Chris Lau, Kapitall: If there was a recent mild sell-offs in the stock market, investors would not really notice it. Wide intra-day swings in the U.S. markets were not accompanied by an increase in the volatility index, as measured by the
Volatility ETF (VXX)
. For market participants speculating on drug and biotech companies, the sell-off is a risk factor. Companies on the verge of launching a product could face a drop in share price, if investors reduce exposure to the high-risk sector.
In the biotechnology sector, stocks that happen to have a share price below $10 experienced a rise in short-selling in February 2013: [Related list:
7 Biotechnology Stocks With Insider Buying Activity
descriptions for all companies mentioned
shares experienced a 166% increase in open short-selling volume by February 28 2013. Short-sellers gained 64% on March 19 when the company said it will reduce its workforce by 75% and will consider bankruptcy protection.
Affymax. The company issued a press releasing saying that Omontys, an anti-anemia drug, may never reach market.
issued $100 million in senior debt due in 2018 that pays 3.50% on February 8 2013. Bearish activity increased 23% to an short open interest of 9.9 million shares. The notes are convertible at $5.33 per share.
closed recently at $4.54. In Q2, the company lost $0.30 per share, beating expectations. Revenue (non-GAAP) was $77.7 million, beating estimates by $3.47 million.
ZIOPHARM Oncology (ZIOP)
traded as high as nearly $6, but closed recently at $4.85. The market is anticipating results from the palifosfamide sarcoma study. Poor results will, needless to say, hurt shares, and investors may be pocketing profits ahead of the news. Short-selling open interest rose 13.1% in February.
PDL BioPharma, (PDLI)
reported quarterly (Q4) earnings of $0.34 per share, on revenue of $86 million. Short-selling open interest rose 13.5% ahead of the report. PDL pays a generous dividend of $0.60, yielding 8.23%.
Investors should strongly consider PDL in
terms despite the bearish bets against the company. Healthy royalty revenue (which rose 7% year-over-year) and earnings of $1.45 per share in 2012 suggest this company is not appreciated.
Arena Pharmaceuticals (ARNA)
is another company to look at
. Weak sales from
are creating so much fear that Arena traded at around $7.40 last week. Short-selling open interest rose 5.3% to 58.27 million shares on February 28 2013. With $216.23 million in share float, short float is
. It still makes sense to
, Kapitall Contributor