Market Overview

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

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

The number of shares sold short in Alexion Pharmaceuticals (NASDAQ: ALXN), Arena Pharmaceuticals (NASDAQ: ARNA), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Onyx Pharmaceuticals (NASDAQ: ONXX), Vertex Pharmaceuticals (NASDAQ: VRTX) and VIVUS (NASDAQ: VVUS) grew somewhat between the February 15 and February 28 settlement dates.

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

Three stocks saw larger swings in short interest between the February 15 and February 28 settlement dates. They were Amgen (NASDAQ: AMGN), Celgene (NASDAQ: CELG) and Pharmacyclics (NASDAQ: PCYC).

Amgen

This California-based biotechnology medicines company saw short interest fall more than 13 percent to 14.87 million shares. That was the lowest number of shares sold short since October. The short interest is about two percent of the float.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. In late February, the FDA halted an Amgen drug trial after the death of a child. Amgen has a market capitalization of more than $68 billion and a return on equity of almost 23 percent. The price-to-earnings (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 a little room to run as their mean price target is more than five percent higher than the current share price. That target would be a new multiyear high.

The share price is up more than eight percent in the past month, and shares are trading more than 34 percent higher than a year ago. Over the past six months, the stock has outperformed competitor Teva Pharmaceutical (NYSE: TEVA) and the S&P 500.

Celgene

The short interest in this biopharmaceutical company jumped about 48 percent in the period to 5.53 million. That ended a three-period decline in the number of shares sold short, and it represents more than 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 late February it announced a $600 million share buyback plan. The company's long-term earnings per share (EPS) growth forecast is more than 22 percent, and the P/E ratio is expected to come down to more 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. But the mean price target is only marginally higher than the current share price, meaning the analysts see little potential upside at this time.

Shares are up about 38 percent year to date and reached a new multiyear high today. The share price is more than 50 percent higher than a year ago. The stock has outperformed competitor Johnson & Johnson (NYSE: JNJ) and the S&P 500 over the past six months.

Pharmacyclics

Short interest in this Sunnyvale, California-based company increased more than 24 percent to 3.72 million shares. That is the largest number of shares sold short so far this year, though days to cover fell to about four. Short interest is more than six percent of the company's float.

Pharmacyclics is a clinical-stage biopharmaceutical company that focuses on developing and commercializing small-molecule drugs for the treatment of cancer and immune-mediated diseases. The company reported better-than-expected fourth-quarter results in early February. It has a market cap of more than $6 billion. The return on equity is more than 42 percent and the operating margin is better than the industry average, but the P/E ratio is higher than the industry average.

Eight of the 13 analysts surveyed by Thomson/First Call recommend buying shares. But their mean price target is less than the current share price. The high price target represents about 17 percent potential upside.

The share price reached a new multiyear high last week and is still up about 50 percent year to date despite pulling back a bit. Over the past six months, the stock has outperformed larger competitor Merck (NYSE: MRK), as well as the broader markets.

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

 

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