This is a two day chart of the stock and it does not get any worse from one day to the next for a stock than this.
Based on the reaction yesterday I am guessing this was unexpected but since I don't follow the stock I don't know, but there is something interesting in the chart that I think we can learn from.
In the last two months, before the FDA news, the stock had already started to go down at a faster rate than the rest of the sector, as measured by client holding iShares Nasdaq Biotech (IBB). NBIX was down about 25% from its March high while IBB was down about 12% in the same time period.
If the FDA problem was unlikely (again I don't know) it is tough for me to blame an analyst for that but according to Yahoo Finance there was no analyst ratings changes between January 11 (a downgrade) and May 5 (initiate with a buy-oops).
The significant lag in the stock over the last two months was a warning from the market that no one in the analyst community heeded. I looked through the headlines and saw that losses widened but that was reported in April, a month after the high was put in.
This ties into the buy and hold discussion from yesterday. A high octane stock goes down a lot more than its peers is a reason to try to do some detective work in an attempt to figure out what's wrong. If you can't figure it out, at that point you should probably sell. Even if the stock goes up a lot after you sell, owning a stock you don't understand is a bad idea more often than not.
3 comments:
We posted a couple good articles on the company's collapse from Jon Ogg, for those who want to understand it better:
Evaluating the Implosion in Neurocrine Biosciences
Neurocrine’s Implosion: Let The Dust Settle Before Buying
OR IS IT JUST ANOTHER MATTER OF ANALYST HYPE?!!!
The one thing that no one seemed to take into consideration is that hyped up headlines (re: FDA approval) is all that investors are reading, rather than reading on to discover the actual facts. I for one, am grabbing as many shares as possible right now.
As for the actual facts, here's a little recap found out there on the web (in more detail):
"It takes a special kind of arrogance for a government agency to pull off what the FDA did yesterday--turn down indiplon's MR formulation without having read all the material submitted. There has been speculation in the media that the empty conference call subsequently held by Neurocrine was empty of content because there is a real problem with the molecule. We don't think so. Pfizer and NBIX said nothing because there is nothing yet to say. There is no problem coming from the 8000 pt clinical trial program that would justify nonapproval. If there were some type of lingering cognitive dulling seen in some patients--like one encounters in most insomnia drugs--that would be appropriately dealt with in labeling discussions. Indeed, by NBIX's report, labeling discussions were being held. Neither Pfizer nor Neurocrine were aware that they were about to be bitch-slapped by the FDA. We suspect that the FDA will not be happy that Gary Lyons publicly acknowledged that the FDA didn't do its homework. And we know that it can take weeks, even months, to schedule a meeting with the right people at the Agency. But here is our prediction of what will happen: The approvable IR formulation will be approved after a few months of labeling talks. There is no hurry, because Pfizer will probably not launch that on its own--although we can think of a rationale for doing so--maybe it will occur to them as well. The Agency, free of those onerous PDUFA deadlines that are such an irrelevant nuisance to be sidestepped, will take several months to read the NDA fully. A resubmission with some type of cosmetic reanalysis will be made. Will another trial be required? The FDA could ask for one simply to justify itself, but with 8000 patient records already on hand, even the FDA may have trouble coming up with a reasonable rationale. So for now, we are betting that another trial will not be required. The timetable for indiplon MR's approval and launch will be set back approximately twelve months. To give the FDA time for some leisurely bedtime reading."
the comment left by anonymous seems to me to obviously be the equivalent of chat room hype.
Since it is not profane I will not delete it but consider the source, oh wait there is no source, it is totally anonymous and un-cited.
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