ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) was one of the top gaining stocks last Friday after adding some 11.46% to close at $27.81. ISIS Pharmaceuticals, a small cap healthcare stock with a market cap of $3.27 billion develops therapeutic drugs inhibiting cell protein synthesis. The company’s principal activity is to develop and market RNA (RiboNucleicAcid)-based novel drugs to treat important diseases such as cardiovascular diseases, diabetes and asthma.
ISIS may be relatively unknown to you, if you are not into trading biotech stocks but the company is well known in the pharmaceutical sector for its Antisense drug discovery technology. ISIS has strategic alliances with AstraZeneca (AZN) for antisense cancer drugs, Roche for antisense drugs for treating Huntington’s disease, and it has four strategic alliances with Biogen Idec (BIIB) to develop antisense drugs for treating neurological diseases.
Why Shares of ISIS Surged Last Week
Shares of ISIS started the uptrend last Thursday after a combination of good news renewed investor confidence to send the shares upwards. It started two weeks ago when ISIS reported positive Phase 2 data on its ISIS-GCGR RX in which a significant reduction was reported in HbA1c in Patients living with Type 2 Diabetes. The excitement continued last Tuesday when the company reported that it has initiated Phase 1 study for ISIS-PKK Rx, an antisense drug in development to treat patients with hereditary angioedemia (HAE).
The excitement was translated into gains in share price last Thursday when the company reported positive mid-stage data on its ISIS-FXI being developed to prevent venous thrombosis in patients who are undergoing complete knee replacement surgery. Shares of ISIS soared 13% on the strength of the news on Thursday. Shares of ISIS then surged another 11.46% last Friday on the strength of a positive commentary from Piper Jaffray.
Piper Jaffray specifically said ISIS is the “arguably the most attractive and undervalued pipeline in biotech, in our view.” The strong momentum was driven higher by the fact that the research firm posited that ISIS could be the target of a potential target by big pharma. Piper Jaffray says, “The systemic undervaluation of the pipeline could be corrected by a new management attitude, a new management team, or a company acquisition.” You will remember that I mentioned companies such as AstraZeneca and Biogen Idec as strategic partners for ISIS; hence, we can infer that Piper Jaffray is not far away from the truth in saying that ISIS could be up for an acquisition.
More Potential Uptrend in ISIS
With current gains, ISIS is trading at 125.31% discount to its 52-week high of $62.66 hence, the stock has a long way to run. The stock chart below shows how shares of ISIS have traded in the year to date.
You will observe that the stock has been trading down since March until it bottomed at $22.76 on May 8. The new uptrend is just kicking in and the RSI of 48.58 confirms that the buying trend on the stock is just starting.
How to Trade ISIS Options
I am seriously bullish on ISIS because of the possibilities in the uptrend because of the quality of its drug pipeline and the attractiveness of its valuation. I am long ISIS and I will be getting into position with the ISIS Jan 2015 30.000 call (ISIS150117C00030000) first thing tomorrow when the market opens.
— Daily Option Alerts