Wave Life Sciences Stock Folds on Drug Decision

Jefferies cut its price target to $38 in response

Deputy Editor
Dec 16, 2019 at 2:37 PM
facebook twitter linkedin

The shares of pharmaceutical concern Wave Life Sciences Ltd (NASDAQ:WVE) have more than halved today after the firm said it would be halting the development of its Duchenne muscular distrophy (DMD) drug, suvodirsen, which failed to improve patients' condition during a phase one study, and Wave Life also said it would be discontinuing the study of the treatment. This report comes just days after Sarepta Therapeutics (SRPT) DMD treatment received Food and Drug Administration (FDA) approval. The stock is down 53.8% to trade at $17.38, at last check. 

In response, Jefferies slashed its price target to $35 from $60, putting the consensus 12-month price target at $36.86 -- a slight discount to last night's close of $37.60. More analysts could roll in with downgrades, should this negative price action continue. Right now, four of those in coverage call WVE a "strong buy," compared to two saying "hold."

Options players have piped up too. The typically quiet options pits have seen 3,798 calls and 2,776 puts cross the tape so far. That's 14 times what's usually seen at this point. Some selling action has been detected at the popular December 15 put, where 1,260 contracts have exchanged hands so far. Some sell-to-open action is happening at the December 20 call contract too, suggesting that these traders are expecting WVE to hold below the $20 region until these positions expire on Dec. 20. 

While calls outnumber puts in today's trading, a preference for the latter has been the norm of late. In fact, during the past 10 days 1.35 puts have been bought for every call on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). On the other hand, short-term players have been reaching for calls, as evidenced by the security's Schaeffer's put/call open interest ratio (SOIR) of 0.45, which sits in the 30th percentile of its annual range. 

Short sellers could be cheering today, though Wave Life landed itself on the short sales restricted (SSR) list. The 4.09 million shares of WVE sold short represent 14.7% of its available float, and would take over 18 days to cover, at the average pace of trading. 

Taking a look at the charts, Wave Life's tumble comes one day after the pharma concern hit a seven-month high, just below the $40 region. The stock rallied hard off its prior two-year bottom of $17.75, with support emerging at its 20-day moving average. The stock managed to close one of its April bear gaps with this rally, and was well on its way to closing up the other gap, too. Needless to say, WVE is now trading well below these two levels, and is eyeing its lowest close since Aug. 2017. 

WVE Chart Dec 16


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial


Special Offers from Schaeffer's Trading Partners