Why These 3 Biotechs Are Getting Slammed

Why biotech stocks BMRN, BLUE, and CELG are down big in today's trading

Jan 11, 2016 at 3:28 PM
facebook twitter linkedin

As the stock market endures yet another volatile session, biotech stocks are among the top decliners. Some of the big movers in focus today are BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)bluebird bio Inc (NASDAQ:BLUE), and Celgene Corporation (NASDAQ:CELG).

BMRN is down 4.5% at $91.45, after announcing interim trial results of its drug for Pompe disease at the J.P. Morgan Annual Healthcare Conference. The stock has been hitting a series of lower highs and lower lows since touching an all-time high of $151.75 last July.

Analysts have been holding out hope for the security -- 10 out of 14 brokerages covering BMRN rate it a "buy" or better, without a single "sell" on the books. But option traders have been bearish lately. On the International Securities Exchange, (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has a 10-day put/call volume ratio of 3.39 -- indicating more than three puts bought to open for each call over the last 10 days. Moreover, this ratio outranks 95% of readings from the last 12 months.

Today, option traders are once again displaying their preference for puts on BMRN. Puts on the biotech are crossing the tape at six times the average intraday rate, and are outpacing calls by nearly 4-to-1.

After hitting a fresh one-year low of $43.51 earlier today, BLUE was last seen trading at $44.74 -- off 19.3% for the day. As the company prepares to present at the J.P. Morgan sector conference tomorrow, early reports indicate a later-than-expected update on the progress of the company's sickle cell treatment.

As a result, BLUE shares have fallen hard, with the stock now down 77% since hitting an all-time high of $197.35 in late May. But 11 out of 14 analysts still call BLUE a "strong buy," compared to just three "holds." And option traders have been bullish, too. The equity has a 10-day call/put volume ratio of 4.11 on the ISE, CBOE, and PHLX -- which ranks higher than 90% of readings in the past year.

Today, total option volume on BLUE is three times the expected intraday level, but short-term premium buyers are paying up for their bets. The stock's 30-day at-the-money implied volatility has spiked 30.5% since Friday to 91.4% -- in the 77th percentile of its annual range, according to Trade-Alert.

CELG is off to a rocky start for 2016, down 5.9% today at $102.52, after the company announced a new CEO and offered a downbeat sales outlook for 2016. The stock hit an all-time high of $140.72 last July -- but has been trending steadily lower since then, with losses accelerating after the stock's latest breach last week of its formerly supportive 320-day moving average.

Analysts remain upbeat, with 14 out of 16 awarding CELG a "buy" or better rating, and not a single "sell" to be seen. But option traders don't appear convinced. At the ISE, CBOE, and PHLX, the equity's 10-day put/call volume ratio of 0.80 is in the 90th percentile of its annual range.

Today, CELG puts are trading at three times their usual intraday rate, and the January 2016 100-strike put is most active. The stock earlier dipped as far south as $99.33 -- marking only its second intraday breach of $100 since October 2014. Looking ahead, the company will announce fourth-quarter earnings before the market opens on Thursday, Jan. 28.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1