This is quite the interesting PDUFA for $BCRX. Rumor has it that the NDA was filed using a multitude of clinical study results for peramivir yet excludes a Phase 3 study that actually failed to meet the primary endpoint designed in the study and was terminated early due to futility. See reference link. Interestingly enough, the company met with the FDA and reached an agreement for all requirements for a complete NDA submission. See reference link Here.
The NDA was filed and subsequently accepted for review with a target PDUFA date of DEC 23 2014. NDA acceptance PR.
Shortly after acceptance, the contract manufacturer for peramivir was issued a 483 from the FDA for deficiencies in drug product manufacturing practices. See Reference link Here.
So here are some potential hiccups for the FDA approval of peramivir.
1) The data submitted for the NDA is a hodgepodge of clinical trial results and excludes the “FAILED” Phase 3 results.
2) The contract manufacturer for peramivir was issued a 483 which will likely lead to a CRL on manufacturing issues.
Bulls in the stock will claim that it’s already received approval in Japan and Korea and that approval in the US is a guarantee. True, peramivir was approved in Japan for use Jan 2010. See Reference link.
But why has it taken an additional 4 years to get to the point for approval in the US? The immediate answer is merely a month away. I predict the FDA will issue a CRL and investors should prepare themselves for this delay.
Currently Shares of $BCRX are trading near a $10 support level.
We are about 4 weeks away from approval and I project with the upcoming flu season and speculation of approval that shares will rise in price into this event. There is a chance that we can put on a risk free trade with a bearish sentiment.
First sell the $10 DEC 20th puts for a credit of ~0.80c. Current midpoint is 0.83c. As shares rise over the next few weeks buy the JAN $8 or $9 PUTS for less than 0.80c (debit). At the same time we would then sell the JAN $12 calls for a credit of $1.20 to $1.50. and the JAN $13 calls for a credit $0.50c ($2 total credit)
This puts us in a diagonal calendar put spread at no cost with a $2 risk. However, we sold the JAN $12 and $13 calls for $2 credit against this position.
If the approval is announced on the PDUFA date of DEC 23rd, this will be “after” DEC options expiration. It is suspected that price will be above $10 and the DEC $10 puts sold will expire worthless allowing us to collect an 0.80c credit. At this point we have the option to either close out the $12 and $13 JAN calls or hold the entire position in anticipation of a CRL. Collecting $2 credit for the calls and the remaining premium of the $8 put options previously purchased.
The risk in this trade is if the CRL is issued before DEC options expiration. The DEC $10 puts sold would be capped for a maximum loss of $2 because we purchased the $8 JAN puts. In fact there will probably still be extrinsic value on the JAN $8 puts and so the loss may be slightly less than $2. But, we also sold the JAN $12 and $13 calls for a credit of $2 which would bring the trade to flat or no loss.
Even if BCRX received approval this Intravenous drug will likely be second place to tamiflu and I can’t see shares of BCRX holding over $12 per share. The likelihood of BCRX over $12 is low probability in my opinion.
Cash, cash equivalents and investments totaled $127.6 million at September 30, 2014
The net loss for the third quarter of 2014 was $8.7 million
Market Cap = An alarming $720.8MBCRX NOV 6 Earnings Statement