2 Biotech Stocks Swinging Wildly After Trial Data

Following the release of drug trial data, Cara Therapeutics Inc (NASDAQ:CARA) is on fire, while Oncothyreon Inc (USA) (NASDAQ:ONTY) is ice cold

Dec 9, 2015 at 11:02 AM
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The release of trial data is a double-edged sword for drugmakers. Upbeat results can spell massive gains, while disappointing data can wipe out fortunes in the blink of an eye. Case in point, Cara Therapeutics Inc (NASDAQ:CARA) is surging on the biotech's latest drug news, while Oncothyreon Inc (USA) (NASDAQ:ONTY) has fallen hard.

CARA was last seen 6.3% higher at $16.13, after the firm's arthritis drug, CR845, met the main goal of a mid-stage study. This is business as usual for a stock that's on the doorstep of a 62% year-to-date advance (though it was more than 100% higher at its mid-August peak).

As such, it should come as no surprise that analysts are backing CARA. In fact, all five brokerage firms tracking the stock have handed out a "strong buy" endorsement, while its consensus 12-month price target of $28.86 registers in record-high territory.

Short-term option traders are quite call-skewed toward Cara Therapeutics Inc, too. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.20 suggests call open interest quintuples put open interest among options with a shelf-life of three months or less. If that's not enough, CARA's 20-day call/put volume ratio of 4.35 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) indicates more than four calls have been bought to open for each put during the last month.

Elsewhere, ONTY is having a markedly different day, following the release of cancer drug trial data. Specifically, the stock has cratered, down 23.6% at $2.39. This, despite Cowen and Company saying of the results, "we see a positive clinical update consistent with our expectations."

With today's bearish gap, ONTY's year-to-date lead has been cut significantly, but still sits at 26% (though as with CARA, ONTY boasted a 100% gain at its 2015 peak). Looking more closely, the stock has breached its 320-day moving average for the first time since May.

This ought to come as a welcome sight to short sellers . Nearly 9% of Oncothyreon Inc's float is sold short, representing almost eight days of trading, at typical volumes. In light of today's plunge, though, ONTY has been relegated to the short-sale restricted list.

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