Clovis Oncology (CLVS) stock jumps after bankruptcy warning


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There’s nothing quite like a good old-fashioned bankruptcy warning to bust a stock on any given day. Today, the latest speculative frenzy appears to be underway with Clovis Oncology (NASDAQ:CLVS). Shares of CLVS are currently up more than 30% in this afternoon’s session, following last week’s dire warning.

On Nov. 9, Clovis stock plunged about $1 a share to 23 cents a share. This came after the company said in a securities deposit that it “will not have sufficient liquidity to sustain our operations beyond January 2023”. As a result, the company said filing for bankruptcy was an “increasingly likely” outcome, as the company appears to be struggling to sell its cancer drug Rubraca.

Rubraca is a drug that has been approved to treat ovarian cancer, an area that has become increasingly competitive in recent times. Accordingly, the company indicated that Rubraca sales declined year over year, dropping 10% to levels that seem unsustainable for the company to continue in business.

While Clovis has laid off more than 100 employees, its debt load looks unsustainable. The company reportedly missed a $1.9 million interest payment and could be on the verge of default. So, we don’t know if Clovis will make it.

Let’s dive into what’s making investors look the other way with CLVS stocks right now.

Why is CLVS stock rising today?

Clovis is a company with a product that certainly deserves the interest of many investors. The company’s drug Rubraca is a leading maintenance treatment used for people suffering from ovarian cancer. The company is one with a drug that might work, but more data is needed for this drug to gain formal approval from the Food and Drug Administration (FDA).

Right now, it looks like Clovis is stuck in a tough spot, with little prospect for revenue growth and an unsustainable business model. Unless the company can raise funds on favorable terms, it’s unclear whether Clovis will be around next year.

That said, speculators seem to be taking this significant drop as a way to bet the company will find its way out of this mess. At these levels, CLVS stock looks more like a call option than an equity investment. Therefore, if the company is able to defer its royalty payments or restructure short-term debt, future approval could return that company’s market capitalization to pre-announcement levels.

It’s a risky bet, but it looks like many aggressive traders and speculators are willing to play along. I’m not betting this rally can last, but CLVS stocks are definitely one investors will want to watch from. here.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative long-term investment outlook.

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