Drug Data Sends These 2 Biotech Stocks on a Wild Ride

Ariad Pharmaceuticals, Inc. (ARIA) and Regulus Therapeutics Inc (RGLS) are moving in different directions on drug data

Apr 15, 2016 at 11:45 AM
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While the broader market spins its wheels, a number of biotech stocks are making major moves. Case in point, Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) was last seen 4.6% higher at $7.10, while Regulus Therapeutics Inc (NASDAQ:RGLS) has dropped 14% at $6.99. Below, we'll take a closer look at the news driving the drug stocks, and how options traders may be responding.

ARIA is rallying after the drugmaker presented upbeat trial data on its lung cancer drug, brigatinib. This is more of the same for the biotech stock, which has boomed 62.5% since its two-year low of $4.37 in early February. Year-to-date, the shares are up nearly 14%.

Options traders are going wild today -- especially on the call side of the fence, where contracts are crossing at 15 times the average intraday rate. Most active by a mile is the weekly 5/13 7.50-strike call, which traders are buying to open, expecting ARIA to topple $7.50 by the close on Friday, May 13 -- a time frame that should include the drugmaker's first-quarter earnings report, tentatively scheduled for early May.

More broadly speaking, options traders have been buying to open Ariad Pharmaceuticals, Inc. puts over calls at a faster-than-usual clip -- though the absolute ratio still favors calls. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.38 ranks in the 82nd annual percentile. As we've recently observed, this pessimism is echoed by short sellers, and both groups could be feeling the heat today.

At the same time, RGLS is reeling, as the stock market reacts negatively to the drugmaker's interim data on its hepatitis C treatment, RG-101. Looking more closely, it's been a volatile session for the stock, which earlier spiked to a 2016 high of $8.90 -- and into positive year-to-date territory -- before selling off sharply and landing on the short-sale restricted (SSR) list.

In recent weeks, options traders have been placing downside bets on RGLS. Specifically, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio checks in at 2.59, with long puts more than doubling calls. Underscoring this put bias, RGLS' Schaeffer's put/call open interest ratio (SOIR) of 1.17 ranks in the 92nd percentile of its annual range.

Options traders aren't the only ones blazing a bearish path toward Regulus Therapeutics Inc​​. While the biotech stock is currently SSR, nearly 29% of its float is already sold short, or 13.2 times its average daily rate of trading.

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