Credit goes to reddit, found this play there and read a bunch of DDs and thought it was intriguing and wanted to share. Links below, plus text of a post. My personal 2c - I don’t know how big of a market neutropenia is vs. cancer (neutropenia is not a cancer, which is what their primary targets seem to be) however priority review + PDUFA means it’s likely a pretty important condition. As far as I know, I think CSFs are the only treatment to really boost white blood count, so this could be a novel combination of a new drug with CSF.
Main thing is if the setup plus a catalyst - IV is insanely high but worth a gamble to me. 29% SI, average price $15.20, so if this gets approved it’s very likely shorts will squeeze, plus relatively low volume. More below in the DD. This is an FDA approval play, so highly risky. I’m only taking a gamble position here, but PDUFA date should be 11/30 (tomorrow)
Taken from: https://www.reddit.com/r/Shortsqueeze/comments/r4i0i0/bysi_dd_on_fda_approval_30th_of_november/ (credit to: masterofhauss
Another good DD on the setup: Reddit - Dive into anything
Who is BYSI (Beyond Spring)
For those of you not familiar with $BYSI - BYSI (BeyondSpring) is a Pharmaceutical company listed on Nasdaq with a major potential catalyst upcoming the 30th of November. The catalyst is a FDA PDUFA Approval for their lead candidate drug - Plinabulin - which may give the company their marketing authorization in the US. They have a similar upcoming catalyst with the Chinese FDA (CFDA) within the not to distant future.
This drug has been given what is called a “Breakthrough Therapy Designation” by the FDA and the CFDA, which is potentially a big thing in drug development. This designation was given in September 2020, which is almost one year + two months ago today.
Their Lead Candidate - Plinabulin 4 dummies
I have read a lot of different views on what this drug really is, and firstly, here is what it´s not:
- Its not a cure for cancer
Here is what it is:
- Its a drug that can significantly approve the cancer-treatment for a lot of people by reducing Chemotherapy induced side effects potentially for all cancers and all chemotherapies which happens, according to their data, to increase the chances of survival quite significantly.
The potential in China and US per year, is approximately 2.9 million treatment cycles, and accounts for two thirds of the global volume. Furthermore, what I believe to be a very, very smart move is getting this approved together with what is today the standard-of-care, which enables BYSI to piggy-back on the existing treatment regimes for these patients.
The 30th of November Catalyst
30th of November is the last date the FDA aims to give their approval / rejection for the indication with the beautiful red ring around it. There are two main outcomes from this date:
- Approval of the drug = BYSI is given marketing authorization in the US for their claims.
Rejection of the drug = CRL = BYSI will have their drug rejected on the US market. Bad news for BYSI. However, its not the end:
- Resubmission = CRL = The FDA will issue a CRL (complete response letter), stating something along the lines of “we have reviewed blablabla… we will support you in helping you achieve approval, but you will have to fix X, Y, Z, U…blablabla first”. In practice, this means a rejection, but the full contents in a CRL are rarely disclosed in full by the receiving party.
What does a Breakthrough Therapy Designation Mean:
Plinabulin has been given a breakthrough therapy designation in both the US and in China, and according to BYSI themselves, it is the first drug in 30 years that could raise the standard of care for the CIN-patients. A BTD also grants them the following benefits:
- Enables closer contact, more feedback and more interactions with the regulatory authorities during the development process, which in my opinion reduces the chances of making formal, or stupid mistakes during the approval process.
In my view, this potential assistance / guidance is something that greatly increases the chances of this drug being approved on the 30th, assuming they have used this offer wisely.
My primary source of data for this statistics is a 2021 report named “Clinical Development Success Rates and Contributing Factors 2011–2020” by Informa Pharma Intelligence. I went through the report, and found some very interesting stuff.
Before reading the exhibits below - take a minute to let the fact that BYSI has an approved NDA (as of 1st of June 2021) sink in for a minute. You´ll understand once you read through the chapter.
Exhibit A - Probability of Success from NDA to FDA Approval is 90.6%!!
BYSI has **an accepted NDA (**new drug application), which by looking at statistics alone gives the company a 90.6% probability of approval, including any resubmissions!!
Pharma Intelligence has looked at data from drug approvals and clinical development success rates between 2011 and 2020
I couldn’t find the numbers of resubmissions that were normal for the NDA to FDA Approval, but I can assume that resubmissions are quite common. Anyways, we are looking at very good numbers for this approval to go through eventually.
Exhibit B - Probability of Success from NDA to FDA Approval for Oncology Drugs is 92%!!
According to Yahoo Finance, Marketwatch, Ortex and Fintel, we have the following numbers:
39 million shares total
20.5 million in the free float (I have not seen the actual calculation on how the various sources come to this number)
Ownership Accumulation Score of 94.75
This is a proprietary feature with fintel.io that rates a stock from 0-100, where 100 is a higher than usual institutional accumulation of shares by institutions, relative to its peers. 50 is the average. A score of 94.75 indicates that institutions are buying, but I wouldn’t trust this one alone as I dont know how its calculated and if it has any solid meaning to it.
Institutional Ownership is increasing ~ 25% of the outstanding shares
The current put / call ratio is 1.58 (fintel.io), with 2.92 in December and 0.54 in January.
The open interest for put-options are 32.73k x 100 shares per contract ~ 3.73 million shares.
