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.

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.