Zoetis, Elanco shares rise as Texas screwworm case boosts treatment outlook

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Zoetis, Elanco shares up on screwworm

Highlights

Zoetis shares rally nearly 4% and Elanco rise 2% after Texas livestock test positive for New World screwworm, sparking supply chain concern.
Zoetis sees FDA emergency use authorization for an over-the-counter screwworm drug and options trading volume hits 20 times the daily average, with a large July 17 80-call trade of nearly $700,000 signaling bullish bets.
Cattle futures rise over 1% but hold mid-range in a multi-year rally, as beef prices remain up 50% since late 2024 and markets do not yet anticipate major supply disruptions.

Trading surge follows Texas parasite detection

As reported by CNBC, shares of Zoetis and Elanco Animal Health move higher in Thursday trading after livestock in Texas test positive for New World screwworm, a flesh-eating parasite that raises concerns for ranchers and the broader beef supply chain.

Zoetis is last up nearly 4% at midday, while Elanco gains 2%. Zoetis draws the stronger market reaction in part because the company received conditional approval from the U.S. Food and Drug Administration last year for an injectable product that treats the pest and helps prevent reinfestation. Last month, the FDA adds to that support by granting emergency use authorization for an over-the-counter drug.

Options activity in Zoetis jumps to almost 20 times its daily average, with just under 12,000 contracts traded and nearly 11,000 of them in calls. More than 4,200 calls are bought, versus about 1,200 calls sold and fewer than 300 puts purchased. Early positioning centers on the $85 level, including one trade of nearly $700,000 in July 17 80-calls at roughly $5 per contract, signaling a bullish bet on further gains by mid-July.

Potential effects on beef supply and markets

Cattle futures are so far taking the development in stride, rising more than 1% in the session while remaining in the middle of a multi-year rally. Prices are up 50% from lows in late 2024, suggesting the livestock market is not yet pricing in a major supply disruption from the Texas case alone.

If the parasite spreads further, beef supply could come under pressure, but consumer demand is also a key risk for investors tracking the sector. Ben Rand, a Nebraska-based broker at Blue Line Futures and regional director of the Federal Crop Agency, says any issue in the beef supply chain could create market volatility because beef remains the preferred commodity for many U.S. consumers. He adds that U.S. producers can manage the situation because a conditional-use drug is now available.

Our earlier coverage of Abbott Laboratories (ABT) focused on a sharp intraday rebound that lifted the stock above its 20-day moving average, even as it stayed below the 50-day and 200-day averages. We noted mixed technical signals and highlighted that, without a clear news catalyst, the bounce could fade quickly if key resistance levels hold.

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