Achieving major milestones with new drugs always lifts stock prices. Orphan drugs come with 10 year patent lives.
New positions are only added on Wednesday and Saturday except in special circumstances.
NEW BULLISH Plays
ACHN - Achillion Pharmaceuticals - Company Profile
Achillion Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes small molecule drug therapies for infectious diseases and immune system disorders in the United States and internationally. Its drug candidates for treating chronic hepatitis C virus (HCV) infection comprise Odalasvir, a NS5A inhibitor, which has completed Phase IIa clinical trials; ACH-3422, a NS5B nucleotide polymerase inhibitor; and Sovaprevir, a NS3 protease inhibitor that has completed Phase II clinical trial. The company is also developing ACH-4471, a complement factor D inhibitor, which is in Phase I clinical trial to treat patients with paroxysmal nocturnal hemoglobinuria and C3G, a disease resulting from alternative pathway over-activation; and other factor D inhibitors. It has a license and development agreement with Ora, Inc. for the development and commercialization of ACH-702, a drug candidate that is delivered topically or locally; and collaboration arrangement with Janssen Pharmaceuticals Inc. to develop and commercialize antiviral drug candidates for treating HCV infection. The company was founded in 1998 and is headquartered in New Haven, Connecticut. Company description from FinViz.com.
Expected earnings May 24th.
Achillion has multiple drugs under development but one could be a blockbuster. The rug ACH-4471 was just given a positive response by the European Medicines Agency Committee for Orphan Drugs. Designating a drug as an orphan gives it a 10-year patent clock where nobody can compete. The drug treats a rare kidney disorder known as C3G. The same drug is also being tested against multiple other diseases.
Achillion is different from other small drug companies because it has $330 million in cash in the bank. They received this in partnership with Johnson & Johnson on a Hep-C drug.
Shares spiked on the announcement to $3.50 and then rested for a week and now they have accelerated again. Resistance is $5.20 but with their drug news they could attract new buyers to overcome that level.
This is a cheap stock and that means the options are cheap as well. We can buy the June $5 call for 40 cents. That gives us the potential for a home run and we can hold over the next earnings with minimal risk.
I am going to profile this as a long-term option position. Given the strong gains in recent days there could be another pause just around the corner. If we do get a pullback then I would also recommend a stock position.
Remember, just because the option is cheap it does not mean you should buy 100 contracts. Sometimes cheap options expire worthless too.
Buy June $5 call, currently 40 cents, no initial stop loss.
NEW BEARISH Plays
No New Bearish Plays