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GNTA high IV
- Thread starter AngusP
- Start date
Actually, I think these are some of the best plays out there for options traders. When trading these things, I follow a couple of basic rules:
1. Read! look through filings and listen to conference calls, know dates and expectations.
2. If it smells like a dog, it is. When listening to the conference calls, how many analyst are on them? If Bubba, an investor, asks a lot of questions then you can bet there isn't much there.
3. Much of the results are already known. These companies use the same people(hospitals or companies or whatever, not patients) for their trials so that much of the information is already out there and they talk. The DNA surprise is rare.
My brother hops around from biotech to biotech and basically knows how his competition is doing. I should call him more.
1. Read! look through filings and listen to conference calls, know dates and expectations.
2. If it smells like a dog, it is. When listening to the conference calls, how many analyst are on them? If Bubba, an investor, asks a lot of questions then you can bet there isn't much there.
3. Much of the results are already known. These companies use the same people(hospitals or companies or whatever, not patients) for their trials so that much of the information is already out there and they talk. The DNA surprise is rare.
My brother hops around from biotech to biotech and basically knows how his competition is doing. I should call him more.
Quote from Trajan:
Actually, I think these are some of the best plays out there for options traders. When trading these things, I follow a couple of basic rules:
1. Read! look through filings and listen to conference calls, know dates and expectations.
2. If it smells like a dog, it is. When listening to the conference calls, how many analyst are on them? If Bubba, an investor, asks a lot of questions then you can bet there isn't much there.
3. Much of the results are already known. These companies use the same people(hospitals or companies or whatever, not patients) for their trials so that much of the information is already out there and they talk. The DNA surprise is rare.
My brother hops around from biotech to biotech and basically knows how his competition is doing. I should call him more.
Trajan, if I may ask, what in your research led you to take a neutral to slightly bearish short-term position on the stock (i.e. 12.5 strike flys with the stock at 14 and change)?
fyi, i have no position....but what about this release sounds bullish??? no reason to be long imo
The single randomized open-label study presented in this application failed to demonstrate overall survival benefit of G3139 + DTIC over DTIC alone. [G3139 is Genasense.] Any claims of improved efficacy based on secondary endpoints, progression-free survival and antitumor response rate are questionable because of the open-label nature of study, missing data, and differences in assessment interval between the two treatment groups. The findings could be falsely positive, especially in view of the lack of confirmation by a second well-controlled and well-conducted trial
The single randomized open-label study presented in this application failed to demonstrate overall survival benefit of G3139 + DTIC over DTIC alone. [G3139 is Genasense.] Any claims of improved efficacy based on secondary endpoints, progression-free survival and antitumor response rate are questionable because of the open-label nature of study, missing data, and differences in assessment interval between the two treatment groups. The findings could be falsely positive, especially in view of the lack of confirmation by a second well-controlled and well-conducted trial
I read the attached file and it seemed like the stock has traded around that 12.5 point for the last yearQuote from Hello_Dollars:
Trajan, if I may ask, what in your research led you to take a neutral to slightly bearish short-term position on the stock (i.e. 12.5 strike flys with the stock at 14 and change)?
Oops, didn't load. What I tried to attach is a research report from Piper Jaffray that was negative on the drugs prospects.Quote from Trajan:
I read the attached file and it seemed like the stock has traded around that 12.5 point for the last year
KEY POINTS:
⢠New Incremental Data Analysis Presented At Major Melanoma Meeting.
During the meeting, Genta presented new incremental survival data from its
Phase III trial of Genasense. As a reminder, in the initial analysis from September
2003, the trial failed to meet its primary endpoint of an improvement in overall
median survival (9.1 months for Genasense+dacarbazine vs. 7.9 months for
dacarbazine alone, p=0.184). New data presented over the weekend included
landmark survival analyses of the intent-to-treat population, demonstrating
statistically significantly higher 15-month and 18-month survival rates for
patients treated with Genasense. We note, however, that these analyses are not
based on any extended follow-up of patients beyond the initial cut of the data
from September 2003 and, as such, we view these data cautiously, given the lack
of benefit at other time intervals and the small number of patients with 15-month
and 18-month follow-up, which forms the basis of the Company's own argument
for why the primary endpoint analysis is not yet mature enough to draw
conclusions.
⢠Panel Meeting Remains Difficult To Call. We had an opportunity to speak to a
half a dozen melanoma experts at the meeting. Although it was difficult to call a
consensus on the prospects for a positive Genasense regulatory review, there
were several common themes in our discussions: (1) the efficacy benefit was
characterized as very modest on both response rate and time to progression; and
(2) all physicians acknowledged that a recommendation for approval would have
to rely predominantly on the argument of limited treatment options for advanced
melanoma. We continue to believe that the odds of a positive panel
recommendation are difficult to call. However, the feedback from physicians
more negatively biases our view on the drug's potential market opportunity
following approval.
