Last Updated on January 15, 2019 by Sultan Beardsley
Question by deadpool from StockTwits:
Q: “how do you feel about ACRX price action today seems like just a red market is tearing everything down. i am hopeful we get back up to 3.30s next week”
Thanks four question deadpool!
The thing about biotech stocks is there is a lot of hype and an influx on money leading into PDUFA dates, clinical data releases, etc; which inflates the stock price. The ‘smart money’ can spot these opportunities and buy prior to the price ‘run-up’. Then after approval there is generally a sell off.
On the flip side, if the the FDA issues a CRL, or a clinical study doesn’t meet its primary endpoint regardless if the data is promising the stock will take a big hit and no spike. In either scenario negative price action is accentuated when the nasdaq and biotech indices are down.
The bottomline is the biotech market is unforgiving. Generally speaking, when a product is approved or data is superb the stock spikes, and then recedes as shareholders sell for a profit. Profit taking initiates a cascade of selling lowering the share price back toward baseline levels like we saw in ACRX,
The MS strategy involves taking 20%-50% gains a few weeks or months after making an investment after the run-up. We nearly always lock in profits and move on before the the binary catalysts to lessen our exposure. I am very bullish on ACRX long-term, but sold my shares because I had massive profits and anticipated a pullback without any fuel to keep the momentum going.
A wise long term strategy would be to accumulate and hold acrx shares. This pullback is a great buying opportunity. The involvement and support from the DOD should not be overlooked. Not to mention Dsuvia offers medical professionals a solution to dosing issues with other pain medications. There is a strong possibility ACRX will be bought out; the question is when and how long are you willing to wait with your money tied up?
As for next week’s price performance I have no idea. It could dip below three, but I doubt it. If that happened prudent investors would engulf the shares. The company could also have an ace press release up its sleeve to the tune of buyout talks or partnership or licensing agreement.
Q: seems like almost everyone on the board is playing a swing on this into PDUFA hype. idk how i feel about this long term. i have been burned lately on holding through binary events (TRVN & ONCS). of course i never hold 100% through it, but it still hurts.
Great point deadpool!
That is why in our swing-trading strategy we rarely hold through PDUFA dates or data releases. It is nearly ubiquitous that clinical stage biotech companies experience a 10%-50% increase in value leading up to the catalyst and then a sell off after approval. The reason being is because FDA approval is just the beginning. Approval alone does not mean much other than the the company has a chance to prove itself. It is then up to the company to show shareholders that they can successfully market and sell their product generating revenue and achieve profitability. After all, the whole point of a company from an investors perspective is to make money for itself and stakeholders.
Hope this helps! Thanks for the question deadpool. We encourage anyone with questions regarding trading biotech stocks, or investing in general, to reach out to us.
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