Biotech Stocks Start Off August with a Bang

The NASDAQ Biotechnology (NBI) is coming off its best month in three years

by Josh Selway

Published on Aug 1, 2016 at 3:27 PM

It's been a huge day for biotech stocks, with several drugmakers enjoying big gains. As a result, the SPDR S&P Biotech (ETF) (NYSEARCA:XBI) is up 2.4% at $63.59, on pace for its best close since early January, while fellow exchange-traded fund (ETF) NASDAQ Biotechnology (INDEXNASDAQ:NBI) has added 1.8% at 3,082.09. This is nothing new for the ETF, however. According to Reuters, the NBI's 12.4% gain in July marked its best month in three years. 

It looks like analysts are upbeat on the biotech sector, too. SunTrust Robinson, for example, said, "We continue to see upside for biotech in H2 on strong financial performance, increased M&A activity, and a catalyst-rich calendar." Meanwhile, Cowen noted how the sector has rebounded since its post-"Brexit" lows, suggesting a layer of support is in place. What's more, two of today's biggest biotech gainers -- Eyegate Pharmaceuticals Inc (NASDAQ:EYEG) and Inovio Pharmaceuticals Inc (NASDAQ:INO) -- sport 100% "strong buy" ratings from the analyst community. 

Taking a closer look at EYEG, the stock is up 11.4% at $2.25, thanks to upbeat trial data for its treatment for cataract surgery patients. However, the shares remain 66% lower year-over-year, and today's gains were capped by the stock's 80-day moving average. Nonetheless, short interest has been plummeting on Eyegate Pharmaceuticals Inc -- which doesn't trade options -- with these bearish bets declining by 34.5% in the last reporting period alone. 

As for INO, the shares are up 5.1% at $10.39, following news of 10 new cases of the Zika virus in Miami, Florida. Meanwhile, Inovio began testing its Zika vaccine on humans last week, with the results set for release later in the year. INO has now added almost 55% in 2016, climbing back atop its 10-week moving average last week -- a trendline that guided the stock higher from February through mid-June. 

Inovio Pharmaceuticals Inc call traders have emerged amid these gains. The options are crossing at three times the expected intraday pace today, continuing a recent trend. Specifically, close to 1,000 INO calls have been bought to open in the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just ​seve​n ​puts. 

Another biotech stock to keep an eye on today is MEI Pharma Inc (NASDAQ:MEIP). The stock is up 6.6% at $1.45, after its acute myeloid leukemia (AML) treatment, pracinostat, was given a breakthrough therapy designation from the Food and Drug Administration (FDA). At last check, MEIP calls were trading at 12 times their average intraday rate.

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