Pharma Stock Eyes 11th Straight Loss After Short Report

VNDA put options are popular as the stock sinks amid fraud speculation

by Andrea Kramer

Published on Feb 11, 2019 at 11:07 AM
Updated on Feb 11, 2019 at 11:44 AM

The shares of Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) got knocked lower this morning, after Aurelius Value said it's short the stock. The report calls out the newly unsealed details of "one of the most expansive and detailed whistleblower writings we have come across," which claims the company "relied on illegal sales tactics and even outright fraud out of concern for the company's stock price." As such, Aurelius sees "significant downside potential" in VNDA stock, and believes "investors are paying a significant 'blue sky' premium." Against this backdrop, Vanda shares are down 5.3% to trade at $17.95, and options are flying off the shelves ahead of earnings later this week.

VNDA stock suffered a massive bear gap last Wednesday, Feb. 6, as analysts reacted to the pharma company's complaint against the Food and Drug Administration (FDA). Specifically, Vanda said the FDA "illegally imposed" a partial hold on tradipitant studies in humans without first conducting "unnecessary and unethical" tests on animals, which would result in the death of multiple dogs. Cantor Fitzgerald subsequently downgraded VNDA to "neutral" from "overweight," and expects at least a 12-month delay for the drug's approval.

Vanda shares are on pace for their 11th straight daily loss, and their fourth consecutive close beneath their formerly supportive 200-day moving average. The equity fell as low as $17.09 in early trading today, into territory not charted since last May.

VNDA stock chart feb 11

Options traders apparently see even more downside ahead for Vanda, even with earnings expected on Wednesday, Feb. 13. While absolute volume is light, VNDA has already seen nearly 850 put options traded today -- 15 times the average intraday pace. Most popular is the February 17 put, which it seems traders are buying to open to bet on a breach of the $17 level by the close on Friday, Feb. 15, when front-month options expire.

Today's appetite for long puts echoes the growing trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly four VNDA puts for every call in the past two weeks.

SAGE Therapeutics Stock Hot Ahead of Earnings
The drug name is scheduled to report on Tuesday
Bear Signal Flashing for This Healthcare Stock Before Earnings
At least four analysts have issued price-target cuts on the stock this week
Signal Says This Retail Stock's on Sale
The shares pulled back this week on news of a Levi Strauss IPO
START YOUR DAY SMARTER.

Get Schaeffer's pre-market news bulletin every morning before the bell rings.
It's free to sign up.


Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


IRA/401K Investment Guide: 2019 Stock Market Crash
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.
3 of Today's Worst Nasdaq Stocks
The stocks are sitting out today's rally in the broader equities market
2019 Rally Continues for Stock Market
The Nasdaq is eyeing its longest weekly win streak since 2016
How American Lithium Tech May Be Poised for 614% Growth
A new lithium technology could change the face of lithium production forever.