Infinity Pharmaceuticals Inc. (NASDAQ: INFI) has seen its stock rise so much on a pact that you might just think it is a buyout. It turns out that the pact is the real news rather than any merger. Infinity will partner with Abbvie Inc. (NYSE: ABBV) to further develop and commercialize IPI-145, also known as duvelisib. This drug is an oral inhibitor that treats blood cancer by blocking PI3K, a protein that plays a role in tumor growth.

Unfortunately, there is one more thing to consider here: is Infinity now fully valued? 24/7 Wall St. has taken a look at the news and then looked at other metrics. We then looked at what the analyst community thought of it, as well as options trading volume, the stock chart and even the short interest.

What seems odd here is that there seems to be no clear outcome on how this should be valued going forward. That being said, we would strongly encourage any investors or speculators who are interested in learning more about Infinity to consider all of these issues. An image at the end of this report combines the chart and fundamentals.

Abbvie agreed to pay Infinity $275 million up front in cash. Infinity is further eligible to receive up to $530 million for the achievement of development, regulatory and commercial milestones, including up to $405 million for the achievement of milestones through the first commercial sale of the drug.

READ ALSO: Credit Suisse Positive on Some Biotechs, Very Cautious on Others

Infinity further announced that it would enter into a master clinical supply agreement with Roche. Roche will supply Infinity with Gazyva so that it can evaluate the combination of both Gazyva and duvelisib. Infinity also entered into a material transfer agreement with Roche in which it will allow Roche to use duvelisib in preclinical and translational research to evaluate the combination of duvelisib and Gazyva.

Julian Adams, president of research and development at Infinity said, “Our ability to evaluate duvelisib in combination with Gazyva in multiple clinical studies is part of Infinity’s strategy to combine duvelisib with both current standards of care and novel targeted therapies.”

One thing to consider is that Infinity does have competition that is already on the market. Gilead, Pharmacyclics and Johnson & Johnson are all said to have brought competing drugs to the market.

The stock chart for Infinity is one that is full of volatility in the past two years. This stock was above $45 less than two years ago. The stock was also trading under $10 for much of 2014. This fresh move took the stock well above the key 200-day moving average for the first time in quite a while (see StockCharts chart below), and we would point out that the 200-day moving average had been a point of very firm resistance on three different waves before this news broke.

Another issue is that the stock options trading volume has not been favorable to the bullish traditional hopes. If you go out to October, the $12 puts saw more than 5,200 contracts trade, versus an open interest of 1,131 contracts. There were more than 1,800 call contracts that traded in the $12 strike price as well. If you go out to the January strike prices, only about 7,500 contracts had traded in the various strike prices in the call options, and that was nearly matched by the put volume.

Analysts may be ratcheting up their expectations and targets ahead, or they may not. The consensus analyst price target was $15.56 for Infinity. The lowest analyst target was down at $9 and the highest was $20. This means that the current view is one that is very mixed, even if the price targets are handily raised in the next day or week in the wake of the news.

READ ALSO: 4 Chip Stocks to Buy That Don’t Need PC Growth for a Strong Finish to 2014

One thing that the bulls may point out is that Infinity’s short interest had fallen significantly, signaling that the bearish stance against Infinity was one that traders and speculators were getting out of the way of. The August 15 short interest was down to 3.59 million shares from 4.128 million shares short at the end of July, and down from 4.67 million shares short in mid-July. In fact, the short interest was the lowest reading for all of 2014.

The headline grabber may be ruling the roost here in Infinity. The headline sounds bullish. The options trading may be cautious, the chart looks bullish and the short interest trend signals that the bears got out of the way (maybe anticipating news).

Infinity shares were up 50% at $16.38 on 12.7 million shares as of 1:45 p.m. Eastern Time. The stock’s 52-week trading range is $8.40 to $21.60. On top of the chart shown below, we have also included an image showing Infinity’s product candidate pipeline and the company’s clinical trial news.

READ ALSO: Credit Suisse’s 4 Top Pharmaceutical Stocks to Buy for the Rest of 2014

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.