How To Trade Biotech Stocks Better: Trading The NDAs (BIIB, AMGN, VVUS, GENZ, GLD)

Investing and trading biotech names can be exactly like gambling, especially the smaller ones.

If a company like Amgen AMGN, Biogen Idec BIIB, Vivus VVUS, Genzyme GENZ or Gilead Sciences GILD or another biotech has a New Drug Application (NDA), this is very important for the futures of the drug. NDA filings do not just 'happen', but come after years of studies are done with positive results.

Before an NDA is field, the company must meet with the FDA for what's known as a "Pre-NDA" meeting, where said company tells the FDA what it will be presenting, and in turn, the FDA makes sure the company understands everything about the NDA, and what it entails, such as requirements, details, and involvement of this type of filing.

After the meeting, the company has to pay a fee to file for the NDA, which costs around $1.3 million, not exactly chump change. This is done to scare away companies that are hoaxes, or just looking for a higher share price.

After the fee is paid, the FDA lets the company know when the application is complete, the company is notified that the NDA has been filed, and the 60 day countdown starts. This means that the FDA has 60 days to determine the 'completeness' of the filing, and whether it will be able to approve the drug based off the filing.

There are two types of reviews: a 'priority' review is 6 months in length, and a standard review 10 months.

If you are going to trade NDA filing catalysts, you need to know that once the FDA has determined the filing is satisfactory, it will then issue what's known as a "74 Day Letter". This letter lets the company know by 74th day after the application is filed whether the drug has been accepted for review.

This comes straight from the FDA's website: "If FDA determines that the application can be filed (i.e., the application is sufficiently complete), the application review continues. Under PDUFA III, FDA agreed to communicate to applicants any significant review deficiencies identified during the filing review by day 74 of the review cycle."

Hopefully this information gives you a better understanding of the NDA process and how to trade it.