Wild Short Interest Swings For Three Top Biotech Stocks

• Short-sellers continued to be selective in the leading biotech stocks in the most recent period.
• Biogen and Medivation saw sharp drops in their short interest in early October.
• The number of Amgen shares short surged during that time.

In the wake of ongoing market volatility and political rhetoric about the cost of drugs, short-sellers continued to get more selective in the leading biotech and emerging pharmaceutical stocks between the September 30 and October 15 short interest settlement dates.

Short-sellers retreated handily from Biogen Inc BIIB and Medivation Inc MDVN. Yet, Amgen, Inc. AMGN saw a notable increase in the number of its shares short in the two-week period.

Here is 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: October Rally Has ETF Shorts Scrambling To Cover

Amgen

This California-based biotechnology medicines company saw short interest rise about 15 percent to almost 12.65 million shares, or less than 2 percent of float. The number of shares short has risen for four periods in a row. It would take more than two 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 released positive Phase 4 data in the period. Amgen's market capitalization is near $121 billion and its dividend yield is about 2.0 percent.

Of the 17 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 12 percent higher than the current share price.

Shares ended the two-week short interest period more than 10 percent higher, while the Nasdaq was up less than 6 percent in that time. Yet now the stock up less than 2 percent year-to-date. Over the past six months, it has outperformed the other two featured here.

Biogen

This S&P 500 component saw short interest tumble more than 17 percent during the two weeks to more than 4.27 million shares. That was almost 2 percent of the float. The year-to-date peak was in the previous period. It would take a little more than a day to cover all short positions.

The company develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. The market cap is near $65 billion, and the long-term earnings per share growth forecast is more than 15 percent.

The consensus recommendation of the 21 analysts surveyed is to buy shares. A move to their mean price target would be a 21 percent gain for the stock. However, note that Biogen shares traded higher than that consensus target as recently as July.

The share price ended the two-week period down about 8 percent, but it has rebounded around 13 percent since. Over the past six months, Biogen has underperformed not only the broader markets, but competitor Abbot Labs as well.

Medivation

Short interest in this company plunged more than 23 percent early in the month to more than 4.41 million shares, or less than 3 percent of the float. The year-to-date peak of more than 7 million was just a month earlier. It would take a little more than two days to cover all short positions.

This $7.5 billion market cap San Francisco-based biopharmaceutical company offers treatments for prostate and breast cancer. Medivation's return on equity is more than 62 percent, and its operating margin is better than the industry average.

The consensus recommendation of polled analysts is to buy Medivation shares, and it has been for at least three months. They see plenty of headroom, as their mean price target is about 31 percent higher than the current share price.

During the period, short-sellers watched the stock rise 9 percent, plunge about 16 percent, but end the two weeks up less than 7 percent. The stock has underperformed larger competitors Abbott Labs and Johnson & Johnson over the past six months.

See also: Short Selling: Karl Loomes Shares The Six Hottest U.S.-Listed Stocks

And Others

The number of shares short in Illumina also swelled by a double-digit percentage in the first two weeks of October, while the short interest in Alexion Pharmaceuticals, BioMarin Pharmaceutical, Gilead Sciences, Incyte, Intrexon and Opko Health grew more modestly.

On the other hand, sellers shied away from Baxalta, Celgene, Juno Therapeutics, Seattle Genetics and Vertex Pharmaceuticals between the settlement dates.

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

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