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Mar 22, 2017

S3 BLACKLIGHT: Tesaro Inc. is Most Profitable Short for First 3 Weeks of March

Cancer therapy developer Tesaro Inc. (TSRO US) has had a stellar run since its 2012 IPO - with its stock price averaging a 64% yearly return from 2012-2016, and it was up 40% in the first two months of 2017. Short interest averaged just $128 million from 2012-2015 and didn’t start significantly increasing until June 2016 and ended the year at $1.07 billion.

Short interest averaged $637.3 million in 2016, but short sellers lost $649 million, or 101.84%, as TSRO’s stock price rose 157% for the year. The first two months of 2017 were even more painful for short sellers as TSRO’s stock price rose 40% and short sellers were down almost $443 million on an average short position of $1.34 billion. In just 14 months, from January 2016 through February 2017, shorts lost $1.09 billion on an average short position of $735.4 million, for a negative return of 148.5%.

This month TSRO’s stock price declined 20.3% when AstraZeneca PLC (AZN US) had Phase 3 trials on its own ovarian cancer treatment which surpassed expectations, with some viewing it as a serious competitor to TSRO’s ovarian cancer treatment Niraparib. To make matters worse for TSRO, Clovis Oncology Inc.’s (CLVS US) ovarian drug Rubraca, also a PARP inhibitor, may also benefit from AZN’s positive trial results.

With TSRO’s stock price down over 20% in March, short sellers have recouped some of the over $1 billion of losses incurred in just over a year. Shorts are up $332 million in net of financing mark to market P/L, or 22.9%, in March on an average short position of $1.45 billion.

TSRO short interest is now $1.3 billion, up 20% for the year, and we expect levels to climb back up to recent highs of over $1.6 billion if TSRO’s stock price keeps dropping as momentum short players enter the name.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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