2 Drug Stocks Breaking Out After FDA Nods

Penny stocks CALA and TLGT are popping today

Patrick Martin
Apr 18, 2018 at 10:21 AM
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Pharmaceutical stocks Calithera Biosciences Inc (NASDAQ:CALA)Teligent Inc (NASDAQ:TLGT), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) are all making big moves today, following Food and Drug Administration (FDA) news. What's more, CALA and TLGT could have room to run, if short sellers decide to hit the exits.

Calithera Stock An Analyst Favorite

Calithera stock is up 14.2% to trade at $7.25 this morning, after the FDA granted "fast-track" designation to the company's kidney cancer drug. The news provides a much-needed jolt to CALA stock, which had shed 24% in 2018 prior to today, and fell to an annual low of $5.35 on April 6. Now, CALA shares are currently on track to finish above their 50-day moving average for the first time since early March. 

Short sellers could be getting nervous today. Short interest increased by 10% during the two most recent reporting periods, and represents 12% of CALA's total available float. At the equity's average pace of trading, it would take six sessions to buy back these bearish bets.

Despite the stock's struggles lately, analysts remain in its corner. All four of the brokerages covering Calithera stock rate it a "strong buy," and its average 12-month price target of $14.25 is nearly double its current perch. 

Teligent Stock Ripe For A Short Squeeze

Teligent stock is up 14.6% to trade at $3.46, after receiving FDA approval for its topical steroid cream for various skin conditions. TLGT stock had shed 17% in 2018 prior to today's burst, but is now on track for its best week since November 2016. The move higher today puts the shares in position to close above their 10- and 20-week moving averages for the first time since July.

A short squeeze could send the equity even higher. Short interest fell by nearly 20% during the most recent reporting period, but the 7.15 million shares sold short represent more than 18% of the stock's total available float. At TLGT's average daily trading volume, it would take one week to buy back the shorted shares.

Analysts See More Upside In RIGL Stock

Rigel Pharmaceuticals stock was higher out of the gate, but is now down 1.7% to trade at $4.04, despite the FDA yesterday approving the company's oral treatment for a rare bleeding disorder. The drug, Tavalisse, will be launched in late May. In response, BMO and Jefferies this morning raised their price targets to $8 and $7, respectively, while Jefferies commented that the approval is "transformational."

It's been a wild ride for RIGL shares in April. The stock was halted yesterday due to volatile trading, and skyrocketed last Thursday after the company mistakenly reported the drug had been approved. Prior to that, on April 3, the stock dropped to a year-to-date low on ugly drug data.

In the options pits, puts are all the rage lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 2.71, indicating puts have outnumbered calls by a nearly 3-to-1 ratio in the past two weeks.


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