Why Dermira, Menlo Therapeutics are Red-Hot Today

DERM options traders are targeting even more upside

by Karee Venema

Published on Oct 18, 2019 at 2:31 PM

The U.S. stock market is trading lower today on disappointing economic data out of China, though all three major indexes are headed toward weekly wins. Among individual stocks making notable moves today are skin disease specialists Dermira Inc (NASDAQ:DERM) and Menlo Therapeutics Inc (NASDAQ:MNLO). Here's a quick roundup of what's moving the shares of DERM and MNLO.

Dermira Eyes Best Day in Months on Eczema Drug Data

Dermira stock is near the top of the Nasdaq today -- up 27.1% at $7.23, eyeing its best day since March 18, when it surged 84.4%. That March bull gap was a response to upbeat study results for the company's eczema treatment, and today's rally comes after a fresh batch of data was presented at a clinical dermatology conference.

Stoking the tailwinds is a bull note out of Cowen, which said the drug could gain a "solid share" of the multi-billion-dollar U.S. market. Needham also chimed in, calling the itchy skin treatment best in class, and waxing optimistic over how quickly the drug kicks in.

DERM options traders are in overdrive, with more than 4,200 contracts traded so far -- 15 times what's typically seen at this point, and volume pacing in the 98th annual percentile. The majority of speculators are betting on a big breakout above $8 in the near term, with buy-to-open activity detected at the October and November 8 calls, the former of which expires at tonight's close.

Menlo Therapeutics Stock Soars on New "Buy" Rating

H.C. Wainwright initiated coverage on Menlo Therapeutics stock with a "buy" rating and an $11 price target -- a 140% premium to last night's close. The analyst in coverage expects data from a late-stage study of the company's prurigo nodularis treatment to be released in the first half of next year, and forecasts regulatory approval by 2021.

In reaction, MNLO stock is up 12.1% at $5.13, rallying right into its 120-day moving average, which has served as stiff resistance since early June. Right above here is the 200-day trendline that's kept a lid on the shares going back to May.

Most analysts are already bullish on MNLO shares, with all but one of the brokerages covering the stock maintaining a "buy" recommendation. Plus, the average 12-month price target sits all the way up at $18.33 -- territory not charted since April 2018.


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