Wednesday, June 20, 2012

Osiris Therapeutics (OSIR) - Stock Up 133%; Price and Vol Reach 2-Year Highs

--- OVERVIEW ---
OSIR is trading $10.96, up 7.2% with IV30™ up 7.3%. The LIVEVOL® Pro Summary is below.


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Osiris Therapeutics, Inc. (Osiris) is a stem cell therapeutic company. It focuses on developing and marketing products to treat serious medical conditions in the inflammatory, autoimmune, orthopedic and cardiovascular areas.

This is a vol note in a bio-tech that has exploded over the last six weeks(ish) from a $4.95 stock, to now just under $11.

--- ANALYSIS ---
Let's start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side, we can see first a nice pop in late-May, and then the recent abrupt climb.  The current level is essentially a 2-year high.  I've posted some news snippets from 5-30-2012 and more recently, but suffice it to say, the first pop was on a medicare reimbursement decision, and the second was on a drug ruling in New Zealand.
NEW YORK (AP) -- Shares of Osiris Therapeutics Inc. rose Wednesday after the stem cell product developer said Medicare is assigning reimbursement codes to its Grafix skin therapy.

The Columbia, Md., company said the transitional code will take effect July 1. Medicare plans to create a permanent reimbursement code for Grafix, and if it does so, that code would take effect in January. The code makes easier for physicians who use Grafix on a Medicare patient to get reimbursement from the Medicare program, and that encourages greater use of the product.

Source: AP via Yahoo! Finance, Osiris Therapeutics rises on Medicare decision

And then some more recent news...

Osiris Therapeutics, Inc. has received approval for its stem-cell therapy drug in New Zealand, the second country to approve the drug for treatment of a rare disease.

Columbia-based Osiris (NASDAQ: OSIR) said Thursday that the company’s Prochymal drug is expected to be available for commercial sale there later this year.

Canada approved the drug in May, making Osiris the first company to receive approval for a stem-cell therapy.

Source: Baltimore Business Journal via yahoo! Finance; Osiris gets OK from New Zealand for stem-cell therapy ,written by Sarah Gantz.

That news flow has pushed OSIR up from a close of $4.71 on 5-7-2012, to now $10.96 -- that's a 133% gain in about six weeks.

On the vol side, we can see how the implied has been rising steadily over the last week (ish). IV30™ has risen from 74.2% on 6-12-2012 to now 98.51% or a 33% increase. The 52 wk range in IV30™ is [55.36%, 92.97%], obviously making today's value a new annual high by a fairly substantial amount. OSIR has been making new annual highs in vol consistently over the last few sessions, but the action today is quite large.

The interesting reality here is that as the news has been coming out, the vol has been increasing. This is unusual in that normally as news comes out, risk (unknown stuff) lessens. The option market clearly reflects heightened risk in this name even after the recent discoveries. How elevated?... The highest it's been in nearly two years.

Let's turn to the Skew Tab to examine the monthly vols.

We can see a monotonic increase in vol from the back to the front, while the skew shape is pretty consistent across the term structure. In English, the option market reflects heightened risk in the near-term relative to the mid-term.

--- SUMMARY --
Finally, let's turn to the Options Tab, for completeness.

We can see the monthly vols are priced to 98.51%, 94.13% and 83.43% for Jul, Aug and Nov, respectively. With the risk elevated and the stock surging, the question is... What now?...

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