Pharma Stock Moves Lower After U.S. Government Prosecution

The equity is down over 22% quarter-to-date

Digital Content Manager
Aug 26, 2020 at 10:04 AM
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The shares of Teva Pharmaceutical Industries Ltd (NYSE: TEVA) are down 0.5% at $9.49 this morning, after the U.S. Justice Department on Tuesday charged the company with conspiring with competitors to raise the prices of generic drugs that treat a number of health conditions. Teva officials said in a statement they are "deeply disappointed" with the government's decision to proceed with the prosecution, and rejected the allegations of wrongdoing. 

On the charts, the equity has been extremely volatile as of late. Shares dropped to the $6.25 mark in mid-March, only to double later in May when the stock rallied to the $13 level, with support from the 20-day moving average. And while the equity traded mostly sideways for roughly two months after that, with support from the 100-day, the shares just breached this floor, earlier in the month. Now, TEVA carries a 22.6% quarter-to-date deficit. 

Analysts are mostly pessimistic towards the security, with 10 of the 14 in coverage carrying a tepid "hold" or worse rating, and the remaining four carrying a "buy" or better. Meanwhile, the consensus 12-month price target of $12.19 is a 27.8% premium to current levels.

That bearish analyst sentiment is not reflected in the options pits, where calls are more than quadrupling puts. In the last 50 days, 93,466 calls have been exchanged, as opposed to a mere 21,843 puts. What's more, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.42 stands higher than only 16% of readings from the past year, implying short-term options traders have been more call-biased than usual. 

 

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