An important lesson to understand in investing is that buyers invest in what they believe to be true even if it is false. Biotechs popping up every second and developing a possible COVID-19 treatment is a perfect example. Many investors buy into the biotech on the belief that the company could develop a viable treatment. Irrespective of whether the company has a strong chance of success.
Nonetheless, there is money to be made in the current COVID-19 treatment/vaccine and testing kit frenzy. COVID-19 is showcasing how pharmaceuticals generate what some would say as unrealistic returns as some surge by 100% in minutes. Leading us to today’s candidate ARCA Biopharma Incorporated (NASDAQ: ABIO).
Why is ABIO up 100% today?
Today ABIO announced the plan to develop (rNaPc2), a selective inhibitor of tissue factor (TF) used to control inflammation, into a potential COVID-19 treatment. More specifically, ABIO will treat Coagulopathy and its associated inflammatory response. Coagulopathy is when the blood in our body clots, transforming from a liquid into a solid/semi-solid state. According to ABIO, “Coagulopathy is one of the most serious adverse side effects seen in COVID-19 patients.” Thus, ABIO’s announcement to develop a treatment for an unmet COVID-19 need triggered a buying frenzy on the market open.
ABIO intends to file an Investigational New Drug (IND) with the FDA in the third quarter of 2020. If the FDA approves the IND and allows ABIO to commence human trials of rNaPc2 then the stock could surge even higher. Also, an essential aspect of filing an IND is having the data, from either animal studies or a petri dish scenario, to support the application. Thus, I would keep my eyes peeled for when ABIO releases a statement confirming the company produced the necessary clinical data for the IND.
If all goes according to plan ABIO expect to commence late-stage clinical testing of rNaPc2 in the second half of 2020.
Is the ABIO profit window still open?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: Not for today but for the future.
Considering ABIO is only at the announcement stage, investors have plenty of biotech catalysts to capitalise off. For example, the FDA accepts the IND, phase I, II, and III trials as well as funding. Therefore, if I were investing, I would look out for solid resistance after today’s market activity. If ABIO stayed above the $8 mark, then we could conclude underlying confidence in the biotech (opinion not advice).
If underlying confidence is clear, I would cement my position with the intention to exit after the FDA approves the IND filling. Because IND filling is a relatively easy hurdle to overcome, and plus FDA acceptance should produce similar growth. In turn, putting emotions aside and looking at the stock activity purely from a catalyst standpoint.
Overall, considering its COVID-19 news, the likelihood of investors staying in is high. Because buyers buy-in on what they believe to be true even if it is not.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick Mcloughlin, Senior Manager of YIG.