Market Overview

Short Sellers Move into Celgene, Regeneron

Short Sellers Move into Celgene, Regeneron

The short interest moves in biotech and emerging pharmaceutical companies were mixed in the first two weeks of April.

The number of shares sold short in Alexion Pharmaceuticals (NASDAQ: ALXN), Amgen (NASDAQ: AMGN), Biogen Idec (NASDAQ: BIIB), Dendreon (NASDAQ: DNDN), Gilead Sciences (NASDAQ: GILD), Illumina (NASDAQ: ILMN) and VIVUS (NASDAQ: VVUS) grew somewhat between the February 28 and March 15 settlement dates.

But Celgene (NASDAQ: CELG) and Regeneron Pharmaceuticals (NASDAQ: REGN) saw more significant rises in short interest in that period. Vertex Pharmaceuticals (NASDAQ: VRTX) saw the largest percentage decline. We take a closer look at these three below.

Short sellers also shied away from Arena Pharmaceuticals (NASDAQ: ARNA), Onyx Pharmaceuticals (NASDAQ: ONXX) and Pharmacyclics (NASDAQ: PCYC) somewhat during that time.


The short interest in this biopharmaceutical company rose about 17 percent to 5.79 million shares, largely erasing a 23 percent retreated in the previous period. The number of shares sold short represented a more than one percent of the total float at mid-April, and days to cover was two.

This maker of therapies to treat cancer and immune-inflammatory related diseases has a market capitalization of more than $50 billion. Celgene is an S&P 500 component, and in early April it acquired patents from Cyclacel for $5.5 million. The company's long-term earnings per share (EPS) growth forecast is about 22 percent, and the return on equity is about 26 percent.

Out of the 30 analysts polled by Thomson/First Call, 13 rate the stock at Strong Buy and 11 others also recommend buying shares. However, the mean price target is only marginally higher than the current share price, meaning the analysts see little upside potential at this time.

Shares are up more than 45 percent year-to-date, despite pulling back about three percent in the past week. Celgene has outperformed competitor Johnson & Johnson (NYSE: JNJ) and the S&P 500 over the past six months.

Regeneron Pharmaceuticals

This Tarrytown, New York-based biotech company saw short interest swell about 14 percent to 4.18 million shares, on an average daily volume that almost doubled from the previous period. The number of shares sold short in mid-April represented more than five percent of the float. Days to cover fell to less than five.

Regeneron develops, manufactures and commercializes medicines for the treatment of serious medical conditions. It announced expansion plans for its headquarters earlier this month. The company has a market cap of more than $21 billion but offers no dividend. Its operating margin is better than the industry average, and the return on equity is more than 86 percent.

Ten of the 18 polled analysts recommend buying shares, and none 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. Even the street-high target sees only about five percent upside.

The share price is up almost 20 percent year-to-date and reached a multiyear high today. Over the past six months, the stock has outperformed peers Amgen and Novartis (NYSE: NVS), as well as the broader markets.

Vertex Pharmaceuticals

Short interest in this Cambridge, Massachusetts-based company retreated almost 16 percent to 4.69 million shares. That is the smallest number of shares sold short in the past year, and days to cover has fallen to about three. Short interest is more than two percent of the company's float.

Vertex manufactures small molecule drugs for the treatment of serious diseases such as hepatitis C and cystic fibrosis. The company set a partnership with Bristol-Myers Squibb (NYSE: BMY) in early April. Vertex now has a market cap of more than $17 billion. The long-term EPS growth forecast is less than seven percent, and the return on equity is in the red.

Of the 27 analysts who follow the stock, 19 recommend buying shares. Only one analyst rates it at Underperform. Their mean price target, or where they expect the share price to go, is less than four percent higher than the current share price. That target is less than the 52-week high.

The stock soared last week on positive drug trial results. The share price is up about 84 percent year-to-date. Because of the surge, Vertex has outperformed larger competitors Bristol-Myers Squibb and Merck (NYSE: MRK) over the past six month.


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