Trade Alert: A Biotech Lottery Ticket
Giving our scientist PhD associate another shot.
Looks like real science. Why not.
Another Biotech With A Catalyst Coming Up
Last month, we bought a lottery ticket on a tiny biotech, based on a post by a scientist-investor whose work I follow.
Trade Alert: Betting On A Biotech
SOM stands for severe oral mucositis, a side effect of radiation treatment for head and neck cancers. One From My Market Watchers Funnel I keep a Twitter list of finance accounts which I’m constantly adding to and pruning. A lot of finance content is simply accounts repeating headlines, or otherwise not adding much value, but occasionally you find exceptions. One of those exceptions may be the account that wrote about the micro cap biotech we’re betting on today. According to his profile, he’s a PhD scientist, and his drill-down on this company’s drug candidate suggests he has a solid science background.
That one didn’t work out: the catalyst there was an FDA decision, following which the stock ended up plummeting over 80%, which will cause our options trade to expire worthless today. As I noted in a comment there, that sort of thing happens with early stage biotechs, and guy who came up with the idea seemed sharp, so I planned to give him another shot. I’m doing that today.
The New Drug Candidate
To summarize a very technical post: patients with aggressive forms of multiple myeloma often need to have their entire immune system nuked with aggressive chemo. Of course, they’ll need an immune system afterwards, and the way they get one back is via transplantation of their own stem cells that were harvested before the chemotherapy. They need a lot of stem cells harvested though, and that’s often difficult process. 92.5% of patients that received this company’s drug candidate were able to get the required amount of stem cells harvested within two days, versus 26.2 % without it.
The Catalyst
The catalyst is a PDUFA (Prescription Drug User Fee Act) decision scheduled for early next month. Initially, I was going to wait until a couple of days before to place a bullish options trade on this, but given the price dynamics with this one, it makes sense to do so now.
The Company and The Trade
The company is BioLineRx (BLRX 0.00%↑) and the trade is buying the $2.50 strike calls expiring on September 15th for $0.10. The max loss on 30 contracts is $300, and the break even is with BLRX at $2.60. This trade has partially filled. The rest of this trade filled on 8/21.
An alternate approach here would be to simply buy a similarly small dollar amount of the underlying shares, which are trading at about $1.39 now. That may give you a better shot of profiting from a smaller move in the stock, since it’s trading so far below the strike price of the $2.50 calls.
Exiting This Trade
Let’s see what happens after September 9th, which is when the PDUFA decision is scheduled to be made.
BLRX got that FDA approval today, but the stock was basically flat. Apparently, they also did a PIPE transaction raising ~$15 million from a Hong Kong investor ( https://x.com/TelAvivTrader/status/1701147532817023019?s=20 ) They're having a conference call about the FDA approval tomorrow.
Exited the other half of my calls at $0.10 today. I may buy longer-dated calls on this one in the future. If I do, I'll of course post a trade alert about it.
Exited half of these calls today at $0.35 for a profit of 350%.