FDA Sets Back Clovis Oncology Inc (CLVS) Once Again

A discouraging note from the Food and Drug Administration (FDA) on Clovis Oncology Inc's (NASDAQ:CLVS) lead cancer drug has the stock lower

by Josh Selway

Published on Apr 8, 2016 at 10:40 AM

In November, biotech stock Clovis Oncology Inc (NASDAQ:CLVS) dropped from around $100 all the way to $30, after the Food and Drug Administration (FDA) requested more data for its lung cancer drug, rociletinib. Now, according to a briefing document released this morning, the FDA is questioning whether rociletinib is better than similar drugs already on the market, and recommended a black box warning label on the drug's packaging. Shares of CLVS have moved lower as a result, to the delight of short sellers and bearish options traders. 

Short sellers would love to see the stock fall even further. Short interest on the drugmaker surged to record levels in early 2016, and even though it's edged lower in recent reporting periods, these bears still control close to 29% of the stock's float. At CLVS' normal daily trading volume, it would take short sellers almost eight days to buy back their shares. 

Skepticism has also been building in the options pits, with CLVS sporting a 10-day put/call volume ratio of 0.85 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). While this means call buying has still been more popular than put buying on an absolute basis, the ratio outranks four-fifths of all others from the past year, indicating an unusually high interest in long puts over calls. And it's more of the same today, with put volume running at five times the intraday average. 

As mentioned, Clovis Oncology Inc (NASDAQ:CLVS) got destroyed back in November due to the FDA request, and has made little headway since. The shares have trailed the S&P 500 Index (SPX) by almost 34 percentage points in the past three months, with the stock's recent "breakout" attempts repeatedly stalling near the $21 level. Today, CLVS is down 1.2% at $18.94, ahead of a key FDA decision next Tuesday.

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