ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS), not to be confused with the Islamic State, is a pharmaceutical company. The company with its market capitalization of $7.42B is engaged in antisense technology, exploiting a drug discovery platform to create a pipeline of drugs. The Company’s primary activity is to discover and develop antisense drugs. The antisense drugs are used to treat a wide range of diseases, including severe and rare, cardiovascular, neurologic and metabolic diseases and cancer.
I wrote about trading ISIS options about one year ago, on May 26, 2014, in a post titled “The Biotech You Must Buy First Thing Tomorrow”. In that post, I discussed how the shares of ISIS have been surging on positive results from product development and clinical trials. I also talked about how the stock had an impressive upside potential. I gave ISIS a $30 price target when I recommended that you purchase the ISIS Jan 2015 30.000 call (ISIS150117C00030000) at a time when the stock was trading around $27 per share.
Excellent Performance in 1 Year
The chart above shows how the shares of ISIS have traded within the last one year when I initiated coverage on its stock. To start with, the stock has gained an incredible 245.5% from a 52-week of $22.25 to a 52-high of $77.80 within the space of one year.
Interestingly, the shares of ISIS have been trading within a range in the year-to-date period as the stock channels between a $60 support and a $75 resistance point. The shares of ISIS will eventually breakout or breakdown below the range.
Can ISIS Breakout to New Highs?
The first factor that supports the breakout possibility for ISIS is the quality of its first quarter earnings release. On May 5, ISIS released its first quarter (Q1 2015) earnings results – the first quarter earnings show that the stock is on the pathway to profitability.
ISIS reported a Q1 net loss of $0.14 per share, which is considerably lower than the consensus estimate of a $0.19 per share loss. More so, the reported loss of $0.14 beats the loss of $0.27 from the comparable quarter in 2014.
ISIS reported that its total revenue increased by 122.2% on a year-over-year basis to $62.6M. The reported revenue beats the consensus analysts’ estimate of $53.3M by 17.5%.
Interestingly, the market is pleased with the quality of ISIS first quarter results and the stock has been trading up nicely since the earnings release. The shares of ISIS climbed a significant 2.50% to close at $61.94 last Friday.
The second factor that supports the breakout thesis for ISIS Pharmaceuticals is the quality of news coming out of its drug pipeline. You will remember that ISIS has been riding on the wings of the strategic alliances that it has formed with the likes of AstraZeneca (AZN) for antisense cancer drugs, Roche for antisense drugs for treating Huntington’s disease, and about four strategic alliances with Biogen Idec (BIIB) to develop antisense drugs for treating neurological diseases.
Last Thursday, Bayer AG announced that it has entered into collaboration with ISIS to gain rights to the ISIS’ anti-clotting drug, which is currently under Phase II trials. The deal already has Bayer paying ISIS $100 million and an additional $55 million based on the success of Phase II clinical trials. In addition, ISIS is expected to receive milestone payments when the drug enters the market after FDA approval.
How to Trade ISIS Options
I am confident that the shares of ISIS will continue higher if the company continues to forge such strategic alliances and if the drugs on which the collaborations are formed continue to advance rapidly in the product pipeline.
I am favorably disposed towards buying ISIS call options, you’ll do well to consider selling a covered call on the ISIS Jul 2015 60.000 call (ISIS150717C00060000). The covered call allows you to obtain ownership in a growing biotech and you get to keep the premium because ISIS will surely be trading higher than $60 at the expiration of the contract.
You might also want to consider buying the ISIS Jan 2016 70.000 call (ISIS160115C00070000) at an asking price of $8.80.
— Daily Option Alerts