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Short Sellers Shy Away From Biotech Stocks

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Short Sellers Shy Away From Biotech Stocks

By and large, the number of shares short in the leading biotech and emerging pharmaceutical stocks shrank between the June 15 and June 30 settlement dates.

The trend was particularly noticeable in Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) and Gilead Sciences, Inc. (NASDAQ: GILD), which saw sharp declines in their short interest.

Bucking the trend was BioMarin Pharmaceutical Inc. (NASDAQ: BMRN), which had a bump in its short interest 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: 9 Top Sell Ideas From Oppenheimer's Technical Analysis Division

Alexion Pharmaceuticals

The number of shares sold short in this biopharmaceutical company dropped from a 52-week high of more than 10 million in the previous period to around 6.93 million. That represented more than 3 percent of Alexion's total float. Days to cover dropped from more than six to close to two.

This Connecticut-based company offers Soliris, a treatment for a blood disorder. Closing its acquisition of Synageva Biopharma garnered Alexion an analyst upgrade. It now has a market capitalization of more than $43 billion. The long-term earnings per share (EPS) growth forecast is about 17 percent.

All but four of the 20 analysts surveyed by Thomson/First Call 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 12 percent higher than the current share price. That consensus target would be a new multiyear high.

The share price ended the two-week short interest period more than 5 percent higher. However, as of Friday's close they are up only about up about 4 percent since the beginning of the year. Over the past six months, the stock has outperformed Amgen and underperformed the Nasdaq.

BioMarin Pharmaceutical

The number of shares sold short in this biopharmaceutical company rose more than 6 percent to total more than 5.42 million. That represented more than 3 percent of the total float, and was the fourth period in a row of rising short interest. It would take a more than three days to cover all short positions.

BioMarin offerings include Naglazyme and Kuvan. This San Rafael, California-based company now has a market cap of more than $22 billion. It released encouraging trial results during the period. The long-term EPS growth forecast is about 25 percent, but the return on equity is in the red.

Six of the 19 analysts surveyed rate the stock at Strong Buy, and 11 more also recommend buying shares. Their mean price target is less than five percent higher than the current share price, but that consensus target would be a new multiyear high.

During the two-week short interest period, shares climbed almost 13 percent, and they ended last week more than 56% percent higher year to date. Over the past six months, the stock has outperformed not only the broader markets but also the other two stocks featured here.

Gilead Sciences

Short interest in this biopharmaceutical company pulled back about 34 percent to more than 23.69 million shares. That was less than 2 percent of the float, as well as the smallest number of shares short in at least a year. It would take a little more than two 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. It got bad news from Chinese regulators during the period. It has a market cap of more than $167 billion. The dividend yield is about 1.5 percent.

Of the 21 polled analysts, five rate the stock at Strong Buy, and 14 more also recommend buying shares. A move to the mean price target would be a gain of more than 7 percent for shares, but note that the stock traded higher than recently when it hit a new 52-week high.

During the short interest period, shares rose more than 4 percent but then gave up that gain. As of Friday's close, the stock is up more than 27 percent year to date. It has outperformed not only the broader markets over the past six months, but peers Amgen and Celgene as well.

See also: These 3 Stocks Are Seeing Short-Selling Activity Rise

And Others

Short sellers also shied away from Acadia Pharmaceuticals, Illumina, Incyte, Juno Therapeutics, MannKind, Medivation, Seattle Genetics and Vertex Pharmaceuticals in the latter weeks of June.

The number of shares short in biotech giants Amgen, Biogen and Celgene was essentially the same at the beginning and the end of the period.

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

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Posted-In: Alexion Pharmaceuticals BioMarin Pharmaceutical Gilead SciencesShort Ideas Top Stories Trading Ideas Best of Benzinga

 

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