SRPT will announce that based on their "favorable" conversations with the FDA, they will seek accelerated approval. I do not believe the FDA will want to deal with the political and public backlash of telling the company not to apply and that they are delaying the drug. Keep in mind that this does not mean the drug has been approved and that they will start to sell it right away. They will only be applying for AA which means that they will have to not only provide the data (which presumably has already been reviewed by the FDA) but they will have to ensure that their manufacturing capabilities are in order and satisfy the FDA. Therefore, the FDA has tried to add additional assurances and safe guards that there will be no issues when the drug is rolled out. If the SRPT does not satisfy the FDA manufacturing requirements, this could cause delays as to when the drug is eventually brought to market. The FDA is probably going to want to make sure all "t's" are crossed and "i's" are dotted to ensure they did everything they could to mitigate any issues. This is to protect their butts. The FDA understands the parents and children want this approved so the FDA will probably approve as long as the FDA can ensure absolute safety. Manufacturing is not something that can be done overnight. It takes time. How much time is up to CG and SRPT. They have the money and it seems they are working on it but we shall see. Therefore, i would not be shocked to see the drug rolled out in 2014. However, the fact that they will (hopefully) announce they will apply for AA will send a sign that the FDA will approve based on the safety and effectiveness of the drug and that as long as SRPT has taken care of the manufacturing end we are all good.
You could do that and still make money and their would be nothing wrong with that. I always hold a core position and trade around it. Accumulation is important in my opinion. The big boys take advantage of that so why shouldn't I? My long position today is significantly greater than it was just 2-3 months ago. Playing the swings and selling covered calls and puts helps you accumulate. I move cash in and out of stocks frequently. Last Tuesday when we dropped to 33 I was closing other positions and added SRPT shares and May calls. If it continues to rise next week I'll take those off or sell calls on top of them. Im not so patient to just buy it and sit and wait. I enjoy the game too much to stay on the sidelines.
This is probably best written opinion on the AA outcome. AA outcome is not a binary event many traders make it to be. SRPT filing for AA is a foregone conclusion. Filing for AA is just the beginning for the tough road ahead when it actually gets the approval. FDA has no desire whatsoever to tell SRPT not to file AA. If FDA has any doubts, they can easily do that thorough analysis once they have all the data and they can convene an Adcom to let outside experts decide on the merit of the drug.
So the implication of this thesis is that the price may spike to mid-50s upon AA filing news, but it will come down to mid-40s once people realize this is just a beginning of an intense 3-4 months process even if SRPT files the very next day, which is not likely.
My trading plan is to sell puts in the low 20s and sell calls above 55.
Not bad, but it assumes the FDA is playing games. Secretly wants to deny. Which to put it mildly is a stretch. Yes, I see your point that politically, just now, it would be "suicide" to show their secret negative bias now. But again that assumes a "secret negative bias". And, tho I'm not a part of the FDA, I think it's safe to say that THERE IS NO SECRET NEGATIVE BIAS. and that they are not tricking the hoi-poloi here. But you are entitled to your paranoid opinion, of cosrse.
good analysis, i totally agree with your thesis. i am trying to think of the best strategy going forward. what are you planning to do? i think it might be wise to sell within 3 days of the announcement they will file, then wait on the sidelines for an inevitable big drop as fears of denial based on manufacturing ramp-up concerns are voiced loudly and all the games are being played. once it has reached a much lower share price and i feel confident the manufacturing fears are fully priced in, i will get back in.
I am thinking the opposite. I think this still runs up quite a bit prior to the news coming out. I think it breaks 40 but no way it breaks 45 until AA is announced. My thinking is the PR saying they will file for AA will be dull, boring, and produce a muted response in the market. This will also be due to the huge run-up the stock had prior to the announcement. I wouldn't be surprised to see only a 20-30% move up the day the PR is issued. Assuming the stock is at $42 the day before, I would see it going to only 50-55 with the announcement.
This is the tricky part. Do you sell off thinking it gaps down and consolidates like after the P2 results? I say no. Unless this shoots up big time, like 50+%, I say you hold, or even add the day the PR is released. I would expect new investors to start slowly coming to the party. What worries me is the OPEX manipulation. Last Friday there was over 2000 contracts traded at the May 55 against only 600 open interest. If those strike prices continue with high volume I'd expect someone to want to keep this low until expiration. That would be a good opportunity to buy more, or even sell puts going forward.