Wild Short Interest Swings For These Three Biotech Stocks

With the ongoing market volatility and political rhetoric heating up, short sellers became more selective in the leading biotech and emerging pharmaceutical stocks between the September 15 and September 30 short interest settlement dates.

Baxalta and Juno Therapeutics in particular saw sharp increases in the numbers of shares short in the period. Yet, short sellers retreated handily from Medivation Inc.

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

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Baxalta

This biopharmaceutical company saw short interest rise more than 16 percent to about 7.57 million shares, or more than 1 percent of float. That was still the lowest number of shares short since Baxalta was spun off from Baxter. It would take less than three days to cover all short positions.

Baxalta's focus is on products primarily for the treatment of hematology, oncology and immunology. It has a market capitalization near $13.55 billion and a dividend yield of about 0.8 percent. Shire has made a bid to acquire Baxalta.

Three of the five analysts surveyed by Thomson/First Call recommend buying shares, with the others rating the stock at Hold. Their mean price target, or where analysts expect shares to go, is around 26 percent higher than the current share price.

The share price retreated more than 15 percent during the two-week short interest period, while the S&P 500 dropped a little more than 3 percent. Over the past six months, the stock has outperformed competitor Biogen, but underperformed the broader markets.

Juno Therapeutics

The short interest in this biopharmaceutical company rose more than 29 percent to more than 7.52 million shares, or around 11 percent of the total float. That was the greatest number of shares short year-to-date. It would take about four days to cover all short positions.

This maker of cell-based cancer immunotherapies is headquartered in Seattle and has a market cap of about $4.9 billion. Analysts expect Juno Therapeutics to report net losses both this year and the next.

No consensus recommendation was listed, but six analysts had a mean price target that represents an expected gain of about 22 percent for the shares. However, that target is less than the post-IPO high from back in June.

Despite considerable volatility, the shares ended the settlement period less than 3 percent lower. The shares have surged more than 18 percent since. Over the past six months, the stock has outperformed Baxalta but underperformed Medivation.

Medivation

Short interest in this company tumbled more than 25 percent late in the month to more than 5.73 million shares. That ended three straight periods of rising short interest, and it represents less than 4 percent of the float. It would take a little more than two days to cover all short positions.

This $6.7 billion market cap, San Francisco-based biopharmaceutical company offers treatments for prostate and breast cancer. It announced the retirement of its chief medical officer during the period. Medivation's return on equity is more than 62 percent.

The consensus recommendation of polled analysts is to buy Medivation shares, and it has been for at least three months. They see plenty of headroom, as their mean price target is about 38 percent higher than the current share price.

Short sellers watched the stock decline more than 15 percent in the final weeks of the month. The stock has not only underperformed larger competitors Abbott Labs and Johnson & Johnson over the past six months, but the Nasdaq and the S&P 500 as well.

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And Others

The number of shares short in Acadia Pharmaceuticals, Biogen and Celgene also swelled by double-digit percentages in the final weeks of September, while the short interest in Amgen, BioMarin Pharmaceutical and Intrexon grew more modestly.

The short interest in Alexion Pharmaceuticals was about the same at the end of the period as at the beginning.

On the other hand, sellers shied away somewhat from Gilead Sciences, Illumina, Incyte, Seattle Genetics and Vertex Pharmaceuticals between the settlement dates.

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

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