JPMorgan Says Drug Stock Can't Live Up to High Expectations

The brokerage firm downgraded a stock that's had a huge year

Mirati Therapeutics Inc (NASDAQ:MRTX) shares have had a huge year, rallying from the low $40 area to a record high of $111.99 on July 31. However, the cancer drug producer has shed 4.9% today to trade at $99.47, following a bear note out of J.P. Morgan Securities. The brokerage firm downgraded its view on MRTX to "underweight" from "neutral," and dropped its price target by $16 to $85, citing expectations that are too high around the company's MRTX849 drug, which is being tested to treat colorectal and lung cancer patients. The analyst in coverage said the current stock price doesn't reflect the short-term risks around Mirati.

Surely, most other analysts have been bullish on MRTX shares, and today's note from J.P. Morgan Securities actually represents the first equivalent of a "sell" to hit the book. By the numbers, seven of the other 12 covering brokerage firms consider the stock a "strong buy."

Many other traders have already been upping the bearish ante on the oncology specialist. That is, short interest increased over 26% in the last two reporting periods. Almost 24% of the total float is now dedicated to short interest, and it would take these bears more than eight days to cover their positions.

And while the security sees little absolute volume in the options pits, those who have taken positions on Mirati Therapeutics have been notably put-skewed. The equity's current Schaeffer's put/call open interest ratio (SOIR) comes in at 1.43, and ranks in the 98th annual percentile.