Takeover Talk Has Bulls Buying Human Genome – WSJ.com

In BUSINESS OF STEM CELLS on August 25, 2009 at 9:45 pm


Options traders rallied around pharmaceutical company Human Genome Sciences as talk of a possible buyout by GlaxoSmithKline made the rounds.

Traders flocked to bullish options in Human Genome, picking up 59,000 calls that allow them to buy the company’s stock and 19,000 puts that allow them to sell it, according to Track Data.

Traders showed particular interest in September $20 calls and September $25 calls, hoping that a deal for the Maryland-based company does in fact materialize and sometime before September options expire on Sept. 17.

Spokesmen for Human Genome and Glaxo said they don’t comment on market rumors.

As takeover talk made the rounds, the price of bullish options in Human Genome spiked higher. The price of the September $20 calls more than tripled, for example, rising to $1.85 from 60 cents.

At current prices, the call options make money if Human Genome’s stock climbs above $21.85. It closed the session at $19.21, hitting a high of $19.98.

The implied volatility on Human Genome’s options also increased, said Interactive Brokers senior market analyst Andrew Wilkinson. That suggests investors are preparing for the company’s stock to stage bigger swings.

There was also action in Osiris Therapeutics Inc., a stem-cell therapeutic company conducting clinical trials of Prochymal, a treatment for acute graft versus host disease.

Trading jumped to five times normal, with investors picking up 10,000 calls and 11,000 puts, and implied volatility on the options rose considerably higher. That suggests investors are bracing for the stock to become more volatile. Osiris closed the session at $14.15, up 16 cents, or 1.1%.

via Takeover Talk Has Bulls Buying Human Genome – WSJ.com.


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