Options Volume Spikes on Sinking Drug Stock

Puma Biotechnology's new Nerlynx deal could be diminishing M&A hopes

by Patrick Martin

Published on Apr 1, 2019 at 2:36 PM

The shares of Puma Biotechnology Inc (NASDAQ:PBYI) are down 9.3% to trade at $35.29, one of the worst stocks on the Nasdaq today, after the company inked an exclusive licensing deal with Pierre Fabre to develop and commercialize its cancer treatment, Nerlynx, in the European Union. The shares are likely suffering because, as analysts at Guggenheim and Cantor Fitzgerald pointed out, the deal could be viewed as negative for a PBYI buyout. The stock's normally dormant options pits have come alive today as a result.

More specifically, over 2,400 PBYI options have changed hands today -- double the average intraday amount, and volume pacing for the 95th percentile of its annual range. There's notable activity at the April 45 call, although it's unclear whether these options are being bought or sold. Meanwhile, it appears some bears are buying to open the May 30 put, which will move into the money if PBYI breaches $30 before May options expire.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 860 calls in the last 10 sessions, compared to just 27 puts. Plus, the resulting 10-day call/put volume ratio ranks in the 95th annual percentile, showing unusual demand for long calls over puts in recent weeks.

On the charts, Puma Biotechnology stock boasts a 74% lead in 2019, thanks to an early March bull gap generated from upbeat Nerlynx sales. Since then however, the shares have churned below the $44 level and racked up three straight weekly losses. Things could get worse this month, too, if history is any indicator. According to Schaeffer's Senior Quantitative Analyst Rocky White, PBYI has averaged an April loss of 7.9% since inception.

Daily Stock Chart PBYI

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