Biotech Investing Glossary
Key terms and definitions for understanding SEC filings, FDA processes, clinical trials, and institutional investment signals in biotech.
#
13F Filing
A quarterly SEC filing required of institutional investment managers with $100 million or more in qualifying assets. 13F filings disclose the manager's equity holdings as of the last day of the calendar quarter and must be filed within 45 days of quarter-end. They are the primary public source for tracking hedge fund positions in biotech stocks. 13F filings show a snapshot of holdings — they do not reveal when positions were initiated or the conviction behind them.
13D Filing
An SEC filing required within 10 calendar days when an investor or group acquires beneficial ownership of more than 5% of a public company's shares and has an activist intent — meaning they plan to influence or change the company's management, strategy, or capital structure. In biotech, 13D filings often precede board changes, strategic reviews, or M&A activity. The filing must disclose the purpose of the acquisition and any plans or proposals.
13G Filing
A simplified version of the 13D filing used when an investor crosses the 5% ownership threshold but certifies passive intent — meaning they are not seeking to influence or control the company. 13G filings have less detailed disclosure requirements and different filing deadlines. A 13G does not indicate activist intent. If a passive investor later decides to pursue activist strategies, they must amend their filing to a 13D.
10b5-1 Plan
A pre-arranged stock trading plan that allows corporate insiders to buy or sell shares at predetermined times, prices, or quantities. Established under SEC Rule 10b5-1, these plans provide an affirmative defense against insider trading allegations. Trades executed under 10b5-1 plans are considered routine and generally do not contain informative signals about a company's prospects. When filtering insider trades for alpha, 10b5-1 plan transactions should be excluded.
A
Advisory Committee (AdCom)
An FDA advisory committee meeting where a panel of independent experts reviews a drug application and votes on whether the benefits outweigh the risks. AdCom votes are non-binding — the FDA can approve drugs that receive negative votes and reject drugs with positive votes — but historically the FDA follows the committee's recommendation approximately 75-80% of the time. AdCom meetings are scheduled before PDUFA dates and create a separate binary catalyst event.
ATM Offering (At-the-Market)
A method for publicly traded companies to raise capital by selling newly issued shares gradually at prevailing market prices through a designated broker-dealer. ATM offerings are the most common dilution mechanism for cash-constrained biotech companies because they can be executed without the sharp discounts typical of overnight secondary offerings. An active ATM program puts continuous selling pressure on the stock.
B
BLA (Biologics License Application)
The formal application submitted to the FDA requesting approval to market a biologic product — including monoclonal antibodies, gene therapies, cell therapies, and vaccines. A BLA is the biologics equivalent of an NDA for small-molecule drugs. BLA submissions also trigger PDUFA dates.
C
Complete Response Letter (CRL)
A letter from the FDA indicating that the agency has completed its review of a drug application but cannot approve it in its current form. CRLs typically require additional clinical data, manufacturing changes, or labeling revisions. Receiving a CRL often causes significant stock price declines in biotech companies. The company can respond with additional data, request a meeting, or withdraw the application.
Cash Runway
The estimated number of quarters a pre-revenue biotech company can continue operating before exhausting its cash reserves, calculated by dividing the most recent reported cash position by the average quarterly cash burn rate. Companies with less than 4 quarters of runway face elevated dilution risk through secondary offerings, ATM programs, or debt financing. Cash runway is especially important when evaluated alongside upcoming catalysts — a company with 2 quarters of cash and a PDUFA date in 3 months has a fundamentally different risk profile than one with the same cash position and no near-term catalysts.
Catalyst
Any upcoming event that has the potential to cause a significant, step-function change in a biotech company's stock price. Major catalysts include: PDUFA dates (FDA approval decisions), Phase 2/3 clinical trial readouts, AdCom meetings, partnership announcements, and conference presentations. Catalysts are binary or near-binary events — the outcome determines whether the stock moves up or down significantly.
D
Days to Cover
Short interest divided by average daily trading volume, representing the number of trading days it would theoretically take for all short sellers to close their positions. Higher days-to-cover values indicate greater short squeeze potential because shorts cannot exit quickly. A biotech stock with 15+ days to cover, active fund buying, and an upcoming catalyst represents a high-probability squeeze setup.
