Drug Data Roughs Up Relypsa Inc (RLYP)

New user growth for Relypsa Inc's (RLYP) hyperkalemia drug, Veltassa, slowed in April

May 17, 2016 at 10:45 AM
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Relypsa Inc (NASDAQ:RLYP) dropped as much as 7.8% this morning after the drugmaker reported a decline in the number of new patients taking its hyperkalemia drug, Veltassa, last month. Adding insult to injury, Citigroup lowered its price target on the stock to $25 from $30. However, the pharmaceutical stock has managed to pare its losses, down 2.5% at $14.45 at last check -- and options traders are counting on a further recovery.

Despite Citigroup's price-target cut, overall, the brokerage crowd is mostly upbeat toward RLYP. Eight analysts currently maintain "strong buy" ratings on the stock, versus one "hold" and two "strong sells." Not to mention, the shares' consensus 12-month price target of $31.75 registers in territory not charted since early August.

It's much the same in the options pits, where roughly 10 calls have been bought to open for each put during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Echoing this, RLYP's Schaeffer's put/call open interest ratio (SOIR) of 0.37 ranks in the bottom quartile of its annual range, with short-term calls nearly tripling puts.

Whether that optimism is warranted is another story altogether. Since hitting a recent top at $25.60 in early April, Relypsa Inc (NASDAQ:RLYP) has plummeted 43.6%. This technical bloodbath has provoked more than a fair share of short selling. In fact, 41.6% of the stock's float is sold short, which translates to 5.8 times RLYP's average daily trading levels. What's more, it's possible some of the recent call buyers are short sellers seeking protection against an unexpected rally.

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