Biotechnology stocks are particularly volatile around upcoming events, such as Phase I, Phase II and Phase III clinical trial data releases or earnings. When you’re trading or investing in biotechs, therefore, you want to keep a watchful eye out for catalyst events.
How to look for catalyst events
One tool that is particularly helpful in identifying catalysts — and therefore potential volatility — is www.biopharmcatalyst.com, which allows you to search for events in specifc biotechnology and pharmaceuticals companies. Checkout this screenshot of catalyst events.
Source: BioPharm Catalyst
This database covers most upcoming events that could affect a biotech or pharma stock, giving you a wealth of trading opportunities.
Beyond that, another useful tool is the company’s website. This gives you an idea of when the company is looking to report earnings; if the company does not note when it will release its next earnings report, check out Nasdaq or Earnings Whispers.
How to search for catalysts
As an example, here’s a look at Stemline Therapeutics Inc. (STML). According to BioPharm Catalyst, the company was expected to provide an update on its patients enrolled in States 1 and 2 of its clinical testing of SL-401 for the treatment of Blastic plasmacytoid dendritic cell neoplasm cancer at EHA on June 23, 2017. That in mind, you might expect what I call the “catalyst run up.” Typically, with cancer treatments, you see a stock rise into the event, in anticipation of positive data being released. Here’s how STML performed leading up to the event.
Notice how the stock rose from around $7.30 to over $8 in anticipation of the big day.
With something like this, I’d be looking to get long ahead of the event — weeks in advance if possible — and to sell out before the company announces its data. This is my trading style, as I’m relatively risk averse, and don’t want to hold the stock into a binary event.
Look at upcoming catalyst events before trading biotech and pharma stocks. Not every notice or catalyst moves a stock, but if you keep practicing and looking at these catalyst events, you will get an idea of how they might move a stock and whether it’s worth a deeper dive. For the most part, BioPharm Catalyst will be your friend and it’ll give you information that you could potentially use for trading.
Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks.