2 Pharma Stocks on Fire

A new Buffett stake is lifting TEVA shares, while AMAG stock is soaring on an FDA nod

Feb 15, 2018 at 9:47 AM
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A handful of pharmaceutical stocks are higher out of the gate today. Among them, Teva Pharmaceutical Industries Ltd (NYSE:TEVA) is making noise after a big Buffett boost, while the shares of AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) are soaring after a nod from the Food and Drug Administration (FDA). What's more, an unwinding of skepticism on Wall Street could add fuel to the fire for TEVA and AMAG stocks.

Buffett Boosts Teva Stock

Teva Pharmaceutical stock is up 9.2% at $21.11, after Warren Buffett's Berkshire Hathaway reported a $358 million stake in the firm. Since touching a 17-year low of $10.85 in early November, TEVA shares have roughly doubled, but are finding a speed bump in the form of their 200-day moving average -- a trendline not conquered since early 2016, when the stock was trading north of $60.

The "Oracle of Omaha" could inspire a few bears to abandon ship, though. Just three of the 24 analysts following Teva stock consider it worthy of a "buy" rating. A round of analyst upgrades could propel the security even higher.

Meanwhile, put buying has been accelerated lately, relative to call buying. TEVA's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.13 -- in the 78th percentile of its annual range. An unwinding of pessimism in the options pits could also be a tailwind for Teva.

FDA Fuels AMAG Stock Rally

AMAG Pharmaceuticals stock is up 19% at $16.55 -- set to topple its 160-day moving average for just the second time since an early 2017 bear gap. AMAG shares are celebrating the FDA's approval of the Makena subcutaneous auto injector drug-device combination product -- a collaboration with Antares Pharma (ATRS) -- designed to reduce the risk of preterm birth in pregnant women.

In light of the regulatory win, analysts at Janney upgraded AMAG stock to "buy" from "neutral." Additional upgrades could be on the way, too, as just two of nine brokerage firms following the drugmaker deem it worthy of a "buy" endorsement. Meanwhile, Piper Jaffray hiked its price target to $18 from $15.

The stock could also be enjoying a healthy short squeeze. Short interest on AMAG represents nearly 29% of the stock's total available float, and a whopping two weeks' worth of pent-up buying demand, at the equity's average pace of trading.


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