Short Interest Swings in Biotech Stocks (BIIB, CELG, GILD)

After largely rising in the previous period, short interest in biotech and emerging pharmaceutical companies was mixed in the final two weeks of September. Shares sold short in Amgen (NASDAQ:AMGN), Arena Pharmaceuticals (NASDAQ:ARNA), Dendreon (NASDAQ:DNDN), Illumina (NASDAQ:ILMN), Onyx Pharmaceuticals (NASDAQ:ONXX) and Vertex Pharmaceuticals (NASDAQ:VRTX) grew somewhat between the September 14 and September 28 settlement dates. But short interest in Alexion Pharmaceuticals (NASDAQ:ALXN), Pharmacyclics (NASDAQ:PCYC), Regeneron Pharmaceuticals (NASDAQ:REGN) and VIVUS (NASDAQ:VVUS) declined during that time.

Three stocks saw larger swings in short interest between the September 14 and September 28 settlement dates. They were Biogen Idec (NASDAQ:BIIB), Celgene (NASDAQ:CELG) and Gilead Sciences (NASDAQ:GILD).

Biogen Idec

This S&P 500 component saw short interest dwindle almost 16 percent to 1.87 million shares, its lowest level this year. Biogen Idec develops and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. In late September Biogen Idec posted positive data from the study of a hemophilia drug that could replace one by Pfizer (NYSE:PFE). The company has a market capitalization of almost $35 billion and a return on equity of nearly 22 percent. The long-term earnings per share (EPS) growth forecast is about 14 percent. But short interest is still less than one percent of the float. Sixteen of the 26 analysts polled by Thomson/First Call rate the stock at Buy or Strong Buy. They believe the stock has a little room to run as the mean price target is about five percent higher than the current share price. But note that is less than the recent multiyear high. Over the past six months, the stock has outperformed Pfizer, as well as the broader markets.

Celgene

Short interest in this New Jersey-based company plunged 18.8 percent to 4.91 million shares, its lowest level in a year. Celgene develops various therapies to treat cancer and immune-inflammatory related diseases, primarily in the United States and Europe. In late September, the company climbed to the number 91 spot on the S&P 500, overtaking Capital One (NYSE:COF). It now has a market cap of almost $38 billion. The return on equity is about 26 percent and the long-term EPS growth forecast is more than 22 percent. Short interest is less than two percent of the float. Of the 28 polled analysts who follow the stock, 22 recommend buying shares; 13 of them rate it at Strong Buy. But their mean price target, or where they expect the share price to go, is less than four percent higher than the current share price. Shares have pulled back from a recent multiyear high. Over the past six months, Celgene has underperformed Johnson & Johnson (NYSE:JNJ) and the S&P 500.

Gilead Sciences

Shares sold short in this California-based biopharmaceutical company jumped 26.3 percent to 26.05 million. Average daily volume was the highest it has been since February. This maker of therapeutics for the treatment of life-threatening diseases such as HIV and hepatitis has a market cap of more than $51 billion. Enthusiasm over the company's new HIV medication prompted analysts to boost their price targets in September. Gilead Sciences too is an S&P 500 component, and its return on equity is more than 36 percent. The long-term EPS growth forecast is more than 15 percent and short interest is less than three percent of the float. Out of 29 analysts surveyed by Thomson Reuters, 22 rate the stock at Buy or Strong Buy; none recommend selling shares. But their mean price target indicates upside potential of less than five percent. The share price has pulled back about three percent from a recent multiyear high. Over the past six months, the stock has outperformed competitor GlaxoSmithKline (NYSE:GSK) and the broader markets.

Exchange traded fund iShares Nasdaq Biotechnology (NASDAQ:IBB) includes Biogen Idec, Celgene and Gilead Sciences among its top 10 holdings. Shares are up more than 34 percent year today, despite pulling back more than three percent in the past week. SPDR S&P Biotech (NYSE:XBI) also includes Gilead Sciences as a top holding, and it is up more than 39 percent year to date, despite a similar pullback.