Short Sellers Dump Amgen, Focus on Celgene, Gilead Sciences

The short interest in biotech and emerging pharmaceutical companies was mixed again in the first two weeks of March.

The number of shares sold short in Arena Pharmaceuticals ARNA, Dendreon DNDN, Illumina ILMN and VIVUS VVUS grew somewhat between the February 28 and March 15 settlement dates.

But short interest in Alexion Pharmaceuticals ALXN, Biogen Idec BIIB, Onyx Pharmaceuticals ONXX, Pharmacyclics PCYC, Regeneron Pharmaceuticals REGN and Vertex Pharmaceuticals VRTX declined during that time.

Three stocks saw larger swings in short interest between the February 28 and March 15 settlement dates. They were Amgen AMGN, Celgene CELG and Gilead Sciences GILD.

Amgen

This California-based biotechnology medicines company saw short interest fall about 19 percent to 12.03 million shares, on top of a more than 13 percent drop in the previous period. That was the lowest number of shares sold short since October. The short interest was less than two percent of the float.

The company develops and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses. Analysts expect double-digit percentage growth in per-share earnings in the current quarter. Amgen has a market capitalization of about $75 billion and a dividend yield near 1.9 percent. Its return on equity is almost 23 percent.

Only 12 of the 27 analysts surveyed by Thomson/First Call recommend buying shares, but just one recommends selling. The current share price is higher than the mean price target, which means the analysts do not see any upside potential at this time.

The share price is up more than 10 percent year to date and trading near a multiyear high. Over the past six months, the stock has outperformed competitor Teva Pharmaceutical TEVA and the S&P 500.

Celgene

The short interest in this biopharmaceutical company rose about 16 percent in the period to 6.42 million. That followed a 48 percent jump in short interest in the previous period. The number of shares sold short represent more than one percent of the total float in mid-March.

This maker of therapies to treat cancer and immune-inflammatory related diseases has a market cap of more than $47 billion. Celgene is an S&P 500 component, and in early March it was a Jim Cramer pick despite news of a disappointing psoriasis drug trial. The company's long-term earnings per share (EPS) growth forecast is about 23 percent, and the return on equity is about 26 percent.

Out of the 29 analysts polled, 13 rate the stock at Strong Buy and 10 others also recommend buying shares. But they see little headroom for the stock, as their mean price target is only marginally higher than the current share price. And their target is about the same as the recent 52-week high.

Shares are up about 38 percent year-to-date but have faced resistance around $114 for the past two weeks. Still, the stock has outperformed competitor Johnson & Johnson JNJ and the S&P 500 over the past six months.

Gilead Sciences

Short interest in this biopharmaceutical company increased more than 4 percent to 66.57 million shares. That is the largest number of shares sold short so far this year, and days to cover is almost seven. Short interest is more than four percent of the company's float.

Gilead Sciences focuses on human therapeutics for the treatment of life threatening diseases such as HIV infection and pulmonary arterial hypertension. The company released encouraging HIV drug data in early March. The company has a market cap of more than $72 billion. The return on equity is more than 32 percent and the operating margin is better than the industry average, but the P/E ratio is higher than the industry average.

All but five of the 29 polled analysts recommend buying shares, with 11 of them rating the stock at Strong Buy. But their mean price target is less than three percent higher than the current share price. However, that target would be a new multiyear high.

Shares are now trading near a multiyear high and are up about 22 percent year-to-date. Over the past six months, the stock has outperformed larger competitors Pfizer PFE and GlaxoSmithKline GSK.