With Amicus and Dynavax Off the Board, a Reliable Trade Workhorse Re-emerges
Here's why this biopharma name is back in the buy zone.
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I have recently lost a couple of my favorite "rinse, wash, and repeat" covered call trades of the past few years. That is because both Amicus Therapeutics (FOLD) and Dynavax Technologies (DVAX) have accepted buyout offers from large drug concerns over the past two weeks. I have had at least a half dozen successfully executed covered call trades in both names and will miss those two free squares on the board.
That said, there are still similar biopharma stocks in my portfolio. For today's trade idea, one of these gets put back in the mix. That would be around Harmony Biosciences (HRMY) .
I highlighted a similar trade in early June on these pages. The stock is up slightly from that article, and the equity is set up well for a rinse, wash and repeat covered call trade. Executing a trade that returns in the low to mid-teens a couple of times annually certainly helps bolster an overall portfolio.
Harmony’s primary asset remains a compound known by the brand name WAKIX (pitolisant), which is approved to treat narcolepsy. WAKIX has patent protection until 2030, and Harmony continues to advance an improved version of this compound within its pipeline. If all goes according to the schedule, this candidate will be approved by the FDA sometime in 2028, which will extend patent protection into the mid-2040s. Pitolisant is also in mid-to late-stage development for several indications including Prader-Willi Syndrome and Myotonic Dystrophy.
Harmony stock suffered a setback in September when its candidate to treat Fragile X syndrome failed to meet its primary endpoint in a Phase 3 study. However, its should be noted that the equity has completely recovered from that brief blip down. In addition, company management has stated the key reason the study did not garner the desired top-line results was due to a higher-than-expected placebo response rate. The trial has been paused, but full study results will be fully analyzed. Given the high unmet need for this rare affliction, this asset might not be fully compromised.
More importantly, Harmony’s business is executing very well. Third-quarter results came out in early November. The company easily and significantly beat top-line and bottom-line expectations. Revenues rose nearly 29% on a year-over-year basis, which triggered management to boost its 2025 sales guidance. Harmony is projected to post earnings of roughly $3.15 per share in 2025 on $850 million in revenues. The current analyst consensus estimate has EPS moving to just over $4.00 on nearly 30% revenue growth in 2026.
Harmony sports an approximate market capitalization of $2.2 billion and the stock currently trades at about $38.00. The equity appears quite cheap given its earnings and sales growth — and even cheaper considering the company has approximately $600 million in net cash on its balance sheet. This makes HRMY a solid and repeatable covered call trade, in my view.
Option Strategy
This is how one can initiate a holding in HRMY with a covered call order. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the July $35 call strikes, fashion a covered call order with a net debit in the $30.00 to $30.50 a share range (net stock price - option premium).
This strategy provides downside protection of 20% with potential upside potential of around 15% over the option duration even if the stock trades down 8%.
At the time of publication, Jensen was long DVAX, FOLD and HRMY.