F
Form 4 (Insider Trade)
An SEC filing required within two business days when a corporate insider — an officer, director, or beneficial owner of more than 10% of a company's shares — buys or sells stock in their own company. Form 4 filings are one of the most informative public signals in biotech because insiders have asymmetric information about clinical programs, FDA interactions, and corporate strategy. Not all Form 4 filings are equal: academic research distinguishes between routine trades (10b5-1 plans, option exercises) and opportunistic trades that predict future returns.
Fund Convergence
A signal that occurs when three or more specialist biotech hedge funds independently build positions in the same stock, as determined by their 13F filings. Fund convergence represents the highest-conviction institutional signal available from public data because it indicates multiple independent expert analyses have reached the same conclusion. BiotechEdge calculates convergence automatically from 20 tracked specialist funds.
I
Insider Trading Signal
An open-market stock purchase or sale by a corporate insider that deviates from their historical trading pattern, indicating a discretionary, conviction-driven trade rather than a routine transaction. Academic research by Cohen, Malloy, and Pomorski (2012) demonstrated that only these opportunistic trades predict future returns, while routine trades contain essentially zero information. Cluster buying — when multiple insiders at the same company purchase shares within a short window — is the strongest publicly available signal.
N
NDA (New Drug Application)
The formal application submitted to the FDA requesting approval to market a new small-molecule drug in the United States. An NDA contains all the clinical trial data, manufacturing information, and proposed labeling for the drug. Filing an NDA triggers a PDUFA date. The FDA files approximately 50-80 NDAs per year.
P
PDUFA Date
A Prescription Drug User Fee Act date — the FDA's target deadline to complete its review of a New Drug Application (NDA) or Biologics License Application (BLA). PDUFA dates are the most important binary catalysts in biotech investing. The FDA will either approve the drug, issue a Complete Response Letter (CRL) requesting additional data, or extend the review period. Standard review has a 10-month PDUFA date from submission; priority review has a 6-month PDUFA date.
Phase 1 Clinical Trial
The first stage of clinical testing in humans, primarily designed to evaluate the safety, tolerability, and pharmacokinetics of a new drug. Phase 1 trials typically enroll 20-100 healthy volunteers or patients and last several months. In oncology, Phase 1 trials often include patients with advanced disease. Phase 1 data rarely moves biotech stock prices significantly unless early efficacy signals emerge.
Phase 2 Clinical Trial
The second stage of clinical testing, designed to evaluate efficacy and optimal dosing in a larger patient population (typically 100-300 patients). Phase 2 trials provide the first statistically meaningful evidence that a drug works. Positive Phase 2 data is often the first major catalyst for biotech stocks. Approximately 30% of drugs that enter Phase 2 eventually reach the market.
Phase 3 Clinical Trial
The pivotal stage of clinical testing, designed to confirm efficacy and safety in a large patient population (typically 300-3,000+ patients) with sufficient statistical power for regulatory approval. Phase 3 trials are randomized, controlled, and often multi-center. Positive Phase 3 results typically support an NDA or BLA filing. Phase 3 readouts are among the highest-impact catalysts in biotech. Approximately 58% of drugs that enter Phase 3 eventually receive FDA approval.
S
Short Interest
The total number of shares of a stock that have been sold short and not yet covered, typically expressed as a percentage of the total float. High short interest in biotech stocks indicates informed bearish positioning — short sellers are betting the stock will decline, often ahead of a catalyst they expect to fail. Short interest data is reported by exchanges twice monthly with a 10-day delay.
Short Squeeze
A rapid price increase driven by short sellers being forced to buy shares to close their positions, which further drives the price up, forcing more shorts to cover. In biotech, short squeezes are most common around positive catalyst events (FDA approvals, positive clinical data) when short sellers are caught on the wrong side of a binary outcome. The three key indicators are: high short interest, high days-to-cover, and an upcoming catalyst.
See these signals in action
BiotechEdge tracks 20 specialist hedge funds, filters insider trades with AI, and maps catalysts automatically.
Get the Monday brief with top-line signals: