Ionis Pharmaceuticals Inc (IONS) Drug Data Puts Short Sellers on Notice

Short interest on Ionis Pharmaceuticals Inc (NASDAQ:IONS) has been climbing in recent weeks

Aug 1, 2016 at 11:19 AM
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Drugmaker Ionis Pharmaceuticals Inc (NASDAQ:IONS) is flying high this morning on news of upbeat interim results in a Phase 3 trial of the company's investigational spinal muscular atrophy treatment, nusinersen. The promising data led biotech issue Biogen Inc (NASDAQ:BIIB) to exercise an option to pay IONS a $75 million licensing fee for the rights to develop and commercialize the drug. As such, shares of IONS have soared 36.4% to $39.80 -- but not everyone is cheering the stock's rally.

Specifically, short interest on IONS has been creeping higher recently. The bearish bets rose by nearly 15% over the two most recent reporting periods, and now account for 11.6% of the stock's available float. What's more, it would take almost seven sessions to cover all these positions, at IONS' typical daily pace of trading.

Luckily, some of these short sellers may have used options to hedge their positions against a surprise upside move, such as today's. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 5.88 shows nearly six IONS calls purchased for every put during the last 10 weeks -- a tremendous preference for long calls, especially considering the equity's recent technical performance. This figure ranks in the high 82nd percentile of its annual range.

Speaking of technicals, IONS is still sitting on a 36% year-to-date loss, even with today's big rally. The shares topped out at a record high of $77.80 in March 2015, and have since fallen hard, tapping a three-year low in late May.

But today's jump has Ionis Pharmaceuticals Inc (NASDAQ:IONS) above its 160-day moving average for the first time since early January, closing its late-May drug-induced bear gap. IONS could also see more upside should analysts raise their outlooks. At present, only three of the 10 brokerage firms following the stock recommend buying it. Plus, the average 12-month price target of $32.38 is now sitting well underfoot.

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