Arthritis Drug Data Powers Galapagos, Gilead Sciences Stock Rallies

Gilead Sciences and Galapagos collaborated on an arthritis drug

by Patrick Martin

Published on Mar 29, 2019 at 10:23 AM

Galapagos NV (NASDAQ:GLPG) and Gilead Sciences, Inc. (NASDAQ:GILD) stocks are higher this morning, after the companies reported positive data for a jointly developed drug to treat moderate-to-severe rheumatoid arthritis (RA). An analyst at SVB Leerink believes the the drug could be launched by 2020, while H.C. Wainwright has come forward with a price-target hike for GLPG to $150 from $136. 

Galapagos stock is benefiting the most from the news, up 16.7% to trade at $112.28, on track for its best day ever. The shares have now broken out above their 160-day moving average, a trendline that's kept a lid on recent rally attempts, and are now pacing toward their highest close since Oct. 1. Year-to-date, the equity is up 21.9%.

A capitulation from some of the weaker bearish hands could keep the wind at GLPG's back. Short interest increased by 23% in the most recent reporting period to 1.05 million shares, a new record high. At the security's average daily trading volume, it would take nearly nine days for shorts to buy back their bets. 

Looking at Gilead Sciences, the stock is up 2.6% to trade at $65.36. Since briefly crossing the $70 level in late January, GILD has carved out a channel of lower highs and lows, guided by its descending 80-day moving average. 

In the options pits, calls reign in popularity. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 11,495 calls in the last 10 sessions, compared to just 3,310 puts.

Meanwhile, GILD's Schaeffer's Volatility Index (SVI) of 22% sits in only the 12th percentile of its annual range. From a volatility perspective, this implies that front-month options are unusually cheap at the moment.

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