Biotech Stock Stays Hot After Cancer Drug Collaboration

AbbVie is entering a cancer therapy research deal with Genmab

Laura McCandless

Deputy Editor

Jun 10, 2020 at 11:00 AM

The shares of biopharmaceutical company AbbVie Inc (NYSE:ABBV) are up 2.1% at $98.16 at last check, after announcing an oncology collaboration with Genmab (GMAB). The companies will work together to develop three of Genmab's bispecific antibodies, as well as a collaboration for future antibody therapeutics to treat cancer. AbbVie will pay Genmab $750 million upfront, as well as agreeing to pay up to $3.2 billion in potential milestone payments. In response, Evercore ISI resumed its coverage with an "outperform" rating and a price target of $111.

Right out of the gate, AbbVie stock hit a new 18-month high of $98.54, and is now up 25% year-over-year. The shares are on track to lock up their fifth-straight gain, with their 20-day moving average emerging as reliable support.

Coming into today, the majority of analysts were bullish on AbbVie, with 10 out of 14 doling out "buy" or better ratings, with zero "sells" on the books. However, ABBV's 12-month consensus price target of $99.19 is a chip-shot away from current levels, implying that more bull notes could provide additional tailwinds for the equity.

Meanwhile in the options pits, calls are all the rage. This is per ABBV's 10-day call/put volume ratio of 5.79 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 98% of all readings from the past year, meaning options traders have rarely been more call-heavy.

It's more of the same today. At last check, 18,000 AbbVie calls have changed hands, double the average intraday amount and six times the number of puts traded. The most popular is the June 100 call, with the 110-strike call from the series also garnering notable attention.

The good news for those options traders is the stock's attractively priced premiums. It's Schaeffer's Volatility Index (SVI) of 29% stands higher than just 18% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.

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