What happened
Shares of the clinical-stage biotech Oramed Pharmaceuticals (ORMP -1.42%) were up by a staggering 41.6% as of 3:30 p.m. ET on Friday afternoon. What's more, this sizable move northwards is being accompanied by a huge uptick in volume, with more than 14.5 million shares traded at the time of this writing.
To put this surge in volume into the proper context, the average daily volume for Oramed's stock over the prior 30-day period has been less than 900,000 shares. The biotech's stock appears to be shooting higher today as a result of short covering (short sellers buying back their borrowed shares).
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So what
Over the last 12 months, Oramed's stock has attracted short sellers in droves, thanks to the global turmoil in financial markets, the drawdown across clinical-stage biotech stocks, geopolitical unrest, and rising interest rates. The long and short of it is that short sellers have specifically targeted cash flow negative operations like Oramed because the current environment is far tougher to raise capital in than it was a year ago.
Why do shorts appear to be covering their bets suddenly? Yesterday, Oramed released a letter to shareholders laying out a strong outlook for the company for the rest of the year. Specifically, management noted that its cash runway should allow it to get to two key data readouts over the next 18 months.
Now what
Is Oramed's stock still worth buying? The company's oral type 2 diabetes therapy could be a game changer if its late-stage data are positive. What's important to understand is that this market is one of the biggest, from a monetary standpoint, in the world of pharmaceuticals. That's a ginormous opportunity for Oramed. In short, aggressive investors may want to consider owning this stock as biotechs at large start to rebound from a rough nine-month period.
