Pharmaceutical Stock Pulling Back Before Earnings

Eli Lilly And Co (NYSE:LLY) stock is down 0.3% to trade at $865.41 at last glance, pulling back alongside the broader market. The pharma giant yesterday revealed it will buy Ajax Therapeutics, a biopharmaceutical company developing drugs for myelofibrosis and polycythemia vera patients for $2.3 billion. The acquisition comes ahead of Eli Lilly's first-quarter earnings report, which is due out before the open on Thursday, April 30.

LLY has been chopping lower on the charts since a rally earlier this month fell short of the $980 level. The security is also facing  pressure at the descending 40-day moving average, which has been capping rallies since February. On track for a fourth-straight loss, Eli Lilly stock is down 19.6% so far this year.

The equity has a positive history of post-earnings reactions, however, finishing higher after five of its last eight reports, including a 10.3% pop in February. This time around, the options market is pricing in an 9% move, regardless of direction, larger than the 8.1% swing LLY has averaged over the last two years.

Short-term options traders are bearish toward Eli Lilly stock, per its Schaeffer's put/call open interest ratio (SOIR) of 1.17 that sits in the 82nd percentile of readings from the last year. This suggests that an upbeat post-earnings reaction could trigger an unwinding of pessimism.