Depomed Stock Upgraded After Pain Drug Deal, Layoffs

Shares of Depomed Inc (NASDAQ:DEPO) are almost 12% higher in electronic trading, after the biotech said it is licensing the sales rights to its opioid pain drugs, Nucynta IR and Nucynta ER, to Collegium Pharmaceutical (COLL). As such, DEPO is also slashing its workforce by 40%, and plans to move its headquarters out of California -- with the company scouting potential sites in the Midwest or along the East Coast.

Adding to the bullish bias is an upgrade to "buy" from "neutral" and price-target hike to $9 from $6 at Mizuho, which called Depomed's exit from the opioid business a "strong positive." This positive analyst attention runs counter to the withstanding setup, with six of seven brokerages maintaining a lukewarm "hold" rating at last night's close.

And the skepticism toward DEPO stock is seen elsewhere on Wall Street, too. Short interest currently accounts for 20.63% of the stock's available float, or 10.45 times the average daily pace of trading.

Looking at the charts, DEPO has struggled for most of the year, shedding 62.2% over the past 12 months, based on last night's close at $7.15. However, since hitting a six-year low of $4.31 on Nov. 2, Depomed stock is up almost 66%. Plus, today's projected breakout could have the stock closing north of its 120-day moving average for the first time since Jan. 4, and filling some of its early August bear gap.