Clovis short sellers undaunted as stock price surges
By Lewis Krauskopf NEW YORK (Reuters) - Clovis Oncology Inc's share price has doubled in the past month, fueled by positive developments for the company's experimental cancer drug and takeover speculation. But some investors also appear to be increasing bets against the stock. The biotech company said late last month its experimental ovarian cancer treatment would be reviewed on a priority basis, with U.S. regulators expected to rule on the drug, rucaparib, by Feb 23. Shares of Clovis, which has climbed to a market value of about $1.4 billion, rose steadily in the past month, from $18.10 as of Aug 22 to $36.50 on Monday, also amid speculation about Clovis as a potential acquisition by a larger drugmaker. But short interest in Clovis has climbed to about $450 million as of Monday, or about one-third of Clovis' market value, according to S3 Partners, a financial analytics firm. That's up from about one quarter of the company's market cap at the end of August, according to S3 Partners. "What I am seeing is a significant amount of new shorts coming in basically betting the other side, betting that either the takeover is not going to happen, or at least it’s not going to happen at this price," said Ihor Dusaniwsky, head of research at S3 Partners. The wager has not paid off this month: Short sellers have about $125 million in paper losses so far in September, Dusaniwsky said. Among biotech companies with a market value of at least $200 million, Clovis had the third-highest estimated short interest, RBC Capital Markets said in a research note last week, behind Sarepta Therapeutics and Ziopharm Oncology. Credit Suisse last week upgraded its rating on Clovis shares to "outperform" from "neutral," and raised its price target to $41 from $19 after assessing the company's potential as a takeover target. A takeout premium appears to be at least somewhat baked into the stock price, said Roy Buchanan, an analyst with Janney Montgomery Scott, who last week lowered his rating on the stock to "neutral", saying fair value the shares was $36. Even though the Food and Drug Administration granted a priority review for rucaparib, "the risk is that the FDA still needs to approve the drug," Buchanan said. (Reporting by Lewis Krauskopf; Editing by Nick Zieminski)
