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
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