Market Overview

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

Short Interest Swings in Biotech Stocks ALXN, AMGN, CELG

The short interest in biotech and emerging pharmaceutical companies was mixed again in the first two weeks of February. The number of shares sold short in Arena Pharmaceuticals (NASDAQ: ARNA), Illumina (NASDAQ: ILMN) and Vertex Pharmaceuticals (NASDAQ: VRTX) grew somewhat between the January 31 and February 15 settlement dates.

But short interest in Biogen Idec (NASDAQ: BIIB), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Onyx Pharmaceuticals (NASDAQ: ONXX), Pharmacyclics (NASDAQ: PCYC), Regeneron Pharmaceuticals (NASDAQ: REGN) and VIVUS (NASDAQ: VVUS) declined during that time.

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

Alexion Pharmaceuticals

Short interest in this Connecticut-based company increased about 7.5 percent to 4.40 million shares. That ended a streak of five periods in which the number of shares sold short declined. Short interest is more than two percent of the company's float.

Alexion develops life-transforming therapeutic products, such as Soliris. The company reported better-than-expected fourth-quarter results. It now has a market capitalization of almost $17 billion. The long-term earnings per share (EPS) growth forecast is about 33 percent, but the price-to-earnings (P/E) ratio is higher than the industry average.

Seventeen of the 23 analysts surveyed by Thomson/First Call recommend buying shares. Their mean price target, or where they expect the share price to go, is more than 24 percent higher than the current share price.

But note that the share price is down more than 13 percent year to date. Over the past six months, the stock has underperformed competitors Amgen and Baxter International (NYSE: BAX), as well as the broader markets.

Amgen

This California-based biotechnology medicines company saw short interest fall more than 10 percent to 17.17 million shares. That was the lowest number of shares sold short since November. The short interest is more than two percent of the float.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. In early February, Amgen raised its full-year earnings outlook but also abandoned trials on a fracture-healing drug. Amgen has a market cap of almost $70 billion and a return on equity of almost 23 percent. The P/E ratio is less than the industry average.

Twelve of the 27 surveyed analysts who follow the stock recommend buying shares; just one recommends selling. They believe the stock has little room to run as their mean price target is about 2.5 percent higher than the current share price. That is because the share price has jumped more than eight percent in the past two weeks and hit a multiyear high today.

Over the past six months, the stock has outperformed competitor Teva Pharmaceutical (NYSE: TEVA) but its performance has been in line the S&P 500.

Celgene

The short interest in this biopharmaceutical company declined more than 12 percent in the period to 3.73 million. That was the smallest number of shares sold short in at least 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 $43 billion. Celgene is an S&P 500 component, and in early February it received U.S. approval of a blood cancer drug and Chinese approval for its myeloma treatment. The company's long-term earnings per share (EPS) growth forecast is more than 43 percent, but the P/E ratio has come down to nearly in line with the industry average.

Out of the 29 analysts polled, 13 rate the stock at Strong Buy and 10 others also recommend buying shares. The mean price target indicates upside potential of more than seven percent and would be a new multiyear high.

Shares are up more than 24 percent year to date but have hit resistance around $100. Still, the stock has outperformed competitor Johnson & Johnson (NYSE: JNJ) and the S&P 500 over the past six months.

ETFs

Exchange traded fund iShares Nasdaq Biotechnology (NASDAQ: IBB) includes all three of the companies featured here among its top 10 holdings. Shares are up more than 22 percent over the past year, despite plateauing in the past six weeks. SPDR S&P Biotech (NYSE: XBI) is up more than 20 percent over the past year.

Posted-In: Alexion Pharmaceuticals amgen Arena Pharmaceuticals Baxter International biogen idecLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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