Market Overview

Short Interest Falls in Vertex, Rises in Biogen Idec (VRTX, BIIB)

Among biotech and emerging pharmaceutical companies, Biogen Idec (NASDAQ: BIIB), saw the most significant rise in short interest between the May 15 and May 31 settlement dates.

The number of shares sold short in Amgen (NASDAQ: AMGN), Dendreon (NASDAQ: DNDN), Onyx Pharmaceuticals (NASDAQ: ONXX) and VIVUS (NASDAQ: VVUS) also grew somewhat in that period.

But Regeneron Pharmaceuticals (NASDAQ: REGN) and Vertex Pharmaceuticals (NASDAQ: VRTX) saw the largest percentage decreases in short interest.

Short sellers also shied away from Alexion Pharmaceuticals (NASDAQ: ALXN), Arena Pharmaceuticals (NASDAQ: ARNA), Celgene (NASDAQ: CELG), Gilead Sciences (NASDAQ: GILD), Illumina (NASDAQ: ILMN) and Pharmacyclics (NASDAQ: PCYC) somewhat during that time.

Here we take a closer look at how Biogen Idec, Regeneron and Vertex have fared and what analysts expect from them.

Biogen Idec

This S&P 500 component saw short interest surge about 39 percent during the period to more than 2.77 million shares. That was the highest number of shares sold short since February, though it represented a little more than one percent of the float. The days to cover rose to about two.

The company develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. In May, Biogen Idec appointed a new chief scientific officer. Its market capitalization is more than $50 billion and the return on equity is about 22 percent. The long-term earnings per share (EPS) growth forecast is about 18 percent.

The consensus recommendation of the 29 analysts polled by Thomson/First Call is to buy shares. Their mean price target, or where they expect the share price to go, indicates more than seven percent upside potential. But note that the consensus target is less than a recent multiyear high.

The share price is up more than 48 percent year-to-date, despite retreating more than seven percent from the multiyear high. Over the past six months, the Biogen Idec stock has outperformed that of larger competitor Pfizer (NYSE: PFE), as well as the broader markets.

Regeneron Pharmaceuticals

This Tarrytown, New York-based biotech company saw short interest decline more than 16 percent to 3.48 million shares, which was the lowest number of shares sold short in at least a year. The short interest represented less than five percent of the float. Days to cover rose to more than four.

Regeneron develops, manufactures and commercializes medicines for the treatment of serious medical conditions. It announced positive test results for an asthma drug in May. The company has a market cap of about $24 billion. Its operating margin is better than the industry average, and the return on equity is more than 51 percent.

Of those analysts polled, 12 out of 18 recommend buying shares, while none recommend selling. They believe the stock has some room to run as their mean price target is about 14 higher than the current share price. Note that the consensus target would be a new multiyear high.

The share price has pulled back more than 11 percent in the past month, but it is still more than 37 percent higher year-to-date. Over the past six months, the stock has outperformed peers Amgen and Novartis (NYSE: NVS), as well as the broader markets.

Vertex Pharmaceuticals

Short interest in this Cambridge, Massachusetts-based company shrank more than 36 percent to total more than 4.47 million shares. That was the lowest number of shares sold short in the past year. Short interest was about two percent of the company's float at the end of May. Days to cover was less than three.

Vertex manufactures small molecule drugs for the treatment of serious diseases such as hepatitis C and cystic fibrosis. Vertex now has a market cap of about $18 billion. It has posted larger-than-expected net losses in recent quarters. The long-term EPS growth forecast is less than seven percent, and the return on equity is in the red.

However, the consensus recommendation of the analysts surveyed is to buy shares of Vertex, and it has been for at least three months. The mean price target is about 12 percent higher than the current share price. Vertex shares have not traded at that level since 2000, and then only briefly.

The stock soared in April on positive drug trial results, but shares have traded between $75 and $85 since then. Vertex has outperformed larger competitors Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK), as well as the broader markets over the past six months.

Posted-In: Alexion Pharmaceuticals amgen Arena Pharmaceuticals biogen idec bristol-myers squibb Celgene Dendreon Gilead Sciences illumina Johnson & Johnson merck Novartis onyx pharmaceuticals Pfizer pharmacyclics Regeneron Pharmaceuticals vertex pharmaceuticals vivusShort Ideas Trading Ideas Best of Benzinga

 

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