I wanted to continue the work started by @DakkJaniels looking into how to play PDUFA approvals. I’d recommend reading the original thread first, if you haven’t done so: "Puts on Pharma" Theory
I’m going to track options pricing for tickers that have an FDA approval over the next few months, to see if there’s anything that can be gleaned from it. Below is the calendar for January (GSK had a PDUFA date on 1/23, but I didn’t get the screenshot in time).
there are 3 outcomes to the PDUFA dates:
with the 2 out of 3 outcomes contributing to a downward price movement, you’re more likely to come out profitable on puts. also, with the announcement from the FDA that they are reducing inspections for non-critical drugs due to omicron, i’d expect more delays in the upcoming months:
someone commented in the other thread that you’d have to find the diamond in the rough to profit from calls and i wholeheartedly agree with this. even with approval, there have been many examples of the ticker not moving up in price as anticipated.
also playing the runup to approval is risky due to the current market conditions.
puts should be the way to go in the foreseeable future.
Here was GSK’s results yesterday after receiving approval. Not sure how helpful this will be, given the craziness in the market yesterday.
Some of the open pricing on strikes are a little wonky, not sure if there weren’t bids/asks at open or what’s going on there. Overall, you could’ve profited, depending on your strike expiry, but there wasn’t much movement here. We’ll see what the next approval(s) bring.
Agreed, puts are safer. However, part of the theory was to play these like earnings, split it into three parts.
On GSK, it would’ve been more profitable to hold through the approval date.
yep, with previous biopharm/tech plays, the runup to approval was generally profitable. holding for approval was a gamble.
even in this market, ETON is green today which might start the runup to approval this week. however, be careful with this one. it previously received a CRL and part of the reason was that the FDA could not inspect the overseas manufacturing facility due to covid last year. with omicron, there’s no guarantee that they have completed the inspection still.
calls/puts play should be treated as a gamble.
The theory hypothesis was that even with approval, many of these stocks dump afterwards.
Yes, hypothesis, thanks for the correction. Trying to put some (more) data behind it.
No problem I said it wrong to begin with haha, but also meant that in response to @MountainMan’s post, to clarify what we are looking at.
Buy the rumor sell the news?
A few days late on the 1/29 & 1/30 approvals. Unfortunately, the only PDUFA that was approved was RHHBY, which doesn’t have options. Still waiting on an approval, with options, to really test the theory.
ETON still hasn’t announced if they’ve received approval, denial, or a delay.
Lastly, I think I need to change how I gather option prices at open, seems like TOS often shows $0, even if there were bids in from previous close. Any ideas?
ETON -
RHHBY -
REGN & SNY -
REGN:
SNY:
Here’s what’s on the calendar for February. @Genti has created a thread to discuss FDA approvals, if you want to follow/play any of them: 2022 FDA Approvals
