Market Overview

In Volatile Markets, Short Sellers Head For Biotechs

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In Volatile Markets, Short Sellers Head For Biotechs
  • As market volatility continued after the August sell-off, short sellers moved on biotech stocks.
  • Large cap biotechs Amgen, Celgene and Gilead Sciences saw surges in their short interest in early September.
  • Short interest rose in nearly all of the leading biotech stocks in that time.

With the markets more volatile after the August sell-off, short sellers found much to like in the leading biotech and emerging pharmaceutical stocks between the August 31 and September 15 short interest settlement dates.

The large-cap biotech stocks -- Amgen, Inc. (NASDAQ: AMGN), Celgene Corporation (NASDAQ: CELG) and Gilead Sciences, Inc. (NASDAQ: GILD) -- were among those that saw double-digit percentage increases in the number of their shares short in those two weeks.

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: Investors In This Biotech ETF Must Have Loved Hillary Clinton's Tweet

Amgen

This California-based biotechnology medicines company saw short interest rise more than 12 percent to about 10.40 million shares, or more than 1 percent of float. That was the highest number of shares short so far this year. It would take about three days to cover all short positions.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. It has a market capitalization near $105 billion and a dividend yield of about 2.1 percent. Amgen is set to acquire Dezima Pharma.

Of the 20 analysts surveyed by Thomson/First Call, nine recommend buying shares, with the rest rating the stock at Hold. Their mean price target, or where analysts expect shares to go, is more than 25 percent higher than the current share price.

The share price was up more than 4 percent at one point but ended the two-week short interest period less than 2 percent higher. Over the past six months, the stock has underperformed Celgene and Gilead Sciences, as well as the broader markets.

Celgene

The short interest gain of more than 19 percent in this biopharmaceutical company brought the total to more than 14.95 million shares by mid-month. That was about 2 percent of the float, as well as the greatest number of shares short since last May. The days to cover was more than three.

This maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of more than $85 billion. Celgene was a top biotech pick at Jefferies during the period.

All but four of the 21 analysts surveyed recommend buying shares, with nine of them rating the stock at Strong Buy. A move to their mean price target would be a more than 27 percent gain for the shares.

The share price increased almost 7 percent during the short interest period, compared to a less than 4 percent gain for the Nasdaq. The stock has outperformed larger competitor Johnson & Johnson over the past six months.

Gilead Sciences

Short interest in this biopharmaceutical company swelled more than 15 percent, from more than 25.65 million shares to 29.60 million. That was about 2 percent of the float. It would take about three 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. The stock was a top biotech pick at UBS. It has a market cap of around $147 billion, and the dividend yield is near 1.6 percent.

Of the 22 polled analysts, seven rate the stock at Strong Buy, and 11 more also recommend buying shares. They see room for shares to run as their mean price target is about 20 percent higher than the current share price.

During the short interest period, shares rose about 8 percent, though they have retreated since. The stock has outperformed not only the broader markets in the past six months, but Amgen and Celgene as well.

See also: Hedge Funds Are Most Short The S&P 500 In Four Years

And Others

The number of shares short in Alexion Pharmaceuticals, Biogen, Illumina, Juno Therapeutics, Medivation and Vertex Pharmaceuticals also swelled by double-digit percentages in the first weeks of September, while the short interest in Baxalta, BioMarin Pharmaceutical, Incyte, Intrexon and Seattle Genetics grew more modestly.

Bucking the trend was Acadia Pharmaceuticals. Short sellers shied away from it somewhat between the settlement dates.

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

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Posted-In: amgen Celgene Gilead SciencesBiotech Short Ideas Top Stories Trading Ideas General Best of Benzinga

 

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