Today’s tickers: DOW, GLD, ISIS, DTV, SINA, XOM, SPWRA, AGO & SINA

DOW - The Dow Chemical Co. – Shares of the manufacturer of chemicals and plastic materials increased 2% during the trading session to $29.45. We observed a mix of bullish and bearish option plays on the stock today. One investor appears to have unraveled an in-the-money ratio call spread in the December contract in order to finance the purchase of 7,500 calls at the December 28 strike for 1.92 apiece. Further along, in the January 2010 contract, another bullish player rolled a long call position to a higher strike price. It looks like the investor originally paid between 2.35 to 3.30 in premium to buy 5,000 calls at the now deep-in-the-money January 24 strike back on September 14, 2009. Today the trader closed out the December 24 strike calls by selling 5,000 contracts for 5.30 each. The closing sale of the calls was spread against the purchase of 5,000 fresh call options at the higher January 28 strike for about 2.45 premium per contract. Finally, protective plays dominated the March 2010 contract. Two put spreads were established this afternoon. The first transaction involved the purchased of 5,000 puts at the March 27 strike for 2.08 each, marked against the sale of the same number of puts at the lower March 20 strike for 47 cents apiece. The net cost of the trade amounts to 1.61 per contract and yields protection beneath the breakeven price of $25.39. The other put spread involved the same number of put options but was transacted at the March 26/19 strikes at a net cost of 1.38 per contract. Downside protection on this play kicks in if shares decline through the breakeven point at $24.62 by expiration day in March.

GLD - SPDR Gold Trust ETF – More than 253,800 option contracts changed hands on the GLD with about 30 minutes remaining in the trading day. Investors traded calls on the exchange-traded fund more than 1.8 times to each put option in play. Shares of the GLD, which replicates the performance of the price of gold bullion, are up 0.25% in late-day trading to stand at $111.90. A large-volume ratio call spread on the fund suggests some investors expect the price of gold to rise sharply by expiration in January 2010. Bullish traders bought approximately 15,000 calls at the January 112 strike for an average premium of 3.88…

Today's tickers: ISIS, DTV, SINA, XOM, SPWRA, AGO & SINA[More...]

This is a follow up to my post, “ISIS Pharmaceuticals breaches long term support.” As many of you may know, posts from this blog are often (though not always) syndicated on SeekingAlpha.com. In the case of my previous post on ISIS, I caught significant flack from the SeekingAlpha community. Among other things, I was accused of not understanding how to invest in biotech and generally missing the point on Isis’ anti-sense technology. (For those interested, I actually posted on Isis’ business and fundamental value in a previous post.)[More...]

Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 7 cents per share in the third quarter, which was wider than the Zacks Consensus Estimate of a net loss of 5 cents. The company had reported a net income of 2 cents in the year ago period. The wider-than-expected loss was due to lower revenues [...]

(ISIS) Isis Pharmaceuticals’ Loss Widens

Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 7 cents per share in the third quarter, which was wider than the Zacks Consensus Estimate of a net loss of 5 cents. The company had reported a net income of 2 cents in the year ago period. The wider-than-expected loss was due to lower revenues and higher operating expenses. 

Revenues declined 9.1% to $26.8 million. Revenues include license fees, milestone-related payments and other payments. Revenues declined during the reported quarter as the company finished amortizing the revenue associated with the $50 million upfront payment received from Johnson & Johnson’s (JNJ) Ortho-McNeil-Janssen in 2007. 

The company reported higher expenses during the quarter mainly due to the expansion of its clinical development programs, including additional expenses associated with the phase III clinical program for mipomersen, expenses for Regulus as it builds its core team and expenses related to the company's expansion of its drug discovery activities into new therapeutic areas. Regulus Therapeutics has been established in collaboration with Alnylam Pharmaceuticals (ALNY). 

We expect operating expenses to continue increasing as the company expands its research and development activities. Isis recently presented positive phase II data on type II diabetes candidate, ISIS 113715, which should move into the advanced stages of development. 

Isis also continued to make progress with its lead pipeline candidate, mipomersen. Collaboration partner Genzyme (GENZ) intends to file the first new drug application (NDA) for mipomersen in the U.S. for homozygous familial hypercholesterolemia (FH) in the second half of 2010, with a similar filing in Europe shortly afterwards. 

Meanwhile, Isis expects to present data from its phase III study in severe hypercholesterolemia patients ahead of the initial NDA filing in the U.S. Positive results would allow the company to file for a broader indication. A potential second filing in Europe will involve a broader patient population, namely, heterozygous FH patients. 

Isis exited the quarter with a strong cash position of $607.8 million. The company averred that it remains on track to exit the year with more than $550 million of cash. The company intends to expand its pipeline by moving at least three new drugs into development in 2009. 

Although we believe that Isis’ antisense technology represents an exciting and potentially revolutionary platform for developing therapeutic candidates to treat a wide margin of diseases, we remain concerned about the company’s dependence on mipomersen for future growth. Any delay in the development and commercialization of the candidate would weigh heavily on the stock. We currently have a Neutral recommendation on the company.
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