Monster insider trading alert for this penny stock that rallied $3,700% in a week

This week, the stock market witnessed a peculiar price movement involving biotech firm Bright Minds Biosciences (NASDAQ: DRUG), which skyrocketed to historic levels, and it seems several investors have profited significantly from this momentum.

To put this spike into perspective, DRUG’s share price ended the latest trading session valued at $47, reflecting a one-day rally of 117%. The momentum is well illustrated in the weekly timeframe, where the stock surged by a staggering 3,700%. 

Attention was drawn to the company after the little-known equity gained 1,500% in one day at the end of the October 15 session. This meteoric rise propelled the stock from a 52-week low of $0.93 to its current record high.

Notably, at the start of the week, the stock had a market cap of $4 million, which peaked at $350 million.

DRUG stock insider trading alert 

It has now emerged that, before the rally, the stock was subject to massive insider trading involving Cormorant Asset Management at the start of the week. 

According to filings, on October 16, the firm bought 422,591 shares of DRUG at an average price of $7.65, totaling approximately $3.2 million. Remarkably, just days later, the value of this investment surged to over $20 million.

The transactions involved purchasing common shares at prices ranging between $4.53 and $25.22 per share, increasing Cormorant’s holdings in the company to 875,000 shares.

It’s worth noting that during the initial surge, the Canada-based company issued a statement clarifying that it was “unaware of any material changes” that could explain the increase in buying activity.

However, the momentum accelerated after the company announced a $35 million private placement. The biotech firm plans to issue common shares at $21.70 each, with prefunded warrants offered at $21.699. The funds raised will be channeled toward supporting research and development, primarily focused on pain treatment drugs.

The company also reported promising preclinical results for its drug candidate BMB-201, which is intended to treat chronic pain. According to the results, the drug reportedly demonstrated similar efficacy to morphine.

What next for DRUG stock 

When reviewing DRUG’s next potential movement, stock market analyst Antonio Costa noted in an X post on October 19 that the move should not make investors underestimate such equities.

Technically, he observed that the stock’s breakout quickly accelerated, finding support at $21, $24, and $41—key levels for any potential pullback. 

“DRUG The stock of the week, month and probably of the year. When it comes to small biotech names everything is possible in Wall Street. Stock ran from $1.10 to $79.02 in just five sessions closing the week with a gain of 4271.7% Just amazing !!! You should never underestimate a biotech/small cap name that trades at $1 because next week could see it trading several times more,” he said. 

Trading volume soared, with over 27 million shares exchanged by the week’s close, indicating strong investor interest driving the rally. Momentum indicators like the Moving average convergence/divergence (MACD) point to continued bullish sentiment, although the rapid rise suggests a potential for short-term cooling.

Given new company-specific fundamentals, it remains to be seen whether DRUG can maintain its incredible gains or retrace in the coming days.