Market Overview

Big Biotech Stocks See Declining Short Interest

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Big Biotech Stocks See Declining Short Interest

While short interest moves in most of the leading biotechs and emerging pharmaceuticals were mild between the May 15 and May 29 settlement dates, short sellers fled from some of the biggest players in the field.

Biogen Inc (NASDAQ: BIIB), Celgene Corporation (NASDAQ: CELG) and Gilead Sciences, Inc. (NASDAQ: GILD) saw the number of their shares shrink by double-digit percentages in the final two weeks of the month.

Here we take a quick look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at short interest moves in other leading biotech stocks.

See also: Sharp Drop In Short Interest For SolarEdge, SunEdison

Biogen

This S&P 500 component saw short interest retreat more than 16 percent during the period to more than 2.54 million shares. That was around 1 percent of the total float, as well as the fewest shares short so far this year. It would take more than two days to cover all short positions.

The company develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. Barron's talked it up during the period. The market capitalization is more than $92 billion, and the long-term earnings per share (EPS) growth forecast is almost 17 percent.

The consensus recommendation of the 22 analysts polled by Thomson/First Call is to buy shares. Their mean price target, or where they expect the share price to go, suggests there is more than 17 percent upside potential. Note that shares briefly spiked higher than that consensus target back in March.

Short sellers watched the stock rise only marginally late in month, although it pulled back more than 4 percent afterward. It is still up more than 15 percent year to date. Over the past six months, Biogen's stock has outperformed not only the broader markets, but larger competitor Pfizer as well.

Celgene

The short interest in this biopharmaceutical company dwindled from more than 16 million shares in the previous period, a 52-week high, to around 14.24 million shares, or almost 2 percent of the total float. The average daily volume fell to a year-to-date low, lifting the days to cover to more than four.

This New Jersey-based maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of almost $90 billion. In May it was praised for its lymphoma treatment candidate. The company's long-term EPS growth forecast is more than 24 percent.

Out of 25 analysts surveyed, 10 rate the stock at Strong Buy and 12 others also recommend buying shares. They believe the stock has plenty of headroom, as their mean price target is more than 17 percent higher than the current share price. That target would be a new multiyear high.

Shares climbed about 2 percent but gave it all back in the two-week settlement period. The stock now is barely any higher than at the beginning of the year. Over the past six months, Celgene has outperformed larger competitor Johnson & Johnson but underperformed the broader markets.

Gilead Sciences

Short interest in this biopharmaceutical company plunged more than 27 percent, from a year-to-date high of about 60 million shares to a year-to-date low of about 40.70 million. That was about 3 percent of the float. It would take more than four days to close out all of the short positions.

Gilead Sciences focuses on human therapeutics for the treatment of life-threatening diseases such as HIV infection and pulmonary arterial hypertension. In May it was praised for its gastric cancer treatment candidate. It has a market cap of around $175 billion. The return on equity is almost 41 percent.

Of the 25 polled analysts, seven rate the stock at Strong Buy, and 13 more also recommend buying shares. Note that a move to the mean price target would be a gain of less than 3 percent from the current share price. Nevertheless, that consensus target would be a new multiyear high.

During the short interest period, shares rose about 4 percent, and the 50-day and 200-day moving averages formed a golden cross. Shares have gained another 2 percent since. The stock has outperformed not only the broader markets in the past six months, but Amgen and Celgene as well.

See also: Lemelson Doubles Short Position In Ligand Pharmaceuticals, Says It's Created 'Pyramid Scheme Of Shell Companies'

And Others

The number of shares short in BioMarin Pharmaceutical, Juno Therapeutics, Medivation and Seattle Genetics had modest bumps in late May, while Alexion Pharmaceuticals saw its short interest surge.

However, short sellers shied away from Acadia Pharmaceuticals, Amgen, Illumina, Incyte and Vertex Pharmaceuticals in that the two-week period.

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

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Posted-In: Biogen Celgene Gilead SciencesBiotech Short Ideas Trading Ideas General Best of Benzinga

 

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