Sarepta Therapeutics Inc., XOMA Corp Get a Drug-Induced Boost

Sarepta Therapeutics Inc. (NASDAQ:SRPT) and XOMA Corp (NASDAQ:XOMA) are soaring on drug news

by Alex Eppstein

Published on Oct 1, 2015 at 11:13 AM
Updated on Jun 24, 2020 at 10:16 AM

Biotechs have been making big moves on drug news of late, and that's certainly the case today. Two drugmaker stocks, in particular, are showing strength in early trading -- specifically, Sarepta Therapeutics Inc. (NASDAQ:SRPT) and XOMA Corp (NASDAQ:XOMA). Below, we'll look at the headlines, their impact on the charts, and how option traders may be reacting.

SRPT is exploding, up 19.7% at $38.44, after the company's Duchenne muscular dystrophy (DMD) treatment showed a statistically significant advantage during a mid-stage study. This comes just a day after the shares ticked higher, despite losing a patent ruling to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). Longer term, it's been tough to contain SRPT, which has surged more than 150% in 2015 alone, and recently touched an annual high of $41.47.

This persistent strength on the charts could be rattling bearish option traders. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has amassed a 50-day put/call volume ratio of 0.36 -- in the 65th annual percentile. Further, SRPT's Schaeffer's put/call open interest ratio (SOIR) of 0.57 sits 10 percentage points from a 12-month put-skewed peak. An unwinding of this negativity could result in tailwinds.

As with some other recently highlighted drugmakers, Sarepta Therapeutics Inc. could burn short sellers. Over one-third of the stock's float is sold short, representing over two weeks' worth of pent-up buying power, at typical volumes.

Even more impressive on the charts today has been XOMA, which was last seen 29.7% higher at $0.97 -- and, at one point, was up by nearly 60%. This sort of move is a rarity, considering the equity is down roughly 73% in 2015. Boosting the shares was a newly inked licensing deal with Novartis AG (ADR) (NYSE:NVS), which paid $37 million for global development and commercialization rights to XOMA's anti-transforming growth factor-beta antibody program.

Today's bullish gap ought to please option bulls, who have been betting on a breakout in recent months. XOMA's 50-day ISE/CBOE/PHLX call/put volume ratio of 12.33 ranks in the 90th percentile of its annual range. However, it's also possible these call buyers are short sellers trying to hedge their bearish bets, as 29.2% of XOMA Corp's float is sold short.

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