Drug Stock Soars on China Pharma Manufacturing Deal

The deal will allow for manufacturing of two key CASI drugs in China

Jun 21, 2018 at 9:28 AM
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CASI Pharmaceuticals Inc (NASDAQ:CASI) said it's teamed up with China-based Yiling Wanzhou International Pharmaceutical Co. to manufacture entecavir and cilostazol, which are used to treat hepatitis B and blood flow, respectively. In reaction, CASI stock is 38% in electronic trading, set to open near its mid-May highs.

Last night, CASI shares closed at $5.70 -- up more than 75% year-to-date. However, the stock had shed 32% since its May 4 seven-year high of $8.42, and had recently been testing support at its 80-day moving average.

Short sellers could feel pressured to cover, should the stock gap higher. Short interest jumped 24% in the most recent reporting period to 2.11 million shares -- representing almost 8% of CASI Pharmaceuticals stock's float, or 5.5 times the average pace of trading.

Cantor Fitzgerald reiterated its "overweight" rating and $23 price target on Mesoblast Limited (NASDAQ:MESO) -- a 315% premium to last night's close at $5.54, and a level not surpassed since September 2014. The brokerage firm waxed optimistic on the Australia-based stem cell specialist's data on its treatment for children with steroid-refractory acute graft versus host disease (aGVHD), saying there were "no surprises" in the results for the late-stage study.

Against this backdrop, MESO stock is up 17.3% in electronic trading. It's been a volatile 12 months for the shares, which were trading as high as $8.55 last July, and as low as $4.74 in February. After topping out at a year-to-date peak near $7.80 in early March, the shares have spent the past three months chopping between $5.25 and $6.50.

While the majority of analysts are staunchly supportive of Mesoblast -- five of six maintain a "strong buy" recommendation -- short sellers have started ramping up their exposure. Short interest surged 26.4% in the most recent reporting period to around 80,000 shares, the most since mid-March. This still just accounts for a low 0.1% of the equity's available float, though.


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