Category Archives: nyse

2 Hotly Debated Drugs Due For FDA Decisions This Week

The FDA is due to decide whether to approve two of the most divisive drugs in the biotech industry this week, both of them crucial for the companies that make them, Sarepta Therapeutics and Intercept Pharmaceuticals. Thursday is the deadline for eteplirsen, Sarepta Therapeutics ‘ ( SRPT ) treatment for Duchenne muscular dystrophy (DMD). Just getting to the filing took years of negotiation between Sarepta and the FDA, and May 26 is three months later than the decision was originally supposed to be made. And after all that, Wall Street is placing low odds on the drug’s approval. That’s based mainly on last month’s advisory committee meeting on eteplirsen, which voted 7 to 3 (with 3 abstentions) that the drug’s effectiveness wasn’t adequately proven by Sarepta’s tiny clinical trial. Sarepta stock hit a four-year low of 8, on April 26, as multiple analysts downgraded it on the assumption the drug will be rejected. Nonetheless, DMD is a devastating disease without a current treatment, and the families of the children affected have turned into a formidable lobby to get something on the market — especially after BioMarin Pharmaceutical ‘s ( BMRN ) rival drug Kyndrisa was rejected in January. Some observers say the families’ desperation might be enough to move the agency. Oppenheimer analyst Christopher Marai on May 2 upgraded Sarepta on the grounds that, in the past, the FDA has been more flexible in such cases of unmet need. He also pointed out that the stock was now cheap. Sarepta stock has remained volatile but has steadied somewhat the past couple of weeks. On Friday, shares jumped 8.8%, to 19.15. Intercept’s Liver-Disease Treatment Expected To Get OK A day after the Sarepta decision, Intercept Pharmaceuticals ‘ ( ICPT ) liver-disease treatment Ocaliva is due for a verdict. Ocaliva’s advisory committee vote last month went the opposite way of eteplirsen’s, with the panel unanimously supporting approval for the drug, which treats the rare disease primary biliary cholangitis (PBC). As a result, Wall Street generally expects approval. Bears, however, are still growling about Ocaliva’s safety, which they say could limit the drug’s label. The day after the panel vote, Morgan Stanley analyst Andrew Berens drove down Intercept’s stock with the theory that the FDA would discourage use in patients with advanced cirrhosis. This might affect not only the relatively small PBC market, but also the much, much bigger possibilities for Ocaliva in non-alcoholic steatohepatitis (NASH). Intercept is testing the drug in NASH, and approval wouldn’t be for a couple of years, but it’s a major part of the stock’s bull thesis, as analysts see annual sales in the multi-billions. Intercept stock has been on a downtrend this month, but it rose 2.4% this past week. On Friday, shares closed up 2.2%, at 134.28.

The Great Temptation, Greatest Danger

“If we survive danger it steels our courage more than anything else.” – Reinhold Niebuhr I am often bewildered that what passes for analysis is really a focus on recent performance, rather than process. Yet, so little attention is given to the investor return/behavior gap, a well-documented phenomenon that proves that “on, average, investors sacrifice a substantial portion of their returns by incorrectly timing when to enter or exit investments”. In correct timing tends to come from chasing performance, getting in after a major up move has already taken place, and then, of course, exiting when the drawdown is likely near its end. The below chart sums up some of the research on this which, in my opinion, is a “must know” when considering where to put money to work. Click to enlarge The best returns in the future come from those parts of the marketplace that have not done well in the past. Yet despite the overwhelming evidence which supports this, strong recent performance is often the core catalyst to make an investment. In reality, it should be the exact opposite. High past performance and continuous visibility of that performance is a temptation too strong for many to ignore, and that temptation unequivocally results in sub-optimal returns going forward on average. Take that truism on mutual funds, and magnify it by a billion when it comes to Exchange Traded Funds (ETFs). Yes folks – I would argue to you that ETFs are the greatest danger to investors. Why? Because ETFs provide an even greater temptation to chase recent performance, day by day, hour by hour, and minute by minute. Overtrading is the ultimate source of the investor return gap, and the temptation to get “in and out” of the market has never been higher thanks to these investment vehicles. Now, don’t get me wrong here. We ourselves use ETFs to execute across our quantitative strategies in mutual funds and sub-advised separate account strategies we run. However, following a systematic, backtested, and quantitative approach using ETFs as the vehicle of choice for execution is NOT what the vast majority of ETFs “investors” do. The pattern of behavior remains the same. Assets for ETFs grow when the ETF has strong recent performance, and collapse after, with a lag, when losses have already occurred. In our case, we rotate based on leading indicators of volatility (click here to learn more). The majority rotate based on old leaders that have had continuously low volatility. The greatest danger is in using past strong performance to make an investment decision. ETFs like the S&P 500 SPDR ETF (NYSEARCA: SPY ) may be the greatest temptation of all that results in exactly that. *Join us this week for our live webcast on the 2016 Dow Award paper, hosted by the Market Technicians Association. Registration available by clicking here . This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Market Lab Report – Premarket Pulse 5/23/16

Major averages shot higher Friday morning before giving back some of their gains on higher, triple witching options-expiration volume. The S&P 500 came up near to its 50-day moving average before heading back down as it stalled on lighter volume. A number of Fed members have spoken including: – Eric Rosengren who said the U.S. is “on the verge” of meriting a June interest-rate hike. – John Williams who recently reiterated his prior view that two to three rate hikes could be appropriate in 2016 with three to four being possible in 2017. – James Bullard, who questioned market expectations for future hikes. Bullard also voiced his confidence in recent employment figures, stating that the U.S. labor market is “at or beyond full employment.” Despite the hawkish commentary, the UK Brexit vote takes place about a week after the June Fed meeting, so it’s unlikely the Fed will raise rates at that meeting. Fed futures put the odds at 26%. Weekend updates on both the short and long side of individual stocks were sent out to members this weekend. Members should be prepared to move with the market in either direction as the indexes sit at near-term support. A strong move back up through their 50-day moving averages by the S&P 500 and the NASDAQ Composite could signal the start of a new upside move, while a significant breach of support would indicate that downside risk is increasing.