Market Overview

Short Interest Swings in Biotech Stocks (AMGN, BIIB, VRTX)

The short interest in biotech and emerging pharmaceutical companies was mixed in the final two weeks of October. Shares sold short in Arena Pharmaceuticals (NASDAQ: ARNA), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Illumina (NASDAQ: ILMN) and VIVUS (NASDAQ: VVUS) grew somewhat between the October 15 and October 31 settlement dates. But short interest in Alexion Pharmaceuticals (NASDAQ: ALXN), Celgene (NASDAQ: CELG), Onyx Pharmaceuticals (NASDAQ: ONXX), Pharmacyclics (NASDAQ: PCYC) and Regeneron Pharmaceuticals (NASDAQ: REGN) declined during that time.

Three stocks saw larger swings in short interest between the October 15 and October 31 settlement dates. They were Amgen (NASDAQ: AMGN), Biogen Idec (NASDAQ: BIIB) and Vertex Pharmaceuticals (NASDAQ: VRTX).

Amgen

Shares sold short in the world's largest independent biotechnology company jumped almost 13 percent to 15.01 million. That was the highest number of shares sold short since March. The short interest is about two percent of the float. This maker of human therapeutics based on advances in cellular and molecular biology for grievous illnesses has a market cap of more than $65 billion. Amgen is an S&P 500 component, and it reported that third-quarter earnings more than doubled year-over-year due to lower costs and higher sales. The company's return on equity is more than 20 percent, and the long-term earnings per share (EPS) growth forecast is more than 10 percent. Out of 27 analysts surveyed by Thomson/First Call, 13 rate the stock at Buy or Strong Buy; just one recommends selling shares. The mean price target indicates upside potential of more than eight percent. Shares have pulled back more than four percent from a recent multiyear high. Over the past six months, the stock has outperformed competitors Novartis (NYSE: NVS) and Teva Pharmacuetical (NYSE: TEVA), as well as the broader markets.

Biogen Idec

This S&P 500 component saw short interest shoot up about 30 percent to 2.19 million shares, following declines in the previous two periods. But short interest remains less than one percent of the float. Biogen Idec develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. In late October, Biogen Idec posted strong third-quarter results and it lifted its full-year outlook. The company has a market capitalization of about $33 billion and a return on equity of more than 21 percent. The long-term earnings EPS growth forecast is nearly 15 percent. Fourteen of the 25 analysts polled rate the stock at Buy or Strong Buy. They believe the stock has some room to run as their mean price target is about 11 percent higher than the current share price. That target is about the same as the multiyear high reached in September. Over the past six months, the stock has underperformed larger competitor Pfizer (NYSE: PFE) but it has outperformed the S&P 500.

Vertex

Short interest in this Cambridge, Massachusetts-based company retreated more than 16 percent to 5.59 million shares. That was the lowest number of shares sold short since July. Short interest is more than two of the float. Vertex manufactures small molecule drugs for the treatment of serious diseases such as hepatitis C and cystic fibrosis. After its report was delayed due to Hurricane Sandy, Vertex posted disappointing third-quarter results. The company now has a market cap of less than $10 billion. The long-term EPS growth forecast is more than 72 percent, and the return on equity is about 16 percent. All but five of the 26 polled analysts who follow the stock recommend buying shares. Their mean price target, or where they expect the share price to go, is more than 32 percent higher than the current share price. Shares have retreated about 16 percent in the past month. Over the past six months, Vertex has underperformed larger competitors Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK), as well as the broader markets.

Exchange traded fund iShares Nasdaq Biotechnology (NASDAQ: IBB) includes Amgen, Biogen Idec and Vertex among its top 10 holdings. Shares are up more than 25 percent year today, despite being more than six percent lower than a month ago. SPDR S&P Biotech (NYSE: XBI) also includes Amgen as a top holding, and it is up more than 29 percent year to date, despite being down about seven percent from a month ago.

Posted-In: Alexion Pharmaceuticals amgen Arena Pharmaceuticals biogen idec bristol-myers squibbLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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