Market Overview

Short Interest Swings in Biotech Stocks (AMGN, CELG, ONXX)

The short interest in biotech and emerging pharmaceutical companies was mixed again in the latter two weeks of January.

The number of shares sold short in Arena Pharmaceuticals (NASDAQ: ARNA), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Vertex Pharmaceuticals (NASDAQ: VRTX) and VIVUS (NASDAQ: VVUS) grew somewhat between the January 15 and January 31 settlement dates.

But short interest in Alexion Pharmaceuticals (NASDAQ: ALXN), Biogen Idec (NASDAQ: BIIB), Illumina (NASDAQ: ILMN), Pharmacyclics (NASDAQ: PCYC) and Regeneron Pharmaceuticals (NASDAQ: REGN), declined during that time.

Three stocks saw larger swings in short interest between the January 15 and January 31 settlement dates. They were Amgen (NASDAQ: AMGN), Celgene (NASDAQ: CELG) and Onyx Pharmaceuticals (NASDAQ: ONXX).

Amgen

This California-based biotechnology medicines company saw short interest rise about 16 percent to 19.18 million shares. That was the highest number of shares sold short in the past year. The short interest is about 2.5 one percent of the float.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. In late January, Amgen announced its Neulasta succeeded in a phase III cancer trial, but the company fell short of fourth-quarter earnings estimates due to higher expenses.

Amgen has a market capitalization of about $64 billion and a return on equity of more than 22 percent. The long-term earnings per share (EPS) growth forecast is about 15 percent.

Half of the 28 analysts surveyed by Thomson/First Call recommend buying shares. They believe the stock has some room to run as their mean price target is a more than 10 percent higher than the current share price.

That target would be a new 52-week high. Over the past six months, the stock has outperformed competitor Teva Pharmaceutical (NYSE: TEVA) but underperformed the S&P 500.

Celgene

The short interest in this biopharmaceutical company sank about 38 percent in the period to 4.26 million. That was the smallest number of shares sold short in a year, and it represents about one percent of the total float.

This maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of more than $41 billion. Celgene is an S&P 500 component, and in late January it said its Abraxane was found to benefit pancreatic cancer patients. It also posted strong fourth-quarter and 2012 results.

The company's long-term earnings per share (EPS) growth forecast is more than 22 percent, but the price-to-earnings (P/E) ratio is higher than the industry average.

Out of the 29 analysts polled, 14 rate the stock at Strong Buy and 10 others also recommend buying shares. The mean price target indicates upside potential of more than nine percent and would be a new multi-year high. Shares are up more than 23 percent year to date.

The stock has outperformed competitor Johnson & Johnson (NYSE: JNJ) and the S&P 500 over the past six months.

Onyx Pharmaceuticals

Short interest in this San Francisco-area company decreased about 11 percent to 5.35 million shares. The number of shares sold short is at its lowest level since August and represents about 7.5 percent of the company's float.

Onyxx develops therapies that target the molecular mechanisms that cause cancer. The company announced an offering of 4.4 million shares in mid-January to raise funds for R&D. The company now has a market cap near $5 billion. The long-term EPS growth forecast is more than 37 percent, but the P/E ratio is higher than the industry average.

All but three of the 20 surveyed analysts who follow the stock recommend buying shares. Their mean price target, or where they expect the share price to go, is more than 27 percent higher than the current share price. But note that the share price is down about five percent year to date.

Still, over the past six months, the stock has outperformed larger competitor Merck (NYSE: MRK), though it has underperformed the broader markets.

ETFs

Exchange traded fund iShares Nasdaq Biotechnology (NASDAQ: IBB) includes Amgen, Celgene and other companies mentioned here among its top 10 holdings. Shares are up about 20 percent over the past year, despite plateauing in the past month.

SPDR S&P Biotech (NYSE: XBI) is up more than 17 percent year to date, despite also meeting resistance recently.

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

 

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