Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Why Investors and Traders Need to Track Content Of Prescription Drug User Fee Act

By Christine ShortMarket OverviewJun 02, 2021 12:53PM ET
www.investing.com/analysis/why-investors-and-traders-need-to-track-content-of-prescription-drug-user-fee-act-200583832
Why Investors and Traders Need to Track Content Of Prescription Drug User Fee Act
By Christine Short   |  Jun 02, 2021 12:53PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Dates and content of the Prescription Drug User Fee Act are essential for portfolio managers of health-care stocks. A single positive or negative announcement from the U.S. Food and Drug Administration (FDA) can send shares of a biotech firm soaring or turn a hot name quickly into a bear market. Among the dozens of corporate event data points provided to our customers, Wall Street Horizon gathers PDUFA dates and content so our clients stay in the know.

PDUFA Details And Market Impact

Specifically, a PDUFA date is the goal date set by the FDA for announcing its decision on a company’s New Drug Application/Biologics License Application/ Supplemental Biologics License Application (sBLA)/ Supplemental New Drug Application (sNDA) after reviewing applications. Traders should be aware that the FDA may rule before the announced PDUFA date. PDUFA dates can even fall on weekends.

Pharmaceutical companies, particularly small biotech companies, can experience significant volatility around PDUFA dates. One of the stocks we feature in this report rallied following positive news, but then recently experienced a gap-down in price associated with a delay in the FDA review process for a key drug in its pipeline.

Viewing PDUFA dates and content along with additional corporate event data allows money managers to see the crucial events on the “horizon.”

Why It’s Different This Time

2020 was a year we will never forget for reasons beyond trading. The last 15 months might have marked a turning point in the health-care sector specifically regarding the drug development and approval process. The FDA even said that 2020 was a strong year for drug therapy approvals despite the focus on COVID-19. The vaccines were fast-tracked by the FDA, and the process was generally smooth despite small hiccups such as the Johnson & Johnson vaccine pause earlier this year.

Industry experts are optimistic that an outcome of the COVID-19 pandemic will be enhanced cooperation among drug companies, researchers, hospitals and regulators. The lessons learned from the process of researching, developing, performing clinical trials, approving and administering the shots might also remove silos that once existed, according to some.

The post-COVID world could feature increased pharmaceutical company drug development and the potential for more efficient and effective FDA oversight. The result could be more drug manufacturers requesting approval from the FDA, hence more PDUFA dates for traders to monitor.

The trend of speeding up drug approval is nothing new. It is how PDUFA dates came to existence in 1992. The process used to take about 30 months before the 1992 PDUFA law, which we detailed in our 2018 piece.

FDA Drug Approval Process Dates To Track

It is important to understand that the following dates represent stages of drug trials, and it may mean there are content updates available as well. Investors can view source documents to read firsthand about the PDUFA update.

PD Start – Date the drug manufacturer submits its NDA

PD Expect – Date the FDA is expected to respond to the drug manufacturer with its approval/non-approval

PD Update – Dates for any/all events that occur during the review process, e.g. FDA updates, changes to the Expect date, etc.

PD End – Date the FDA responds to the drug manufacturer

Companies In-Play With Upcoming PDUFA Dates

Within the small and mid-cap biotech space, Omeros Corporation (NASDAQ:OMER) recently had its Transplant-Associated Thrombotic Microangiopathy (TA-TMA) drug Narsoplimab pushed back three months from mid-July to mid-October.

Omeros is a biotech firm with a market cap slightly under $1 billion. The Seattle-based company and Nasdaq-listed stock has been a strong performer since Q3 2021 as traders grow more optimistic regarding upcoming drugs. Management believes Narsoplimab plays a role in growing its diversified pipeline.

On Jan. 19, 2021, Wall Street Horizon reported OMER’s PDUFA target action date of July 18. On May 20, however, OMER announced that the FDA will require additional time to review the BLA for Narsoplimab. The new PDUFA target action date is Oct. 17, 2021. As this date falls on a weekend, we expect the PDUFA decision on the preceding Friday. Wall Street Horizon provided clients a link to the Omeros press release so they can investigate the news further.

