Short Sellers Retreat From Biotech Stocks

Short Sellers Retreat From Biotech Stocks

View photo.By and large, short interest among the leading biotechs and emerging pharmaceuticals dwindled between the January 15 and January 30 settlement dates.

Leading that trend were Amgen, Inc. (NASDAQ: AMGN), Celgene Corporation (NASDAQ: CELG) and Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX).

Here we take a quick look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at short interest in other leading biotech stocks.


This California-based biotechnology medicines company saw short interest retreat less than 9 percent to more than 7.04 million shares, the lowest number of shares short in at least a year, and about 1 percent of the float. At the current daily volume, it would take about two days to cover all short positions.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. It reported better-than-expected quarterly results during the period. Amgen has a market capitalization of near $116.4 billion and a dividend yield of about 2.1 percent.

Half of the 24 analysts surveyed by Thomson/First Call recommend buying shares, with the rest rating the stock at Hold. Their mean price target, or where analysts expect shares to go, is around 13 percent higher than the current share price. That consensus target would be a new multiyear high.

Short sellers watched the share price rise more than 5 percent but then give up that gain during the two-week short interest period. They have been relatively flat since and are down less than 4 percent year to date. Over the past six months, the stock has outperformed Gilead Sciences and the Nasdaq.

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The short interest in this biopharmaceutical company plunged more than 31 percent to more than 11.03 million shares. That was still about double the level of short interest a year ago. It was more than 1 percent of the total float, and it would take more than two days to cover all short positions.

This New Jersey-based maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of about $94.7 billion. Its cancer treatments helped boost fourth-quarter results. The long-term earnings per share (EPS) growth forecast is more than 25 percent.

All but four of the 27 analysts surveyed recommend buying shares, with 11 of them rating the stock at Strong Buy. A move to the analysts’ mean price target would be a gain of more than 13 percent for the shares. That consensus target would be a new multiyear high as well.

Here too the shares rose about 5 percent but gave it back during the two-week period. However, the stock is now up almost 6 percent since the beginning of the year. It has not only outperformed the other two biotech stocks featured here over the past six months, but the Nasdaq and S&P 500 as well.

Vertex Pharmaceuticals

Short interest in this Cambridge, Massachusetts-based company fell more than 32 percent to total more than 2.80 million shares. That was the smallest number of shares sold short in the past year. Short interest was more than 1 percent of the total float, and the days to cover was less than two.

Vertex manufactures small molecule drugs for the treatment of serious diseases such as hepatitis C and cystic fibrosis. It has a market cap of about $26.2 billion. It posted a wider net loss in the period but beat revenue expectations. Also, its return on equity is in the red.

The consensus recommendation of the analysts surveyed is to buy shares of Vertex, and it has been for at least three months. The mean price target is more than 19 percent higher than the current share price. That consensus price target would be a new multiyear high as well.

The stock fell more than 6 percent during the two-week period, and shares have retreated a bit more since then. Vertex has not only outperformed larger competitors Bristol-Myers Squibb and Merck over the past six months, but Amgen and the broader markets as well.

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And Others

Short sellers also appeared to lose interest in Alexion Pharmaceuticals, Biogen Idec, BioMarin Pharmaceutical, Gilead Sciences, Ilumina and Medivation as the a volatile month in the stock market drew to a close. Incyte, bucked that trend, although the number of its shares short grew only marginally during the period.

At the time of this writing, the author had no position in the mentioned equities.

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Short Sellers Retreat From Biotech Stocks

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