Since the pandemic, investing in pharmaceutical stocks has taken on a new level of interest.
Anyone who bought Pfizer stock last year is likely to be quite happy now. Other stocks have seen notable increases, such as Moderna, ThermoFisher, and Roche. At least in the short term, it’s likely to be a hot sector for traders.
So, what are some of the things that traders might want to look out for?
Besides earnings, what could move pharma stocks are announcements about their latest medicines developments. Particularly, if a new medication has been approved by regulators to be brought to the market because that means all the investment is finally about to pay off.
Typically, a regulatory approval means a major jump in the stock price. And it’s not unlikely to see a rise in the double-digits.
Where to find the data
Naturally, traders are very interested to know when that kind of announcement will be made.
In the case of the largest pharmaceuticals market in the world, the US, this is hard to predict. Typically, the FDA quietly releases their decisions on their website in the hours before trading.
It’s possible to have a general idea around which week the FDA might make an announcement, but getting the day right is often quite tricky.
But for the second-largest pharmaceuticals market in the world, the European Union, the situation is different. The European Medicines Agency approves medications through the Committee for Medical Products for Human Use or CHMP.
The committee meets once a month and publishes all of the approvals for that month at once. Naturally, that causes quite a bit of fluctuation in the stocks of companies who have medications approved or rejected.
When, and how to use it
Unlike the FDA, the CHMP has a very consistent schedule. In fact, the calendar of CHMP meetings is published years in advance.
Typically they happen in the second half of the month, and the results of the meeting always come out on a Friday, just after 07:00 EST. But, some companies will publish press releases about the approvals or rejections a couple of hours before the formal CHMP release.
If you are trading any of the major pharma companies, it would be a good idea to check the EMA’s website for the CHMP meeting schedule. In the week ahead of the publication, the website publishes what companies and what pharmaceutical candidates are being discussed.
If one of them is from a company that you want to trade, it would be a good idea to know so you can set up your trading accordingly.
Knowledge avoids risk, increases profits
Not only can pharma companies that have approvals see their stock rise in the double digits, but those who have “negative recommendations” can see a similar drop.
So, even if you are trading on technicals, knowing when this could happen could help your trading. Make sure your stop losses are in place ahead of the meeting as this could help shave off some potential losses.
The same goes for adjusting take profits to take into account potential approvals!
