Saturday, June 13, 2009


My entry yesterday on FaceBook: "Someone BIG hit the ask hard on BDSI before the close. A few hundred shares trade here and there, and then a huge 176,000 share buy hits the tape. Someone wants in before Monday's FDA decision. Spiking up in after hours. Good thing I doubled down this am..."

A massive buy at $6.78 for 176,000 shares occurred at 15:38:37, just before market close, surrounded by normal closing out of positions on a scale of a few hundred shares. Clearly, a hedge or mutual fund wanted in before Monday's expected FDA decision on Onsolis, a pain medication for cancer patients. The FDA made a favorable assessment of the drug and delivery technology last October, but due to a change in policy on monitoring potential addiction, BDSI was required to re-format data to the new standards, REMS. The Complete Response Letter delayed the approval date until June 15, 2009, so the recent run up in share price is in anticipation of successful approval. To long investors, FDA approval is a slam dunk Monday. With the FDA, nothing is ever a slam dunk, so we'll have to wait and see.

Having said that, I doubled up my investment yesterday morning. So far, it is paying off as the big trade before yesterday's close drove up the shares to above $7.50 in after hours. BDSI is a conservatively run company, focusing on existing approved drugs delivered by innovative but effective technology. They have managed their finances well, securing a partnership with Meda, which includes milestone payments, so their cash position should be solid with little dilution to existing shareholders. The short interest is low (but climbing), so I don't expect a big short squeeze, but a steady increase after an initial spike up Monday. The breakthrough drug delivery technology and two other drugs in the pipeline should provide for a sustainable company going forward.

If for some reason, the FDA delays a decision again with the infamous "approveable" letter, BDSI shares drop back to $3. I would probably buy more at depressed levels, knowing approval is imminent, if not impending. If Onsolis is approved, BDSI should see the teens.

This is not a recommendation. Due your due diligence. Investing in biotech stocks is risky, and you can lose all or most of your investment. Good luck to all.

Disclosure: I am long BDSI.

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