Binary events are the lifeblood of investing in biotech companies. A clinical trial result or Food and Drug Administration decision can send the company's value up or down considerably. And not necessarily the same amount in either direction; the magnitude of the move is ultimately based on the expected outcome. If it goes against consensus, you'll see a bigger movement.

Recently we saw a couple of big moves. Sarepta Therapeutics (NASDAQ:SRPT) moved up dramatically after announcing that the FDA was willing to assess Sarepta's Duchenne muscular dystrophy drug, eteplirsen, for an accelerated approval. Revance Therapeutics (NASDAQ:RVNC) also went up on positive results from a phase 1/2 study for RT002 as a treatment for moderate-to-severe frown lines. Investors were impressed with the duration of response -- more than seven months -- for Revance Therapeutics cosmetic drug. Finally, Cytokinetics (NASDAQ:CYTK) was the loser of the group when tirasemtiv failed a phase 2b clinical trial in ALS. Part of Cytokinetics' steep decline in might be because the company doesn't have much else in its pipeline. Cytokinetics does have another phase 2b drug in development, but it's partnered with Amgen.

In the video below, senior biotech specialist Brian Orelli and health-care analyst David Williamson discuss how investors should value binary events and preview MannKind (NASDAQ:MNKD) and Orexigen (NASDAQ: OREX), which are facing FDA decisions for their drugs in the coming months. MannKind is developing an inhaled insulin called Afrezza, while Orexigen is looking for approval of its obesity drug Contrave.

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