⢠Binary Events Over Next Week. The next major milestones for Genta, include:
(1) Genta will host a conference call and provide a corporate update on April 29
in conjunction with its 1Q earnings; (2) release of the FDA briefing documents
for the Genasense advisory committee meeting on April 30; (3) the FDA advisory
committee for Genasense on the morning of May 3; (4) the presentation of
additional survival analyses from the Phase III Genasense melanoma trial in early
June at the American Society of Clinical Oncology meeting; and (5) FDA action
on the Genasense melanoma application on June 8.
INVESTMENT RECOMMENDATION:
We remain on the sidelines, given the binary nature of next week's FDA advisory
committee meeting for Genasense and the difficulty in calling the outcome of the
panel meeting.
Here what they say today:
Genta Incorporated (GNTA - $14.43)
Market Perform Volatility: High
Health Care
FDA Briefing Documents Are Negative
KEY POINTS:
⢠FDA Briefing Documents Are Negative. FDA briefing documents released this
morning highlight five major concerns the agency has with the Genasense
application. Specifically, the FDA believes the open label nature of the study,
missing data, and differences in the assessment of response between control and
Genasense patients could have introduced bias into the study. The agency did not
appear impressed with the robustness of data for the secondary endpoints
(response rate and progression-free survival), particularly in light of the increased
toxicity profile in the Genasense arm.
⢠Major Differences Between Response Rate Analysis By Independent Lab
And Genta. The FDA reported that 11 of the 71 responders in the Genasense arm
were deemed not assessable and 20 of 71 could not be confirmed by the
independent radiology lab. In addition, all five of the complete responders in the
Genasnse arm could not be verified by the independent lab. The independent lab's
response rate assessment was 6.7% for Genasense vs. 3.6% for the control, with
p=0.056. These data are significantly less impressive than Genta's top-line
reported results.
⢠FDA Has Statistical Issues With Progression Free Survival Analysis. The
FDA states there was a difference in assessment of response between the
Genasense and control arms that could positively bias the results. In addition,
Genta failed to incorporate missing data for non-target lesions in a differential
fashion (34% for the Genasense arm and 23% for the control arm), which could
have biased the response rate and progression-free survival conclusions. Taking
into account the missing data diminished the statistical significance of the
progression-free survival data.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
(1) Outcome and timing of the FDA panel meeting and the final statistical analysis
of the Genasense melanoma data; (2) Genasense NDA approval delays; and (3)
Genta's cash position if Genasense approval is delayed.
Genta Incorporated (GNTA - $14.43)
Market Perform Volatility: High
Health Care
FDA Briefing Documents Are Negative
KEY POINTS:
⢠FDA Briefing Documents Are Negative. FDA briefing documents released this
morning highlight five major concerns the agency has with the Genasense
application. Specifically, the FDA believes the open label nature of the study,
missing data, and differences in the assessment of response between control and
Genasense patients could have introduced bias into the study. The agency did not
appear impressed with the robustness of data for the secondary endpoints
(response rate and progression-free survival), particularly in light of the increased
toxicity profile in the Genasense arm.
⢠Major Differences Between Response Rate Analysis By Independent Lab
And Genta. The FDA reported that 11 of the 71 responders in the Genasense arm
were deemed not assessable and 20 of 71 could not be confirmed by the
independent radiology lab. In addition, all five of the complete responders in the
Genasnse arm could not be verified by the independent lab. The independent lab's
response rate assessment was 6.7% for Genasense vs. 3.6% for the control, with
p=0.056. These data are significantly less impressive than Genta's top-line
reported results.
⢠FDA Has Statistical Issues With Progression Free Survival Analysis. The
FDA states there was a difference in assessment of response between the
Genasense and control arms that could positively bias the results. In addition,
Genta failed to incorporate missing data for non-target lesions in a differential
fashion (34% for the Genasense arm and 23% for the control arm), which could
have biased the response rate and progression-free survival conclusions. Taking
into account the missing data diminished the statistical significance of the
progression-free survival data.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
(1) Outcome and timing of the FDA panel meeting and the final statistical analysis
of the Genasense melanoma data; (2) Genasense NDA approval delays; and (3)
Genta's cash position if Genasense approval is delayed.
More:
Downgrading GNTA To Underperform
KEY POINTS:
⢠Panel Unlikely To Recommend Approval For Genasense, Downgrading To
Underperform. Based on FDA briefing documents released today, we believe
the May 3 Oncology Division Advisory Committee (ODAC) is unlikely to
recommend Genasense for approval. As we pointed out in our earlier note this
morning, the FDA was highly critical of the response rate and progression free
survival data (on which Genta is hoping to get FDA approval), and highlights
dramatic discrepancies between Genta's reported top-line results and the
independent radiology findings. We believe these analyses call into question the
clinical significance of the Genasense data and could lead to a negative panel
recommendation.
