Transkaryotic Therapies (NASDAQ:TKTX) is a biopharmaceutical company primarily focused on researching, developing and commercializing treatments for rare diseases caused by protein deficiencies. Within this focus, the company markets Replagal, an enzyme replacement therapy for Fabry disease, and is developing treatments for Hunter syndrome and Gaucher disease. In addition to its focus on rare diseases, TKT intends to commercialize Dynepo, its gene-activated erythropoietin product for anemia related to kidney disease, in the European Union.
A lengthy search for bullish stocks with robust option premiums turned up few candidates this week and, to make matters worse, our first selection was abandoned at the last minute after we uncovered some inauspicious data in its last quarterly report. That left us reviewing the Supplemental Positions for another favorable issue but there were really no "standouts" in the group. However, when all else fails, we fall back to technical analysis and the strength of TKTX is clearly displayed by the recent activity in its share value. On Friday the issue climbed to a new 52-week high, supported by heavy volume, and the next level of resistance is near $30. In addition, there is reasonable technical support near the sold (put) strike price and a short-term trading range exists slightly below the (target) cost basis in the stock.
Although we generally try to avoid speculative biotechnology companies, the current market conditions, not to mention the upcoming earnings season, warrant a slightly different approach and we believe this (mildly aggressive) position is suitable for the MCM Portfolio.
Fundamentals Chart Earnings Dates Analyst Ratings
Suggested (Bullish) Option Position:
Sell Put MAY 25.00 UFT-QE
Current Price = $0.75 Open Interest = 10
Potential Profit (5 contracts @ $0.75) = $375
Initial Margin (5 contracts) = $4,860
Return on Investment (max) = 5.7%
Cost Basis in Stock = $24.25
Days to Expiration = 41