XNPT cleared for takeoff!

3 Feb

I have been trading stocks for years and recently I found one of the most lucrative trading methods is trading biotech stocks on momentum.  Biotech stocks can be very volatile and have their share of risk, however, if you have a solid trading plan you can mitigate some of this risk creating great risk/reward to make the trade.

The most lucrative trading method is using the momentum of a biotech’s upcoming PDUFA date as a catalyst for the stock to rise on average of 10-40%.  A PDUFA (Prescription Drug User Fee Act) date is the final date set by the FDA to approve or not approve a prescription drug.  This is after up to three clinical trials and millions of dollars have been spent researching and compiling data all for the future sale of these drugs.  This is the catalyst that drives the stock as a prescription drug is given a patent and has no competition for years.  The trading plan is to get in early enough and ride the momentum to a week or two before the PDUFA decision date and then sell for a profit.

I will now go over my first shared biotech momentum stock:

XNPT – Xenoport

Xenoport is currently awaiting FDA approval on April 6th for Horizant for the treatment of restless leg syndrome.  This is a resubmission from a CRL (complete response letter) that was issued back in 2009.  See link:

http://finance.yahoo.com/news/GlaxoSmithKline-and-XenoPort-bw-1414074274.html?x=0&.v=1

Recently the company has issued 4M common shares up to the public, diluting the current shareholders.  Often this happens with a biotech before they get drug approval because it is often very expensive to bring a drug to market and most of these companies have no revenue.  Their bread and butter is in their pipeline.  So these biotechs frequently issue more shares to fund their R&D efforts.  Usually these offerings dilute the shareholders and drive the stock price lower because of this dilution.  This is the case here see the stock chart:

On or around Feb 19th, XNPT announced the sale of the shares which caused the big drop that day and the slide since.  This creates a great buy opportunity to get into the stock now for the run up to the FDA decision.

Currently XNPT also has the following drugs in its pipeline:

 My price target is between $10-11 about 1-2 weeks before the April 6th PDUFA date.  I will comment more as the date comes closer.  As always do your own due diligence (DD) before investing in any security.

Disclosure:  Long XNPT

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8 Responses to “XNPT cleared for takeoff!”

  1. pokerexpress February 5, 2011 at 3:11 pm #

    Other comments:
    * Market cap of $233M should give this some room to run
    * Could not find any data on the potential market for RLS, still researching

  2. Ben Yoffe February 6, 2011 at 1:26 pm #

    Its not really true.

    If you look recently on CLDA – they had a big negative momentum before the FDA decision. I think its all about cover and as for now XNPT doesn’t have much.

  3. pokerexpress February 6, 2011 at 2:16 pm #

    Good point Ben. No trading method is ever fool proof, I looked at the chart for CLDA and if you entered the trade at the 3 month mark you would have lost money. I am sure there were other variables surrounding this stock that caused the slide. Some of the stocks I have traded before using this method last year and this year:

    DEPO – bought Dec sold Jan, JAZZ bought Jun 10 sold Aug 10, MNKD bought Nov 10 sold Dec 10.

    • pokerexpress February 8, 2011 at 8:30 am #

      Today’s action brought a 3% slide on a slight increase in volume. I sensed some fear on the message boards that it is sliding on increased volume, talk of bad phase II data on GERD, bio traders selling the stock, etc. First of all, as for the volume, this is a low volume stock. Any volume is going to move this puppy easily. I don’t think a 530k day is a big warning signal yet. We need to be patient and pay attention to the price action during the next few days. Since we are out a few months from the PDUFA we are subject to more volatility which should pay off in the future.

  4. pokerexpress February 17, 2011 at 2:17 pm #

    XNPT came out with earnings that beat the street today:
    http://finance.yahoo.com/news/XenoPort-Reports-Fourth-bw-2998818826.html?x=0&.v=1

    I believe we should begin to see a run up here. Be wary of the Phase II data that is supposed to come out towards then end of Q1 (which would be next month). I may sell and then get back in after this data is announced. Will keep you all posted.

    • pokerexpress February 28, 2011 at 9:45 pm #

      got stopped out last week when this stock continued to fade. Not sure if I will be getting back in as my capital is tied up in other securites.

      • pokerexpress March 21, 2011 at 11:13 am #

        The price action has been terrible and today we finally found out why. The GERD data came out and was no good, thus rendering the heartburn drug useless. Bad news for this stock. If you are in you may want to shoot for a bounce into the April 6 pdufa otherwise I would not touch this stock now. I am glad I got stopped out of this one back in Feb as it went nowhere since.

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