Brokerage Backlash Sends Esperion Therapeutics Inc (ESPR) Tumbling

Esperion Therapeutics Inc (NASDAQ:ESPR) is sharply lower today, but call volume is accelerated

May 22, 2015 at 10:58 AM
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Similar to fellow drugmaker Otonomy Inc (NASDAQ:OTIC), Esperion Therapeutics Inc (NASDAQ:ESPR) is having a rough day. The shares were off nearly 11% at their intraday low -- and were last seen down 6.8% at $106.02 -- after receiving a dreary analyst note. What's more, the stock has earned itself a spot on the short-sale restricted list. The sell-off has done little to sway option traders' enthusiasm, with calls changing hands at seven times what's typically seen at this point in the day, and outpacing puts by a nearly 3-to-1 margin.

Seeing the most action in ESPR's options pits thus far is the June 115 call. It appears as if traders are purchasing new positions here for a volume-weighted average price (VWAP) of $3.46, making breakeven for the call buyers $118.46 (strike plus VWAP). This is just a stone's throw away from the security's record high of $120.96, tagged yesterday.

Today's call-skewed session is just more of the same toward a stock that had nearly tripled in value year-to-date heading into today's trading. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.57 calls for each put over the past two weeks.

Plus, ESPR sports a Schaeffer's put/call open interest ratio (SOIR) of 0.50. In other words, call open interest doubles put open interest among options expiring in three months or less.

As touched upon, Esperion Therapeutics Inc (NASDAQ:ESPR) is falling today after receiving some bearish backlash from the brokerage bunch. Specifically, Chardan Capital Markets initiated coverage on the stock with a "sell" rating and a $55 price target -- a more than 48% discount to current trading levels -- citing a dangerous risk-reward profile. Analysts seem to be at odds, as this runs counter to the upbeat "overweight" initiation ESPR received at Barclays Wednesday, which went along with a $150 price target.

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