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Oct 26, 2017

S3 Analytics: Biotech Shorts Profit on Celgene Earnings Disappointment

Celgene Corp (CELG) is down 18% in early morning trading after it reported 3rd quarter earnings were below analysts’ estimates and the global biopharma company cut its 2020 forecast with EPS and net product sales both lowered sharply. Celgene’s miss is affecting the entire Biotech Sector, with the Spider S&P Biotech ETF (XBI) down 1.58% and the iShares Nasdaq Biotech ETF (IBB) down 2.09% in early morning trading. Celgene short sellers are up $183 million in mark-to-market profits today.

Short interest in the Biotech sector has been increasing throughout 2017, up 25% domestically and 26% worldwide, even though the sector’s stock prices have been trending higher. Nasdaq Biotech stocks (IBB ETF) are up 19% in 2017 while the S&P Biotech stocks are up 39% (XBI ETF).

With today’s sector wide price weakness, the top five shorts in the Biotech sector have added $273 million of mark-to-market profits today, bringing their October profits up to $673 million. The top five are still down $399 million year-to-date, but have recouped 63% of their losses this month. Unfortunately, Celgene short sellers were the only ones of the top five that had substantial short covering this month, with buying to cover 1.9 million shares in October resulting in missing out on an addition $41 million of mark-to-market profits today.

Short sellers have slightly decreased their exposure in October with short interest falling 5% as the Biotech sector weakened and some shorts locked in short term profits. With today’s overall sector falling over 1.5% the trend may continue as more short sellers close down their positions to realize October profits or limit year long losses.

Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
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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