Take a Thrill Ride of the FDA Advisory Panel’s Decision

Gambling on FDA Advisory Panel Decision?

I recently encountered a short article on how to use FDA’s advisory panel to trade stocks. The article caught my eyes because I am really curious about how Wall Street plays games using FDA.

Pump and Dump Prelude?

My case-in-point is VIVUS, a biopharmaceuticals company whose weight management drug QNEXA (phentermine/topiramate) faced the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee’s vote whether it can go on market on July 15.  On July 13’s Wall Street Journal, a report “FDA Finds ‘Significant’ Weight Loss With Qnexa” and New York Times’s “F.D.A. Review of Diet Pill Relieves Investors” both had positive outlooks for QNEXA to pass panel vote to go on market.  And Leerink Swann analyst Steve Yoo told Reuters, “The topics the FDA raised are in line with what we expected,” and he said “the likelihood of a positive panel vote has increased, which in turn increases the likelihood of approval.”  Three major news sources were upbeat about QNEXA’s clinical trial results.

Science Speaks Louder

To give myself a benefit of doubt, I went to FDA’s website to download over 200 pages document.  I have to admit that I am not experienced enough to make a judgement call, but there are many safety issues that seem to be not negligible.  On July 15, the FDA panel rejected QNEXA due to its questionable safety issues.  Admittedly, share price of VIVUS tanked during after hour trading.

What do I learn from this case?  Timing is everything and beware of analyst’s opinions.  Because some information may not be toxic on the surface, inside it can poison you if you don’t do your own due diligence and give a benefit of doubt on things you don’t really understand.  There are more cases you can practice as many drugs are waiting in line for FDA advisory panels’ examinations.

[Disclosure: I don’t own any of the stocks in the articles I provided the links to, and I don’t endorse any strategies of trading stocks.]

Until next post, keep on reading and writing!!