Very Large Call Buy in Auxilium Pharmaceuticals (AUXL) on Weakness

Super busy day in the unusually large options trades today, unfortunately we were out of the office til now.  One of the more interesting, and large, call buys was seen in Auxilium Pharmaceuticals, Inc. (AUXL).

One trader has a strong conviction that Auxilium Pharmaceuticals, Inc.(AUXL) is going higher by March 2015.   The trader bought 4,800 AUXL March $21 calls on weakness in the shares post earnings. They paid $2.15 for all those calls, at the ask.  That makes for a hug bet with a transaction value of about $1,032,000.

Auxilium Pharmaceuticals, Inc.(AUXL) is currently trading well down at $18.01, down $1.82, or almost 10% though it is off it’s low of the day of $17.80.  AUXL has a 52 week high of $32.89, and a low of $16.36 on the year.  It’s trading an average volume with over 959,000 shares trading by 2:00 pm today.

Auxilium Pharmaceuticals, Inc.(AUXL)just announce quarterly earnings today, August 7, so this is not your standard earnings play here, more likely a value play.  AUXL got crushed 10% today as it totally missed estimates today.  Analysts expected a loss of 21 cents, while the company reported a loss of 44 cents. Revenue estimates were 88.5 Million dollars, and the company reported just $83 Million in revenue.  So after all that bad news, a trader must feel this is way over done and buys 4,800 March $21 calls in AUXL.

auxilium pharma auxl logoSo what does this trader know that no one else seems to know?  May be some something to do with the QLT deal or other material news is “anticipated” to be released soon?

We like this trade given it’s size, and the fact that it’s now traded over 5,000 contracts now, and best of all we can now get in below the price paid by the trader in the know.  The ask on these calls is now $1.95.

Thirteen analysts currently follow Auxilium Pharmaceuticals, Inc.(AUXL).  The average rating on AUXL is “overweight” and the average price target is $27.00.  There definitely doesn’t look to be room for a nice analyst upgrade / price target increase in the very near future.  We have a hunch it’s some other news to come that precipitated this big call buy.  The last analyst action was August 7, when Aegis cut it’s price target from $37 to $34…seems legit.  They just initiated coverage June 26th, with a BUY rating.

Auxilium Pharmaceuticals, Inc. is a specialty biopharmaceutical company focuses on developing and marketing products to predominantly specialist audiences.