Confirmed screwworm case in Texas sends two biotech stocks higher

• Zoetis options volume surged to nearly 20 times the daily average, with one trader spending $700,000 on July calls betting on a 5% further stock increase
• Former FDA Commissioner Scott Gottlieb warned that if cases cluster or spread to wildlife like white-tailed deer, the odds of containing the outbreak at the border 'drop sharply' over the next 18-24 months
• Cattle futures rose over 1% on supply concerns, though experts note U.S. producers have tools to manage the threat given the recently approved conditional-use drug

Summary: Screwworm Case in Texas Boosts Biotech Stocks

Key Market Movement:

Two animal health biotechnology stocks rallied Thursday following confirmation of a New World screwworm case in Texas. Zoetis (ZTS) surged nearly 4% while Elanco rose 2% in midday trading.

Trading Activity:

Zoetis experienced exceptional options volume, reaching almost 20 times the daily average with just under 12,000 contracts traded. Bullish sentiment dominated with nearly 11,000 call options versus minimal put activity. One notable trade involved a $700,000 purchase of $80 strike calls expiring July 17, betting on another 5% upside.

The Threat:

New World screwworm, a flesh-eating parasite, is currently circulating in tens of thousands of animals across Mexico. Former FDA Commissioner Scott Gottlieb warned that if cases cluster or spread to wildlife like white-tailed deer, containment at the border becomes significantly more difficult. He identified the next 18-24 months as the highest vulnerability period.

Treatment Opportunity:

Zoetis received conditional FDA approval last year for an over-the-counter drug to treat screwworm, positioning the company as a primary beneficiary if the outbreak spreads.

Market Implications:

Cattle futures gained over 1%, continuing a rally that's up 50% from late 2024 lows. Analysts note potential strain on beef supply if the parasite spreads, though U.S. producers are considered equipped to manage the situation. Given Americans' strong preference for beef and fast food, any supply chain disruption could trigger market volatility across the food sector.

Industry experts suggest U.S. producers can handle the outbreak with newly approved treatments available.