3 Drug Stocks Making News

GILD announced a nearly $12B deal to buy Kite Pharma

Aug 28, 2017 at 10:29 AM
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U.S. stocks are mixed this morning, with the main focus staying on crude prices after Hurricane Harvey swept through Houston, Texas and surrounding areas over the weekend. Among specific equities in focus are pharmaceutical companies Gilead Sciences, Inc. (NASDAQ:GILD), AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), and Biogen Inc (NASDAQ:BIIB). Here's a quick look at what's moving shares of GILD, AVEO, and BIIB

GILD Rallies Up to Resistance After KITE Deal

Gilead Sciences is hitting headlines this morning after striking a deal to buy Kite Pharma (KITE) for $11.9 billion, or $180 per share in cash. The announcement has GILD trading up 1.6% at $74.95. The shares remain pinned just below the $76 level, which -- despite multiple challenges -- hasn't been surmounted on a weekly closing basis since last November. This area is also home to GILD's descending 80-week moving average.

Given GILD's long-term underperformance on the charts, it's not surprising to see puts have gained popularity in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.58 ranks in the 90th percentile of all other ratings in the past year. This suggests there is a much healthier-than-usual appetite for bearish bets over bullish of late.

EU Approves AVEO Kidney Cancer Drug

AVEO is up 3.2% at $3.92 after its Fotvida renal cell carcinoma drug was approved for the European market, triggering a $4 million R&D payment from licensee EUSA Pharma. The biopharma stock gapped higher in June after the kidney cancer treatment was initially recommended for approval by the European Medicines Agency, and earlier today hit a new four-year high of $4.24. 

Some short sellers are likely hitting the exits today as AVEO rallies. Short interest on the stock ramped up by 43.5% in the most recent reporting period, and now accounts for a healthy 14.6% of AVEO's float -- plenty of fuel for a short-squeeze rally.

Biogen Bounces on Alzheimer's Data

Pharma concern Biogen is up 2.3% at $291.70 -- and eyeing another test of long-term resistance in the $295-$300 area -- after unveiling well-received data from its phase 1B study of aducanumab, its experimental Alzheimer's drug. Despite the roller-coaster price action in BIIB, the options market is pricing in extremely low volatility expectations at the moment. Biogen's Schaeffer's Volatility Index (SVI) of 21% ranks lower than 99% of all other readings from the past 12 months.

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