OMER PDUFA Update.
OMER PDUFA Update.

Source: Wall Street Horizon

Shares of OMER fell sharply on the news as seen in Figure 2. There was a small uptick in volume on the May 20 decline as well.

Figure 2: OMER Stock Price History (1-Year).
Figure 2: OMER Stock Price History (1-Year).

Incyte Corporation (NASDAQ:INCY) is expected to receive an FDA decision on Ruxolitinib Cream to treat Atopic Dermatitis (Eczema). Incyte submitted an NDA for the drug. On Feb. 19, 2021. The company announced that the FDA accepted the application for Priority Review. The resulting PDUFA target action date was set to June 21.

INCY is an $18-billion market cap biotech company listed on the Nasdaq. Based in Wilmington, Delaware, the global company focuses on the discovery and development of small-molecule drugs.

Event Clusters – Forming the INCY Mosaic

Institutional traders may gather additional insight by analyzing clusters of corporate events around these crucial PDUFA updates. For example, with INCY, Figure 3 shows that a lot was happening in the first quarter.

Figure 3:  INCY Event Cluster.
Figure 3: INCY Event Cluster.

Source: Wall Street Horizon

Amid several PDUFA updates, there were two health-care conferences and a dermatology summit. This event cluster helps traders grasp potential risks.

Look no further than Figure 4. Where do we see the most volatility? January through early March. In fact, the stock bottomed during the March 3 Cowen and Co. 41st Annual Healthcare Conference 2021 – which Wall Street Horizon clients were aware of ahead of time. Clients often glean additional intel on a stock by researching the speakers at a conference, the topics discussed, in addition to the timing and dates of these important corporate events.

Figure 4: INCY Stock Price History (1-Year).
Figure 4: INCY Stock Price History (1-Year).

Trading Strategy And Managing Risk

There is a parallel between trading around PDUFA dates and owning stocks through earnings. Traders must know the market expectation. Are analysts optimistic or pessimistic? What do the options chains show in terms of important strike levels regarding open interest? What has company management said recently (i.e. has there been any pieces of guidance)? Has there been valuable information shared by an FDA Review Committee? These are all boxes to be checked by a seasoned trader.

Relating this concept to INCY, WSH clients can also view all past and upcoming events. Earnings dates play a critical role in managing risk. It’s often the case, following a key PDUFA update, that the company will provide additional color during an earnings release or conference call.

Keeping abreast of earnings dates and changes helps manage risk.

For example, during the volatile Q1 2021 period, traders were able to spot the Feb. 9 earnings report date. We provided a URL to the Businesswire full earnings report briefing.

On Jan. 19, 2021 at 8:02am, as shown in Figure 5, Wall Street Horizon recorded a key change in INCY’s Q4 2020 earnings date from Feb. 11 Unconfirmed to Feb. 9 Confirmed.

Figure 5: INCY Earnings-Related Events.
Figure 5: INCY Earnings-Related Events.

Conclusion

It’s been said many times, but the COVID-19 pandemic accelerated many existing trends. Drug manufacturers and biotech companies could provide more breakthroughs in the years ahead care of the experiences of the last 18 months. The FDA approval process might also become more streamlined. For investors, this combination could bring about a higher volume of critical company-specific announcements. Investors must step up their game to keep pace. Wall Street Horizon PDUFA content and corporate event coverage keep traders a step ahead.

Why Investors and Traders Need to Track Content Of Prescription Drug User Fee Act
 

Related Articles

Michael Kramer
Are U.S. Stocks Grossly Overvalued? By Michael Kramer - Sep 17, 2021

This article was written exclusively for Investing.com.Stocks have had a fantastic run over the past 18 months. It seems that many investors owe much of the credit to low-interest...

Why Investors and Traders Need to Track Content Of Prescription Drug User Fee Act

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Chijioke Uche
Chijioke Uche Jun 07, 2021 3:24PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
how are you
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email