Replies to post #6210 on Biotech Values

[DewDiligence]

When to sell:

>>My experience as an individual investor is that you have to work overtime to avoid the BIG loss.<<

Especially true in biotech. Hence the new tag line at the bottom of my iHub posts.

Mbkennel (whom we ought to get to post here) has some rules that are worth considering:

Statistical issues --> Sell
Regulatory issues --> Sell
Management issues --> Sell

To these I would add another:

No SPA in pivotal trial --> Sell

There are exceptions, of course, and none of these rules should be applied dogmatically. But most of the time you will save money by following them.

[Aiming4]

Exiting a position after a negative pivotal event...

Someone asked earlier how to exit a position where a pivotal event turned negative. From watching some of the colossal flops (and participating in one), the best thing to do in my opinion is sell out right away if a pivotal trial misses it's primary endpoint or an NDA gets rejected. There is usually a bit of a small bounce about 3-4 days after the initial big drop which some desperately interpret as a sign of recovery. That is rarely the case, and a slow but steady decline in share price ensues. You're better off having sold in premarket or by 10 am on the day. As with anything, there are exceptions; but in general, this strategy holds.

I've been following PARS with great interest after their recent TBI Phase III failure, and I had already concluded that I would sell ASAP with bad results, which I did for $1.15.

I was anticipating a bounce, but not to the magnitude it has hit the past 2 days, a brief high of $1.68 today, with plenty of opportunity to sell over $1.50.

My question is... with all the day traders and momentum traders looking for events like PARS failure, wouldn't it be a good idea for a previously long investor to:

A) Hold any shares you want to sell until the bounce.

B) Pick up some extra shares on D-Day, then hold for a few days and sell on the bounce to make up a little of the loss from your long shares.

I see no reason for PARS current pps (other than the convenient Merck rumor that fueled the price increase the past 2 days), I think it's an excellent short candidate for those with the means to short stocks under $2.

Just curious if anyone else sees the above as a reasonably valid approach to binary event failures... Aiming4.