Additional Trading Ideas:
In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:
Bullish ideas: EBAY, LEG, ACM, TPX, HZNP, DISCA, LYV,
NEW BULLISH Plays
Seattle Geneitcs, Inc. - SGEN - close: 46.87 change: +1.20
Stop Loss: 43.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: Yes, see below
It has been a very bumpy ride for biotech investors this year. Yet the biotech space continues to outperform the broader market. The IBB biotech ETF is up +20% in 2015 versus the NASDAQ composite's +6.6% gain. SGEN is faring even better with a +45.8% gain this year.
SGEN has been working on its antibody-drug conjugate (ADC) technology for years but it still sounds like science fiction. They can create ADCs that target a specific type of tumor cell in the body. It links up with a cancer cell and then delivers a cytotoxin, which is a cell-killing agent.
According to the company, "Seattle Genetics is a biotechnology company focused on the development and commercialization of innovative antibody-based therapies for the treatment of cancer. Seattle Genetics is leading the field in developing antibody-drug conjugates (ADCs), a technology designed to harness the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.
The company's lead product, ADCETRISÂ® (brentuximab vedotin), is a CD30-targeted ADC that, in collaboration with Takeda Pharmaceutical Company Limited, is commercially available for two indications in more than 55 countries, including the U.S., Canada, Japan and members of the European Union.
Additionally, ADCETRIS is being evaluated broadly in more than 30 ongoing clinical trials in CD30-expressing malignancies. Seattle Genetics is also advancing a robust pipeline of clinical-stage programs, including SGN-CD19A, SGN-CD33A, SGN-LIV1A, SGN-CD70A, ASG-22ME, ASG-15ME and SEA-CD40. Seattle Genetics has collaborations for its ADC technology with a number of leading biotechnology and pharmaceutical companies, including AbbVie, Agensys (an affiliate of Astellas), Bayer, Genentech, GlaxoSmithKline and Pfizer."
SGEN has a pretty robust pipeline with multiple therapies in phase 1 to phase 3 trials. That probably makes them a buyout target in this merger happy market. Yet that is just speculation on my part. Here's a list of SGEN's current pipeline (SGEN's pipeline).
I hesitate to mention earnings because most smaller biotech firms don't have any. The earnings they do have tend to be lumpy due to milestone payments from partners. SGEN actually has revenue from sales of its FDA approved therapy (listed above). Yet they continue to run losses every quarter. That's because running so many clinical trials is expensive.
Looking at the last couple of quarters SGEN has reported results that were above Wall Street estimates on both the top and bottom line. Revenues in the fourth quarter were up +10% from a year ago while revenues in the first quarter were up +20% from a year ago.
Recently SGEN has seen some bullish headlines regarding insider buying.
The company's largest shareholder, Baker Brothers Advisors, bought more than one million shares of the company. This raised their stake in SGEN from 23.4% to 24.25%. Traditionally insider buying is seen as a big bullish vote of confidence on the company's future.
The stock has been soaring the last few weeks with a run from an intraday low of $33.68 on April 30th to a new 52-week high near $47.00 this Friday. You could definitely argue that SGEN is overbought. I'm sure a big portion of that move could have been short interest. It could be short covering that drives the next move higher. The most recent data listed short interest at 29% of the 92.9 million share float. That's enough for a potential short squeeze. Bears may be panicked with SGEN above resistance near $45.00.
SGEN looks pretty bullish right here. I'd be tempted to buy the stock now. However, tonight we are suggesting bullish positions on SGEN if shares trade at $47.15. Just keep in mind that trading biotech stocks is a higher-risk proposition. Not only do biotech stocks tend to be more volatile but you never know when the right or wrong headline (usually regarding some clinical trial) could send shares of your trade crashing or soaring overnight.
Right now the IBB biotech ETF is poised to break through major resistance. That could spark short covering across the biotech space.
Trigger @ $47.15
- Suggested Positions -
Buy SGEN stock @ $47.15
- (or for more adventurous traders, try this option) -
Buy the SEP $55 CALL (SGEN150918C55) current ask $2.35
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike
Chart of the IBB biotech ETF: