Bears Cheer As FDA Note Sinks Merrimack Pharmaceuticals Inc (MACK)

Trading on Merrimack Pharmaceuticals Inc (MACK) was halted amid FDA news

by Alex Eppstein

Published on Oct 22, 2015 at 1:55 PM
Updated on Oct 22, 2015 at 2:02 PM

Shares of drugmaker Merrimack Pharmaceuticals Inc (NASDAQ:MACK) were halted earlier, after the company announced its pancreatic cancer treatment has received Food and Drug Administration (FDA) approval. However, the shares have resumed trading, and are sharply lower due to a black box warning (much like this sector peer), dropping 17.2% to $8.29. This price action is likely pleasing at least two groups of traders.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MACK has racked up a 10-day put/call volume ratio of 0.82. This ratio ranks in the 96th percentile of its annual range, meaning speculators have bought to open puts over calls at a faster pace just 4% of the time in the prior 12 months.

Similarly skeptical of MACK are short sellers. Short interest has been gradually rising on the stock, and now accounts for roughly one-fifth of its total float. At the equity's average trading level, it would take more than two weeks to repurchase these bearish positions.

On the other hand, analysts are extremely bullish toward Merrimack Pharmaceuticals Inc (NASDAQ:MACK), seemingly dismissing its nearly 30% year-to-date retreat. In fact, 100% of covering brokerage firms have handed out a "strong buy" endorsement on the security, and its consensus 12-month price target of $15 sits at levels never before seen.

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