⢠Uncertainty Around Two Remaining Genasense Trials. Genta has also
conducted two other Phase III trials for Genasense, one in chronic lymphocytic
leukemia (CLL), and another in multiple myeloma (MM). Genta elected not to
unblind either of these trials ahead of the regulatory outcome for Genasense in
melanoma. We expect that, if the panel indeed recommends against approval,
Genta will switch gears and unblind one of these two trials. Given the highly
competitive nature of the MM market (Thalomid, Velcade), Genta may decide to
release the CLL trial first, although the company has refrained from issuing any
specific guidance. While there was some single agent activity noted in a small,
uncontrolled CLL study, the uncertain outcome of both trials increases the risk
profile of Genta.
⢠Genta Could Face Cash Crunch This Year. Genta's 2004 guidance included a
cash burn rate of $20 million per quarter over the course of 2004. Genta had
$67.5 million in cash as of March 31, 2004 (which translates into a current $0.87
cash/share) and we estimate that the net cash position was $17.5-22.5 million (a
$10 million convertible note and a $35-40 million drawdown on a line of credit).
If Genta were to stick to its original guidance, it would need to raise additional
funds to support ongoing operations assuming that FDA approval for Genasense
did not happen this year. We believe that Genta could face a cash shortfall or
undergo significant restructuring in the absence of positive Genasense clinical
data.
INVESTMENT RECOMMENDATION:
We are downgrading to Underperform from Market Perform based on our
expectation that the May 3 ODAC panel meeting will be negative. Our new price
target is $5, based on a 40x multiple of our 2009 EPS estimate, discounted at 45%.
Our new estimates reflect no sales in melanoma and sales in CLL and myeloma,
and our new discount rate reflects a higher risk profile of positive data from both
CLL and myeloma.
Downgrading GNTA To Underperform
KEY POINTS:
⢠Panel Unlikely To Recommend Approval For Genasense, Downgrading To
Underperform. Based on FDA briefing documents released today, we believe
the May 3 Oncology Division Advisory Committee (ODAC) is unlikely to
recommend Genasense for approval. As we pointed out in our earlier note this
morning, the FDA was highly critical of the response rate and progression free
survival data (on which Genta is hoping to get FDA approval), and highlights
dramatic discrepancies between Genta's reported top-line results and the
independent radiology findings. We believe these analyses call into question the
clinical significance of the Genasense data and could lead to a negative panel
recommendation.
⢠Uncertainty Around Two Remaining Genasense Trials. Genta has also
conducted two other Phase III trials for Genasense, one in chronic lymphocytic
leukemia (CLL), and another in multiple myeloma (MM). Genta elected not to
unblind either of these trials ahead of the regulatory outcome for Genasense in
melanoma. We expect that, if the panel indeed recommends against approval,
Genta will switch gears and unblind one of these two trials. Given the highly
competitive nature of the MM market (Thalomid, Velcade), Genta may decide to
release the CLL trial first, although the company has refrained from issuing any
specific guidance. While there was some single agent activity noted in a small,
uncontrolled CLL study, the uncertain outcome of both trials increases the risk
profile of Genta.
⢠Genta Could Face Cash Crunch This Year. Genta's 2004 guidance included a
cash burn rate of $20 million per quarter over the course of 2004. Genta had
$67.5 million in cash as of March 31, 2004 (which translates into a current $0.87
cash/share) and we estimate that the net cash position was $17.5-22.5 million (a
$10 million convertible note and a $35-40 million drawdown on a line of credit).
If Genta were to stick to its original guidance, it would need to raise additional
funds to support ongoing operations assuming that FDA approval for Genasense
did not happen this year. We believe that Genta could face a cash shortfall or
undergo significant restructuring in the absence of positive Genasense clinical
data.
INVESTMENT RECOMMENDATION:
We are downgrading to Underperform from Market Perform based on our
expectation that the May 3 ODAC panel meeting will be negative. Our new price
target is $5, based on a 40x multiple of our 2009 EPS estimate, discounted at 45%.
Our new estimates reflect no sales in melanoma and sales in CLL and myeloma,
and our new discount rate reflects a higher risk profile of positive data from both
CLL and myeloma.
Quote from Trajan:
Oops, didn't load. What I tried to attach is a research report from Piper Jaffray that was negative on the drugs prospects.
Okay, thanks for sharing the report. I now understand the basis for your play. But a broader issue re biotech trading comes to mind. Though I have a background in equity research, as a non-scientist, I personally find it a pointless exercise to attempt to evaluate the prospects of new drugs, compounds, etc. Thus, when applying fundamental analysis to the space, I'm forced to pretty much rely on the sell-side, which often has divergent opinions on such prospects and/or disparate levels of quality. And given my aforementioned background, I'm loathe to rely on the sell-side alone in any situation.
So that pretty much leaves a technical approach based primarily on reasonable S/R levels, which you seem to have incorporated as well. Also, I tend to look at open interest levels to see which strikes make the best pinning candidates. But in the end, I still find the sector to be mostly a crap shoot that defies traditional valuation analysis. Hence, finding cheap flys with attractive risk:reward profiles strikes me as the best way to play it.