Market Overview

Short Sellers Retreat From Biogen Idec, Move On Pharmacyclics (BIIB, BMRN, PCYC)

Among leading biotech and emerging pharmaceutical companies, short sellers retreated from Biogen Idec (NASDAQ: BIIB) by the largest percentage in early October.

Amgen (NASDAQ: AMGN), Illumina (NASDAQ: ILMN), Regeneron Pharmaceuticals (NASDAQ: REGN) and Seattle Genetics (NASDAQ: SGEN) saw short interest decline somewhat between the September 30 and October 15 settlement dates.

Short interest in Alexion Pharmaceuticals (NASDAQ: ALXN) and Gilead Sciences (NASDAQ: GILD) was relatively unchanged from the previous period.

However, the number of shares sold short in BioMarin Pharmaceutical (NASDAQ: BMRN) and Pharmacyclics (NASDAQ: PCYC) grew by double-digit percentages during the first two weeks of the month.

Short interest in Celgene (NASDAQ: CELG), Dendreon (NASDAQ: DNDN) and Vertex Pharmaceuticals (NASDAQ: VRTX) also increased.

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

See also: Short Interest In Facebook Falls, In Groupon Rises

Biogen Idec

This S&P 500 component saw short interest plunge more than 29 percent during the period to around 2.19 million shares. That was the smallest number of shares sold short since May, and it represented about one percent of the float. The days to cover declined to less than two.

The company develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. In October, Biogen Idec announced encouraging results for its multiple sclerosis drug. The market capitalization is more than $59 billion and the long-term earnings per share (EPS) growth forecast is about 20 percent.

The consensus recommendation of the 29 analysts polled by Thomson/First Call is to buy shares. Yet, their mean price target, or where they expect the share price to go, indicates only about four percent upside potential. That the consensus target would be a multiyear high, though.

The share price is up about 66 percent since the beginning of the year and reached a multiyear high on Thursday. Over the past six months, the Biogen Idec stock has outperformed not only the broader markets, but larger competitor Pfizer (NYSE: PFE) as well.

BioMarin Pharmaceutical

Short interest in this San Rafael, California-based company grew about 11 percent to total more than 5.18 million shares, or less than four percent of the float. Since March, the number of shares sold short was only higher in one period. It would take more than two days to close out all of the short positions.

This biopharmaceuticals company has a market cap of more than $9 billion. It raised $340 million in an offering during the period, and the CEO sold some shares. The long-term EPS growth forecast is about 25 percent, but the return on equity and operating margin are both in the red.

Nine of the 22 polled analysts rate the stock at Strong Buy, and another five also recommend buying shares. The analysts see room for shares to run, as the mean price target is more than 15 percent higher than the current share price. But note that shares traded higher than that target back in September.

Shares have pulled back about five percent in the past month. The share price is up less than 33 percent year-to-date. The stock has outperformed the likes of Amicus Therapeutics (NASDAQ: FOLD) over the past six months, but it narrowly underperformed the S&P 500.

Pharmacyclics

Short interest in this clinical-stage biopharmaceutical company rose about 12 percent in early October to more than 1.10 million shares. That was on top of a 17 percent increase in the number of shares sold short in the previous period. Short interest was about two percent of the company's float.

This Sunnyvale, California-based company focuses on the development and commercialization of small-molecule drugs for the treatment of cancer and immune mediated diseases. Wells Fargo and Goldman Sachs analysts were upbeat about the stock during the period. The operating margin of this $9 billion market cap company is better than the industry average.

Twelve of the 17 surveyed analysts recommend buying shares, and none recommend selling. Their mean price target represents about eight percent potential upside, relative to the current share price. However, that target is less than the 52-week high reached in early October.

Shares have pulled back about 11 percent from that recent high. The share price still is up more than 102 percent year-to-date. Over the past six months, the stock has outperformed larger competitor Merck (NYSE: MRK) and the broader markets.

See also: First Solar, SolarCity Face Rising Short Interest

At the time of this writing, the author had no position in the mentioned equities.

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Posted-In: Alexion Pharmaceuticals amgen Amicus Therapeutics biogen idec BioMarin Pharmaceutical Celgene Dendreon Gilead Sciences illumina merck Pfizer pharmacyclics Regeneron Pharmaceuticals seattle genetics vertex pharmaceuticalsShort Ideas Trading Ideas Best of Benzinga

 

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