GNTA high IV

Discussion in 'Options' started by AngusP, Apr 28, 2004.

  1. Down 37% ooohh I'm scared. ridiculous volatility for such a crap move, glad I sold the overpriced options.:D
     
    #51     Apr 30, 2004
  2. Trajan

    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.
     
    #52     Apr 30, 2004
  3. bubbrubb

    bubbrubb

    stock is worth $2-3 on Tuesday
     
    #53     Apr 30, 2004
  4. 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)?
     
    #54     Apr 30, 2004
  5. bubbrubb

    bubbrubb

    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
     
    #55     Apr 30, 2004
  6. Trajan

    Trajan

    I read the attached file and it seemed like the stock has traded around that 12.5 point for the last year
     
    #56     Apr 30, 2004
  7. Trajan

    Trajan

    Oops, didn't load. What I tried to attach is a research report from Piper Jaffray that was negative on the drugs prospects.

    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.
     
    #57     Apr 30, 2004
  8. Trajan

    Trajan

    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.
     
    #58     Apr 30, 2004
  9. Trajan

    Trajan

    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.
     
    #59     Apr 30, 2004
  10. 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.
     
    #60     Apr 30, 2004