Why Short Sellers Are Making a Massive Bet in Major Pharma

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Pharmaceutical companies usually are involved in a lengthy process of getting their drug candidates to market through clinical trials. There is a fair amount of risk involved, should a study come back negative or a candidate not be approved. Conversely, if a drug gains FDA approval or passes a clinical trial, there can be big upside.

The Trump administration has promised reforms in the health care sector, such as changing the bidding process for drugs and shortening the FDA approval process. It has yet to be seen how much headway the White House can actually make with these reforms. Judging by this report, short sellers are making a tremendous bet against Trump’s plan.

Keep in mind that short sellers betting against big pharma are taking on an added risk. They have to pay out the ongoing high dividends on top of the cost of borrowing the shares.

The February 15 short interest data have been compared with the previous figures, and short interest in these selected pharmaceutical stocks all increased. Also the short interest for one of these stocks absolutely exploded.

Short interest in Pfizer Inc. (NYSE: PFE) massively jumped to 137.21 million shares from the previous 34.30 million. Its shares were last seen at $34.28, within a 52-week trading range of $28.74 to $37.39.

The number of Merck & Co. Inc. (NYSE: MRK) shares short increased slightly to 18.98 million from 18.36 million in the previous period. Its shares were trading at $65.85, in a 52-week range of $50.09 to $66.16.

Teva Pharmaceutical Industries Ltd.’s (NYSE: TEVA) short interest grew to 27.97 million shares, compared to the previous level of 20.99 million. Shares were trading at $35.75, in a 52-week range of $31.90 to $59.35.

The short interest rise in Bristol-Myers Squibb Co. (NYSE: BMY) was to 15.95 million shares, from the previous reading of 13.45 million. Shares were trading at $56.56, within a 52-week range of $46.01 to $77.12.

The number of shares short in AbbVie Inc. (NYSE: ABBV) increased to 31.63 million, compared to the previous 30.98 million. The stock was trading at $62.22, in a 52-week range of $54.24 to $68.12.

Eli Lilly and Co.’s (NYSE: LLY) short interest increased to 12.37 million shares from the previous 10.82 million. The stock was trading at $83.06. The 52-week range is $64.18 to $83.79.