Wednesday, December 14, 2011

BioSante Pharma (BPAX) - Bio-tech 550% Vol Reflects News Due Now on "Female Viagra" Results

BPAX is trading $2.52,unched on the day with IV30™ up 0.3%. The LIVEVOL® Pro Summary is below.


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BioSante Pharmaceuticals, Inc. (BioSante) is a specialty pharmaceutical company focused on developing products for female sexual health and oncology.

This is a vol note on a pharma that appears ready to disclose some big information today or tomorrow, with front month vol at 551. Yeah, 551%.

Here's the story / news for a quick recap before we look at the options 'n stuff.


LINCOLNSHIRE, Ill. (TheStreet) -- BioSante Pharmaceuticals(BPAX) will tell us soon whether or not its testosterone gel improves the sex lives of certain women.

A scheduled presentation Wednesday by BioSante executives at an investor conference was cancelled this morning. No reason was provided but it's not a stretch to assume BioSante has results in hand from two phase III efficacy studies of Libigel.

BioSante is likely to announce the results of the Libigel studies this afternoon or tomorrow morning. That's an educated guess given that data were expected to be ready mid-December.


More than efficacy, the safety of therapies like Libigel is the real regulatory hurdle. BioSante will be announcing efficacy results from two phase III studies of Libigel now but a large cardiovascular safety study of the product is still underway and will not yield data until next year. BioSante can't see approval for Libigel unless the safety study comes back clean.
Source: BioSante Pharma Readying Release of 'Female Viagra' Study Results, written by Adam Feuerstein.

So, there you go. Let's start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

While the stock has been as high as $4 in July, it's fallen to now the $2.50 range. But, check out that vol -- the implied has been rising as the HV20 has been meandering down. This is a common vol trend in a company with big news due out (like a bio-tech). The stock finds a valuation pre-news and doesn't really move while the implied risk (vol) rises into the announcement. Needless to say, this creates a massive vol diff between the implied and essentially and historical realized measure. Specifically:

IV30™: 225.65
HV20: 55.88
HV180: 71.66
Dec ATM vol: ~520

Let's turn to the Skew Tab.

We can see a large divergence between the front and the second months. While Dec is priced to ~550 vol, Jan is priced to 225. The option market reflects the likelihood of an event (announcement) in the next two and a half days. Spooky...

Finally, let's turn to the Options Tab, for completeness.

Note that the Jan 5 calls are $0.5 bid and the Jan 1.5 puts are $0.20 bid. It is interesting to note that the Dec and Jan 1 puts are no bid.

This is trade analysis, not a recommendation.

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