20% but the 500%er will make you happy! But again more for lower sp stocks. $8 looks a bit high to play ramp up, i assume it has alot going for it at the moment and this drug is just an extra?

BE cautious on that one
Cheers

Kordoyn · June 21st, 2009, 04:53 PM

Do these guys already have a few drugs out with FDA approval? Their market cap seems to be pretty high for a company with no income, so I'm guessing they do have something. Other than that, the safe play is to dump before FDA date, while the not so safe way is to just hold long and see what happens. Either strategy works, just depends on your comfort level with risk.

Bufarda · June 21st, 2009, 08:12 PM

They have 37mil in cash and almost no debt,even if it's not approved this time they can keep going until it will.

Kordoin they got a 30mil up front fee from KG in the end of 2007.
Anyway here's the link for they Q10(they English is better than mine

)

http://www.acurapharm.com/SEC%20Repo...Form%2010Q.pdf

Stuebi · June 21st, 2009, 08:32 PM

Thanks, Vic and Kordoyn. It sounds like my strategy isn't too far off, but we'll see about my pick...Assuming it is approved, this would be their first FDA approval. However, if they don't get approval, they have enough assets to keep them afloat as they address any issues and get back on track for approval. Aside from this drug, the big upside potential is the "Aversion Technology" platform that will presumably be applied to other drugs of abuse. Hopefully the FDA will give them the chance!

---------- Post added at 07:32 PM ---------- Previous post was at 07:30 PM ----------

Sorry Bufarda, didn't see your response before i posted mine. Thanks for posting the link.