Short-Term Volatility Expectations Explode on Sinking Biogen Stock

Bearish analysts have blasted BIIB stock today

by Emma Duncan

Published on Mar 21, 2019 at 10:32 AM

The shares of Biogen Inc (NASDAQ:BIIB) are plunging in today's trading, after the pharma giant and its partner Eisai halted two late-stage Alzheimer's disease drug trials. The decision came after an independent data company said the trials were likely to fail. Considering the drug, aducanumab, had once been projected by Goldman Sachs to reach $12 billion in sales, BIIB is down 27.5% at $232.28, just off a fresh two-year low of $229.11.

Analysts wasted no time reacting to the news. William Blair downgraded BIIB stock to "market perform," while Baird and Piper Jaffray handed out price-target cuts to $250 and $280, respectively. Plus, Cowen and Company slashed its price by 31% to $275. RBC also lowered its BIIB valuation to $240 from $318, calling this a "transformative failure" for Biogen's pipeline. Ahead of today, 14 of 22 covering firms held "buy" or better ratings.

Options traders have been bracing for a pullback. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.57 ranks in the 90th annual percentile, meaning puts have been bought to open over calls at an accelerated clip in recent weeks.

Today, more than 14,500 calls and 9,100 puts have changed hands so far today -- 34 times what's typically seen at this point in the day, and volume pacing in the 100th annual percentile. Short-term volatility expectations have exploded amid today's bear gap, too, with BIIB stock's 30-day at-the-money implied volatility of 37.3% docked in the 88th percentile of its 12-month range.
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