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Seattle Genetics ( SGEN)

Short interest: 26%
52-week high: $19.42
Current price: $19.04
Year-to-date performance relative to the Nasdaq Biotechnology Index: Up 27%

The market opportunity for the newly launched Adcetris in relapsed and refractory Hodgkin's lymphoma is much smaller than Seattle Genetics' executives and bullish analysts forecast. Recent sell-side surveys of lymphoma doctors claim to have found enough eligible patients to predict a successful Adcetris launch. These reports have helped Seattle Genetics' stock price recover from the August lows following the market collapse. Hedge-fund shorts have done doctor surveys of their own which reveal the opposite -- too few Hodgkin's patients -- and they're betting that Seattle Genetics' stock price will fall again.

Even if Seattle Genetics puts up early strong Adcetris sales numbers in the third and fourth quarters, it will be more likely due to inventory stocking and a backlog of advanced Hodgkin's patients who were waiting for treatment. Once that initial bolus of patients is treated, Adcetris sales will fall off a cliff. And moving Adcetris into earlier-stage Hodgkin's will be very difficult because the standard drug therapy used today is already highly effective, with response rates hovering near 90%.

Shorts also point to Seattle Genetics' decision to prevent distributors from reporting monthly Adcetris sales figures to IMS Health as a red flag suggesting the company is nervous about the drug's commercial trajectory.

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