AMGN’s shares are factoring in FDA’s upcoming meeting
Posted by Jack Haddad on December 10, 2007 at 10:52 am
AMGN has retreated from a recent high of 55.50 on fear that the FDA will suggest new revisions in regard to the company’s anemia drug, Arsenap. The shares lost nearly 6% last Friday as investors panicked. For those who can withstand buying while everyone else is fleeing, AMGN is a buy!
That said, I purchased 2 blocks (20000 shares) at an average price of 49.88. Simultaneously, I wrote the following covered call options to help hedge my shares: 200 DEC strike 50 calls at a premium of 1.66/contract. This means that I have an intrinsic value of 1.66/share by DEC expiration. It’s a not a bad return in little under 12 days remaining.
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What do you think about CELG being knocked down today? I personally don’t care for biotechs all that much since I don’t have the stomach for it, but even to me CELG seems to be heavily discounted after today’s actions. Overreaction perhaps?
Jorge,
The fall in the shares were attributed to the fact that Rival drug Velcade was shown to have a 4-fold increase in efficacy and response rate in clinical trials on patients with multiple myeloma, though CELG’s drug Revlimid met efficacy expectations.
The fall is overdone… Just because a drug is more efficacious than its rival, it does not mean that it has fewer side effects. Tolerability is very important in pharmaceutical agents, especially when treating cancer patients. From my experience in clinical trials, drugs/neutraceuticals with fewer side effects than their competitors have always generated more sales.
The above analogy reminds me of a shizophrenic patient that I treated back in my days as an intern. The attending physician prescribed him a new drug called Clozapine, an agent that mildly kills white blood cells. However, the drug does miracles in reducing the patients’ delusions and hallucinations. Patients often beg to be on it, though they have to have a blood test every week to monitor their white count. Well, this particular patient died in his sleep 3 weeks after ingesting the medication, while another patient on Zoloft (an older generation antipsychotic) had lived 36 years with slightly more symptoms.
For some, it’s the quality of life over the mere length of it and vice of versa!