Chiasma Inc (CHMA) Sinks on FDA Speculation

Speculation is swirling that the Food and Drug Administration (FDA) will reject Chiasma Inc's (NASDAQ:CHMA) acromegaly treatment

Apr 14, 2016 at 2:58 PM
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It's a pretty mild day for the broader stock market, but biotech stock Chiasma Inc (NASDAQ:CHMA) is seeing some action. Specifically, the stock has plunged 13.8% to $9.40 -- after earlier being off by more than 17% -- on speculation the Food and Drug Administration (FDA) is preparing to reject Chiasma's oral treatment for acromegaly, a rare disease affecting the pituitary gland.

However, this negative price action is nothing new for Wall Street freshman CHMA, which is down 69% from its mid-August all-time high of $30.52. What's more, the stock's recent rally attempt was quickly halted by its 80-day moving average. CHMA has only closed north of this trendline twice since it was formed in mid-November.

Daily chart of CHMA

Short sellers, meanwhile, have been bracing for more downside. Short interest jumped 8.3% in the last two reporting periods, and now accounts for a lofty 12.5% of CHMA's available float. It would take almost a week to cover these shorted shares, at the stock's average daily pace of trading.

Analysts, however, have a taken a glass-half-full approach to CHMA. In fact, all four analysts covering the shares maintain a "strong buy" rating on the equity. Should Chiasma Inc (NASDAQ:CHMA) continue to struggle both on and off the charts, a round of downgrades could create more headwinds for the shares.

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