Market Overview

Short Interest in Biogen Idec and Vertex Shrinks (BIIB, CELG, VRTX)

Among biotech and emerging pharmaceutical companies, Celgene (NASDAQ: CELG) and saw the most significant rise in short interest between the May 31 and June 14 settlement dates.

The number of shares sold short in Onyx Pharmaceuticals (NASDAQ: ONXX), Pharmacyclics (NASDAQ: PCYC) and Regeneron Pharmaceuticals (NASDAQ: REGN) also grew somewhat in that period.

But Biogen Idec (NASDAQ: BIIB) and Vertex Pharmaceuticals (NASDAQ: VRTX) saw the largest percentage decreases in short interest.

Short sellers also shied away from Alexion Pharmaceuticals (NASDAQ: ALXN), Amgen (NASDAQ: AMGN), Arena Pharmaceuticals (NASDAQ: ARNA), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Illumina (NASDAQ: ILMN) and VIVUS (NASDAQ: VVUS) during that time.

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

Biogen Idec

This S&P 500 component saw short interest decline less than 10 percent during the period to around 2.50 million shares. The average daily volume was the highest it has been since January. But the number of shares sold short represented about one percent of the float. The days to cover dropped to a little more than one.

The company develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. In June, Citigroup downgraded Biogen Idec. The company has a market capitalization of more than $48 billion and the return on equity is about 22 percent. The long-term earnings per share (EPS) growth forecast is almost 20 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 about 14 percent upside potential. But note that the consensus target is less than the multiyear high reached in May.

The share price is more than 17 percent lower than a month ago, but still up more than 32 percent year-to-date. Over the past six months, Biogen Idec stock has outperformed that of larger competitor Pfizer (NYSE: PFE), as well as the broader markets.


The short interest in this biopharmaceutical company rose more than 11 percent to 4.29 million shares, largely erasing a 14 percent retreat in the previous period. The number of shares sold short represented about one percent of the total float at mid-June, but days to cover remained at a little more than one.

This maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of about $49 billion. Celgene is an S&P 500 component, and in mid-June it added $3 billion to its stock buyback plan. The company's long-term EPS growth forecast is more than 22 percent, and the return on equity is about 25 percent.

Out of the 30 analysts polled by Thomson/First Call, 14 rate the stock at Strong Buy and 11 others also recommend buying shares. And the mean price target is about 15 higher than the current share price, meaning the analysts see some room for shares to run. That target would be a new multiyear high.

The share price is up more than 41 percent since the beginning of the year, though shares have traded mostly between $110 and $130 since March. Celgene has outperformed competitor Johnson & Johnson (NYSE: JNJ) and the S&P 500 over the past six months.

Vertex Pharmaceuticals

Short interest in this Cambridge, Massachusetts-based company shrank about 10 percent to total more than 4.02 million shares. That was the lowest number of shares sold short in the past year. Short interest was less than two percent of the company's float in the middle of June. Days to cover was more than two.

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 more than $17 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 15 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 $83 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 CelgeneShort Ideas Trading Ideas Best of Benzinga


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