2 Pharma Stocks Spiraling on Reports of a Not-For-Profit Generic Drug Competitor

Several U.S. hospitals are reportedly teaming up to fight soaring drug costs

Jan 18, 2018 at 3:29 PM
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Threats of a government shutdown have the Dow retreating from the record high set earlier -- and testing its newfound footing atop 26,000. This negative price action is not confined to blue chips, either, with network infrastructure specialist ADTRAN, Inc. (NASDAQ:ADTN), and pharma stocks Lannett Company, Inc. (NYSE:LCI) and Endo International plc (NASDAQ:ENDP) also in the red. Here's a quick look at what's moving shares of ADTN, LCI, and ENDP today.

ADTRAN Stock Plummets After Bear Note

Northland Securities cut its ADTRAN price target to $23 from $28, reacting to the company's big fourth-quarter earnings miss on Tuesday night. ADTN shares have slumped 11.4% to trade at $16.70, earlier notching an annual low of $16.65.

Since hitting its most recent high just north of $23 on Dec. 22, ADTN has lost one-quarter of its value. Short sellers have been actively betting against the stock, too, which has likely applied additional pressure. Though ADTRAN stock is short-sale restricted today, short interest jumped more than 77% in the two most recent reporting periods.

Lannett Stock Shorts Have Been Covering

News that four U.S. hospital systems are joining forces to launch a not-for-profit generic drugmaker has Lannett stock down 4.4% to trade at $23.65 -- on track to close below its formerly supportive 80-day moving average for the first time since late September.

Nevertheless, LCI shares are holding above the $22.50-$23.00 region, which coincides with a 50% Fibonacci retracement of the stock's 2017 rally and a 20% year-over-year gain, respectively.

On the sentiment front, short sellers have started covering their extreme position, with short interest down 13.2% from its Sept. 1 decade-plus peak of 16.76 million shares. However, 25.8 million LCI shares remain dedicated to short interest -- representing 39% of the stock's float, or 25.8 times its average daily pace of trading.

Endo Stock Options Traders Brace for Bigger Losses

Endo International shares are also plummeting on reports of a nonprofit rival, even as an analyst at Cantor Fitzgerald expressed skepticism over the impact it would have on the generic drug market, calling it "just noise." ENDP stock was last seen trading 3.4% lower at $7.43, sinking below recent support from its 80-day moving average.

The shares are now down 43.6% year-over-year, but remain well off of their 15-year low of $5.77 from Oct. 27. Options traders in recent weeks have been seemingly betting on ENDP stock to retreat back to this technical milestone. The February 6 put has seen the biggest rise in open interest over the past two weeks, and data from Trade-Alert indicates these options were likely bought to open.


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