Bears Pounce on Struggling Regulus Therapeutics Inc. (RGLS)

Regulus Therapeutics Inc (RGLS) was placed on the short-sale restricted list

by Josh Selway

Published on Feb 9, 2015 at 12:01 PM
Updated on Apr 20, 2015 at 5:32 PM

Unlike sector peer Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), Regulus Therapeutics Inc (NASDAQ:RGLS) is getting whacked today, off 7.7% at $15.56, after the company reported that two patients relapsed after receiving its hepatitis C drug in a study -- roughly one month after saying it would fast-track the development of the treatment. The stock has since been placed on the short-sale restricted list. In the options pits, RGLS puts are crossing at four times the normal intraday pace, as traders look for alternative ways to place bearish bets.

The most popular put is the February 15 strike, which it seems most traders are buying to open. These speculators are hoping for the equity's technical woes to push it below $15 by the close on Friday, Feb. 20, when front-month options expire.

It was already clear that traders had their doubts on the security. Just in the past month, short interest increased close to 25%, and it now accounts for over 30% of RGLS' float. At the stock's average daily trading pace, this represents over seven days' worth of pent-up buying demand.

Interestingly, analysts don't have the same outlook on the shares. In fact, all four covering brokerage firms deem the stock a "strong buy." Also, its consensus 12-month price target of $27.00 stands at a 73.5% premium to current levels -- and in territory yet to be charted.

From a technical perspective, Regulus Therapeutics Inc (NASDAQ:RGLS) has struggled the past few months. In early November, the stock hit a record high of $25.60, but has since lost over 39%.

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