The Blubber

BridgeBio Pharma (NASDAQ:BBIO), headquartered in Palo Alto, California, is a biopharmaceutical company that focuses on the creation and testing of transformative medications for genetic diseases and cancers. On Friday, October 8th, 2021, BBIO saw a significant hike in options volume, reaching a total call volume of 6,159; over 18 times the volume of the previous high of the week, which was on October 7th, at 328 call volume.

In the image above, we can see that BBIO doesn’t generally have a high volume of options flow. What’s curious about the flow from Friday is the timing. On Thursday, October 7th, BridgeBio announced the publication of pre-clinical data for their potentially best-in-class drug designed for treatment-resistant cancer; namely small-cell lung cancer.

The drug, BBP-398, was a collaborative effort between BridgeBio and the University of Texas MD Anderson Cancer Center, and exhibits pre-clinical efficacy in research models, and also displays synergy with existing cancer drugs sotorasib and osimertinib. A month ago, the company also received FDA fast-track designation for an experimental muscular dystrophy therapy.

Generally, when we see good news such as this for a biopharma company, we can see the good news reflected in the flow. This time, however, the flow reacted initially with a negative sentiment. Take Friday’s flow, for example. Although the volume is leaps and bounds ahead of the usual volume, and although that volume is overwhelmingly in call options, the flow itself spoke of bearish expectations.

Most of the call volume pictured at the beginning of this post came in as bid-side sells; meaning the contracts were “sold to open” on the bid side, indicating an expectation of downward movement. Indeed, the stock price did fall some on Friday, and opened today at $43.89.

BridgeBio also announced that it will present some of this data at their second ever  Research and Development (R&D) day, slotted for Tuesday, October 12. With that date fresh on the horizon, and the weekend separating announcement and event behind us, the flow tells a slightly different story.

Where Friday’s flow displayed a heavy bearish sentiment, today’s flow is more mixed. There are some large orders pictured above, with a heavy focus on calls expiring January 21, 2022 and February 18, 2022. The call strike garnering the most attention is the $50 strike for both January and February. The flow we see today does seem to display tentative emotions though, as all of them have been flagged as potential multi-leg orders; seemingly paired with the sold-to-open $70 calls of the same strike dates.

Despite the good news, BBIO has seen some struggles in the market. This morning, although the stock is up $1.39 to $45.50 (3.15%), it is still down -3.95% in the last 5 days, and 10.63% in the last 30 days (though the stock is up 14.12% in the last 365 days).

Perhaps the data and outlook they share at October 12’s R&D day will shed light on some of the sentiment we see in the options flow, but the sheer volume of flow compared to historical flow does have us wondering:

Is this flow correlated with R&D day and their treatment updates, or is there something deeper beneath the surface that drives this flow and sentiment?

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