Gilead shares closed at $ 77.83 on Friday. (File)
NEW YORK / WASHINGTON:
Timely trading in options from Gilead Sciences Inc. ahead of good news about the biopharmaceutical’s COVID-19 drug therapy could draw regulatory scrutiny, experts said.
Gilead shares soared nearly 10% on April 17 following a media report detailing encouraging partial data from trials of COVID’s drug investigational remdesivir -19 severe.
These gains were overshadowed by a rise in the prices of bullish options which traded in unusually high volume a few hours before the report and whose value more than doubled overnight.
On May 1, Remdesivir received emergency use authorization from the US Food and Drug Administration to treat patients with COVID-19.
Gilead did not hear from regulators regarding the transactions, company spokesman Chris Ridley said, refusing to comment on the matter.
At the start of the trading day on April 16, when Gilead’s stock was hovering around $ 75, four big blocks of his options were bought for around $ 1.5 million each. These exceptionally large transactions bet Gilead’s shares would rise north of $ 80 to $ 87.50 by mid-August.
“These are fairly large transactions,” said Henry Schwartz, president of the options analysis firm Trade Alert, adding that the fact that they were made around the same time was also unusual. “It stands out,” he said.
In one of the transactions, 3,143 calls to bet on Gilead’s shares that would exceed $ 85 as of August 21 were purchased for a total of $ 1.6 million. Until April 17, the value of these contracts jumped to $ 3.02 million, according to a Reuters analysis of trading data. The other three trades also made significant gains.
Gilead shares closed at $ 77.83 on Friday.
“It sounds problematic,” said Howard Fischer, partner at Moses & Singer law firm and former senior counsel with the United States Securities and Exchange Commission (SEC).
“When there is a specific spike in the company’s trading activity – just before a conclusion is announced – it can be a wake-up call for regulators,” he said.
The SEC is looking for unusual deals before news announcements and has used the data to provide insight into past insider trading, according to public documents. The agency declined to comment.
Although it is possible that the transactions were fortuitous, motivated by a bullish feeling for the drug manufacturers in the middle of the pandemic, the options transactions in other pharmaceutical names did not show similar activity, according to a Reuters review.
“It looks like someone has some reason to choose this time of day to spend a lot of capital on Gilead,” said Schwartz.
(With the exception of the title, this story was not edited by GalacticGaming staff and is published from a syndicated feed.)
