Regeneron Pharmaceuticals Inc (REGN) Dips on Drug Data

Regeneron Pharmaceuticals Inc (REGN) is still on track for a strong second half in 2016, despite a setback from its Eylea combination therapy trial

by Kirra Fedyszyn

Published on Sep 30, 2016 at 12:04 PM

Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is falling today on news that the drugmaker's combination therapy containing its eye drug Eylea failed in a mid-stage trial in patients with age-related macular degeneration. The setback has REGN trading 1.6% lower at $399.92, bringing its year-to-date loss beyond 26%.

However, REGN's more recent technical performance has been far from disappointing. As we approach the end of the third quarter, the stock has added roughly 15% since the end of June -- on track for another strong second half. And the shares appear to have found a foothold near their 80-day moving average -- a level that pressured REGN in April and May, but may be switching to a more supportive role. Moreover, this trendline coincides with a 23.6% Fibonacci retracement of the stock's November 2015 highs and June 2016 lows.

REGN Daily Chart September 30

Options traders have largely been betting on REGN repeating its typically bullish second-half trend, purchasing calls over puts at an unusually rapid rate. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.39 sits higher than two-third of the past year's readings.

But a preference for puts seems to be emerging, particularly among the equity's near-term options. REGN has a Schaeffer's put/call open interest ratio (SOIR) of 1.23 -- showing puts outnumbering calls among options expiring in three months or less. Moreover, this reading ranks in the 66th percentile of its annual range. Puts are popular today, as well, crossing the tape at five times the typical intraday rate. In fact, put volume is running in the 100th percentile of its annual range, ready to add to already elevated put open interest levels, which are docked in the 88th annual percentile.

Still, these put open interest levels don't necessarily mean options traders have turned bearish. Data from the major options exchanges confirms that 6,987 REGN puts have been sold to open over the past 10 weeks, compared to 5,752 that were bought to open.

Outside of the options pits, sentiment toward REGN is more clearly glum. Short interest on the equity climbed by nearly 14% during the most recent two-week reporting period, and now represents 5.4% of the stock's total float -- or roughly a week's worth of buying power, at REGN's average daily volumes. Analysts don't appear to have high expectations, either. Of 18 brokerage firms tracking the shares, 11 call Regeneron Pharmaceuticals Inc (NASDAQ:REGN) a "hold" or a "strong sell."

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