Two "misses"

BDSI's cancer pain drug Onsolis did gain FDA approval as expected, but the prices have declined since its approval, which is unexpected. I'm sitting on a slight loss on the shares, so will probably hold until their next pivotal event in September/October--or until the market realizes the commercialization potential of Onsolis, its unique breakthough drug delivery technology, and solid pipeline up for FDA approval.

I also contemplated taking a stab at Human Genome Sciences (HGSI) last week, waiting for today's announcement for its Lupus drug, Benylsta. Results were positive, and shares rocketed overnight over 200%, despite the market's prior skepticism. Even though we missed on it, I don't feel that bad, because I didn't perform enough due diligence to be comfortable enough to pull the trigger. The main beneficiary is the biotech sector, as these big winners will attract more retail and institutional investors. Clinical stage biotech stocks require capital to fund their development work, so the positive news gives them more options for financing.

Two ships arrive overnight...

BDSI's cancer drug pain-killer finally gained approval yesterday, after an almost year-long delay regarding labeling issues against misuse and abuse. With a novel drug delivery system, along with a strong pipeline, and a low float of shares, this investment in BioDelivery Sciences is a winner.

http://www.reuters.com/article/marketsNews/idINN1643063420090716?rpc=44

BCRX shares shot up overnight, after partner Shionogi announced positive results in Peramivir Phase III trials in Japan and Korea. Peramivir is an anti-viral which competes against existing stockpiles of Roche's Tamiflu and GSK's Relenza. Due to mutation, viral strains are starting to show resistance to Tamiflu and possibly Relenza. Hence, the race to develop a new anti-viral.

We've known of this partnership for a while and the stock has more than tripled since we bought in May, but the shares should soar higher if and when the US assigns Emergency Use Authorization for stockpiling against a pandemic flu.

http://finance.yahoo.com/news/BioCryst-Pharmaceuticals-prnews-4103594572.html?x=0&.v=1

BDSI

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.