According to fintel, the amount of disclosed put-options in BYSI from BYSI owners are ~ 786.2k shares. However, none of these holders are net short, which is given by the Net Long/Short Value list at fintel where only 3 out of 190 institutional owners are net short, and with negligible numbers.
What this number doesn’t say however, is the expiry dates of the options, but if we look at the total put / call ratio = 1.58, the 786k is roughly 24.8% of the Open Interest of put options, which in layman’s terms means that Institutional investors that are net long in BYSI owns 25% of the put options on the market.
So, the conclusions from this:
- Institutional investors that have a net long/value (which is 187 out of 190) owns 786.2k / 100 = 7862 put option contracts which is 7862 / 32763 ~ 24% of the total open put volume
I would assume this makes sense in the case where you want to hedge your position in case of rejection.
December 2021 Option Numbers - Bearish or Bullish? I cant tell.
The put / call option ratio for the dec 21 expiry = 2.92 (source: fintel.io)
This number has a couple of interesting interpretations:
- The option writers are bullish → You will only sell a put-option if you think the movement of the underlying stock will rise, thus leaving the put-option worthless for the one who bought it.
- The option buyers are bearish → You will buy a put option if you think the movement of the underlying will fall, thus increasing the value of your option.
There might also be tactics here that I don´t understand or know of that makes issuing put options in a stock you think will decline in value make sense.
Low share of US patients and different pharmacokinetics in US vs. Asian Patients
These reports may be found by searching for “clinical trial snapshots FDA” on google. I have looked at oncology drugs in particular. The findings here is not necessarily on BYSIs side, as they have a 50% asian in CIN and 87% in NSCLC, which would be a higher than average share of asian patients in the trial data leading to approval, but not in any way unrealistic or abnormal, as numbers from 2020 and 2019 points to approvals with as much as 76% asian participants and as low as 2% US patients.
According to this we find that 41% came from the US and that 14% were asians on average. The highest individual approval had 41% asians. The smallest percentage of US patients the FDA approved in oncology in 2020 was 2%.
24% US patients and 18% asians on average. The highest individual approval had 76% asian patients. The smallest percentage of US patients the FDA approved in oncology in 2019 was 7%.
SEC data from BYSI indicates 50/50 for CIN trials and 13/87 for NSCLC
According to the 2020 20-F filed in April (page 13) - the CIN trials have 50% from US, Ukraine and Russia, and 50% from China.
However, the NSCLC trials have 13% US and 87% Chinese patients, which could make this a harder regulatory hurdle, but based on the approval statistics from the FDA from 2019 and 2020.
FDA is struggling with capacity and might not keep the 30th PDUFA date
Could potentially cause the price to drop a little bit on no news.
FUD Article on Seeking Alpha from 7th of September from Night Market Research (Short Activist)
I came across an article from Seeking Alpha, written by Night Market Research, that is a seemingly thorough piece of work, and a lot of attention to detail. However, it is written by a company with a disclosed short position with the aim of hammering the stock price.
It highlights poor clinical trial conduct, clinically meaningless key metrics, lack of transparency, conflicting management statements and low percentage of US patients as reasons for bearish view.
Its hard to make something of this, but some of the statements might be true, and some will not, but its hard to say if this has any impact on the FDA decision to approve or reject. It could be everything from failure to meet primary and secondary end-points, poor statistics, manufacturing issues, labeling errors ++.
Risk of Resubmission - CRL Statistics from 2020
Based on this article from Drug rejections hold steady in 2020 | Evaluate - there were 36 CRLs out of 174 NDAs in 2020. It means that there is a 20% chance of getting a CRL on the PDUFA date, or in other words - 20% of applications will need a resubmission, if these numbers are true.
In the case of FDA approval the 30th, chances are this will blow up like dynamite. Lets look at the numbers:
According to Ortex, 28.62% of the FF was reported shorted on this friday, that´s 5.88 million shares.
Its not extreme, but more than enough to slingshot this into the atmosphere if the FDA hands out the approval the 30th.
The cost-to-borrow and utilisation doesn’t indicate that this is going to squeeze without the FDA catalyst, but these numbers might change rapidly tomorrow when the market opens.
- Drug has the potential to become a blockbuster drug if approved, that could become a new standard-of-care within chemotherapy and has been granted a breakthrough therapy designation in China and the US:
- Approval, based on statistics alone is very very likely. Its the Phase III to NDA acceptance that is the long-shot, not the NDA to FDA approval, 92% vs. 47% for Oncology Drugs, incl. resubmissions.
- 2020 numbers indicate that there is a 20% chance of receiving a CRL (resubmission), which would lower the probability to somewhere between 80-92%, which is still very high.
- Institutions has been increasing their ownership steadily since mid 2021.
- FDA has a history of accepting trials with low percentage of US Patients, as low as 2%, and as high as 76% asian patients over the last 3 years within Oncology.
- High short numbers (28%) and low float (10 mill) may squeeze this to outer space if the FDA approves.
- Still a high-risk, high-reward play. Could easily drop 50% if the FDA rejects the application, but could also easily surge 400-500% on squeeze and approval.
Per June 30th, the company has approximately 121 million USD in cash ~ 3 USD / Share + the value of the SEED Therapeutics platform, meaning in the case of rejection, it could hit the stock hard, but I wouldn´t expect more than a 40-50% drop looking at similar cases (NRx Pharma e.g.).
If you spot any flaws in my logic, any wrong conclusions or obvious mistakes - please let me know!