Sellas Life Sciences stock surged 176 percent yesterday and hit its 52-week high. However, the stock was trading lower sharply in premarket trading today. Why’s Sella Life Sciences stock so volatile this week and should you buy it after the fall today?
Sellas Life Sciences is a late-stage biopharma company that’s working on the development of novel immunotherapies for several cancer indications. It’s not uncommon for pharma companies to display volatility as they release trial results. Moderna is a major example as the stock rallied after the positive results of its COVID-19 vaccine candidate.
What happened to Sellas Life Sciences?
Earlier this week, Sellas announced an exclusive license agreement with 3D Medicines, a China-based biopharma company. The company said that it could receive up to $202 million as payments as license fees and milestone payments. This does not however include any royalty fees.
The news was released on Dec. 7 and Sellas rallied yesterday, Dec. 11. The rally had more to do with mid-stage study results released by Greenwich LifeSciences for its GP2 therapy. Both these companies released data Dec. 11 at the San Antonio Breast Cancer Symposium.
Sellas Life Sciences on Stocktwits
Many users on Stocktwits are discussing the short-squeeze caused by the sharp rise in Sellas Life Sciences stock. In a stock squeeze, a sudden rise in a stock leads to massive losses for short-sellers who then have to cover their positions by buying the stock that further ignites the rally. Username FSRtotheMoon called upon shorts to cover their positions before their losses widen further.
Why $SLS was so hot recently.— Brian Jones (@TraderBJones) December 10, 2020
SELLAS Life Sciences shares are trading higher, potentially in sympathy with recent volatility Greenwich LifeSciences. The company on Monday also announced a license agreement for development and commercialization of GPS and GPS+ with 3D Medicines.
Sellas Life Sciences stock forecast
According to the estimates compiled by CNN, only two analysts are covering Sellas Life Sciences stock and its median price target is $8. That’s less than half of Sellas Life Sciences stock prices after the sharp rise yesterday.
However, after the massive gains yesterday, it was trading down almost 20 percent in pre markets and quoted at around $14.21. Greenwich LifeSciences which is up almost 15-fold this month was also trading down over 20% at $72 in pre-markets today.
Is Sellas Life Sciences stock a buy?
Sellas Life Sciences stock has rallied on optimism over positive trial results that are scheduled to be released today. Some degree of optimism is already built in the stock. If the trial results are not positive, the stock might fall. However, if the company reports positive results for Galinpepimut-S, we could see the stock rise even further.
For those looking to buy Sellas Life Sciences stock, it ultimately depends on your view of its trial results. For investors bullish on the trial results, the stock is a buy. But remember, clinical-stage trail companies are always a high-risk high return trade-off. There are instances when stocks have tumbled badly after the trials failed.