Oramed Pharmaceuticals, Inc. (ORMP) Booms on Licensing Deal

Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP) is surging on a $50 million licensing deal with Hefei Life Science & Technology

by Josh Selway

Published on Nov 30, 2015 at 1:57 PM
Updated on Nov 30, 2015 at 1:59 PM

Drugmaker Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP) was already hot on the charts before today's open, outpacing the S&P 500 Index (SPX) by almost 32 percentage points during the past three months. Today, it's more of the same, with the shares surging 15.5% to $9.01 -- and earlier touching an annual high of $10.74 -- on news of a $50 million licensing deal, giving Hefei Life Science & Technology exclusive marketing rights to the oral insulin capsule, ORMD-0801, in Macau, China, and Hong Kong. 

Option volume on ORMP is accelerated in response -- though the stock doesn't typically see much option activity to begin with. Specifically, 588 total contracts have crossed today, compared to an average of just 52 at this point in the afternoon. On a closer look, 124 of those contracts are puts, which is especially unusual, considering only one ORMP put had been bought to open over the past 10 weeks.

Digging deeper, the most active strike is the December 10 call. It looks like traders are buying new positions, anticipating a move into double-digit territory for the shares by front-month expiration, at the close on Friday, Dec. 18.

Now might be a good time to buy premium on ORMP. For instance, the security's Schaeffer's Volatility Index (SVI) of 91% falls in the 8th annual percentile, meaning the options market is pricing in relatively low volatility expectations right now, from a historical standpoint. 

Separately, short interest represents almost 8% of the equity's float, and it would take these shorts over 12 sessions to repurchase their bets, at normal daily volumes. As such, there's plenty of sideline cash to drive ORMP higher. 

As for analysts, they remain completely bullish. All three brokerage firms with coverage on the stock say it's a "strong buy." Additionally, Oramed Pharmaceuticals, Inc.'s (NASDAQ:ORMP) consensus 12-month price target of $24.75 stands in territory not charted since January 2014. 

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