Analyst: This Drug Stock's Drop is "Overdone"

JPMorgan analysts are defending sliding CHRS stock

by Josh Selway

Published on Jul 8, 2019 at 2:58 PM

The broader U.S. stock market is lower today, headlined by a pullback in Apple shares. Three names to watch are Chinese wealth management firm Noah Holdings Limited (ADR) (NYSE:NOAH), along with healthcare companies Intra-Cellular Therapies Inc (NASDAQ:ITCI) and Coherus BioSciences Inc (NASDAQ:CHRS). Let's take a look at how the shares of NOAH, ITCI, and CHRS are trading today.

NOAH Shares Sell Off on Investor Update

NOAH is getting crushed today after the company announced that its "affiliated entity" Shanghai Gopher Asset Management provided financial services for companies related to Camsing International -- whose controlling shareholder was just arrested by Chinese police. As traders consider this news, the stock is trading down 20.4% at $35.63, putting it right near its 52-week low of $34.20 from October.

While Noah Holdings is on the short-sale restricted list (SSR) due to today's losses, many short sellers already took action before today. By the numbers, 10.5% of the equity's float is held by short sellers, accounting for 10.8 days' worth of buying power, based on average daily trading volumes.

Trial Update Sends ITCI to New Low

ITCI shares were last seen down 21.3% at $10.59, earlier hitting a two-year low of $10.09, after the company's bipolar depression drug failed one of two late-stage studies. The stock has lost almost half its value in the past 12 months, and negative analyst notes could come through to drive it even lower. That's because right now all five covering brokerage firms have "strong buy" recommendations, and the average 12-month price target is up at $29.50.

Some may be speculating on more downside, based on today's options activity. New positions are opening at the August 7.50 put, and most have crossed at the ask price, hinting at buy-to-open activity.

JPMorgan Stands By CHRS Stock After Pullback

CHRS stock is down 18.5% at $18.54, due to disappointing preliminary quarterly sales for its infection treatment Udenyca. Coherus BioSciences stock was on a strong uptrend before today, hitting a two-year high of $23.43 on July 3. Right now the shares are pacing for their first close below the 50-day moving average since April.

Wall Street was very bullish on the equity coming into today, with all five in coverage saying it was a "strong buy." And J.P. Morgan Securities told investors already that today's sell-off was "overdone" and reiterated its "overweight" rating and $33 price target. That analyst said the company's sales update for Udenyca was only slightly below his target.

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