How to Trade This Cash-Rich Biopharma Name
This weekend’s covered call idea is around a cash-rich biopharma concern that is expecting a key FDA approval to close out 2026.
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The 10-year and 30-year treasuries hit their highest yields since 2002 this week. Even a poor August BLS jobs report on Friday, which showed only 29,000 positions created last month, couldn’t bring down yields. This was far below expectations of 85,000. July’s job number estimates were also slashed by 29,000. The unemployment rate in August crept up by .1% to 4.2%.
This weekend’s covered call idea is around a cash-rich biopharma concern that is expecting a key FDA approval to close out 2026. The firm, Mineralys Therapeutics (MLYS) has a cash-rich balance sheet that will support the coming marketing rollout. After declining by around one-third year to date, the stock trades for just under half the consensus price target on the shares from the analyst firm community, which is universally bullish on MLYS. The options against the equity don’t have the liquidity I like to see in covered call trades. However, they are more than lucrative enough to make up for that. Especially for us small traders.
The stock currently trades around $24.00 a share and sports an approximate market capitalization of $2.1 billion. After raising $150 million via a secondary offering in early June, the company ended Q2 with just over $660 million, providing a cash runway well into 2028.
The company’s primary asset is called lorundrostat. The candidate should be approved by the FDA for the treatment of adult patients with hypertension in combination with other antihypertensive drugs just before Christmas. One of the reasons for the stock’s decline in 2026 was that Baxfendy from AstraZeneca (AZN) was approved for the same indication this spring and has a first-mover advantage.
That said, it is a large market, with Baxfendy projected to hit $3 billion in sales by FY2032. Llorundrostat showed solid efficacy and safety results across a half dozen studies including two registrational trials. The company is not expected to become profitable until FY2029 when analysts expect nearly $700 million of revenues. Liorundrostat is projected to hit blockbuster status (over $1 billion in annual sales) in FY2030.
Liorundrostat also has potential to expand to other indications and is currently in mid-stage evaluation to treat hypertension in patients with chronic kidney disease (CKD) and albuminuria. FDA approval in December could put Mineralys on the radar of a potential acquirer. Finding a commercial partner could be another potential positive. Management has been actively pursuing these opportunities, which is of note.
Option Strategy
Here is how one can initiate a position in MLYS utilizing a covered call strategy.
Selecting the February $22.50 call strikes, fashion a covered call order with a net debit in the $17.50 to $18.50 a share range (net stock price – option premium). This strategy provides downside protection of nearly 25% over the trade’s duration and has similar upside potential, even if the stock trades down 5% over its option duration.
At the time of publication, Jensen was long MLYS.
