Madrigal's Successful Late-Stage Trial Draws Options Bulls

The company could seek accelerated drug approval in early 2023

Digital Content Manager
Dec 19, 2022 at 3:15 PM
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Madrigal Pharmaceuticals Inc (NASDAQ:MDGL) is surging, last seen up 250.3% to trade at $223.50, after its experimental drug Resmetirom met the main goals of a late-stage study. Specifically, the drug showed improvement in scarring or fibrosis of fatty-liver disease, or non-alcoholic steatohepatitis (NASH), in 24% of patients. In turn, the company noted it will file a marketing application with regulators seeking accelerated approval in early 2023.

Wainwright hiked MDGL's price target to $225 from $170 in response. More bull notes could be on their way, too, given the 12-month consensus target price of $180 is now a 17.2% discount to the stock's current levels. The security looks ripe for a short squeeze, too, as the 2.16 million shares sold short make up 16% of its available float, or over one week's worth of pent-up buying power.

Call volume is today running at seven times what is typically seen at this point, with 17,000 calls across the tape so far, compared to only 2,841 puts. The most popular contract by far is the January 2023 120-strike put, though, where new positions are currently being opened.

This penchant for calls hasn't always been the norm. In fact, Madrigal Pharmaceuticals stock's Schaeffer's put/call open interest ratio (SOIR) of 1.27 stands higher than 88% of readings from the past year, meaning short-term options traders have rarely been more put-biased.  

Shares earlier surged to a four-year high of $235, blasting through long-term resistance from the $80 region, as well as several long-term moving averages. The security is also looking to log its biggest single-day percentage jump on record, as it adds to its 158.5% year-to-date lead.

  MDGL Intraday 2

 

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