A growing interest among short sellers has been seen on the specialty pharmaceutical sector, reports on Wednesday suggests. Short interest grew by 10% on average in the second half of May among the specialty pharma companies that RBC Capital Markets analyst Randall Stanicky covers. Two of the most significant jumps in short interest were in Allergan PLC (ticker: AGN) and Teva Pharmaceutical Industries (TEVA), both driven by litigation concerns, according to Stanicky. Short interest surged 43.9% at Allergan and 75.3% at Teva during the period.
Previously, both Teva and Allergan’s share plummeted down as risks on opioid legislations plagued the pharma industry. Teva is trading down 41.1% since January. In May, the company agreed to pay $85 million to settle a lawsuit brought by the state of Oklahoma over its marketing of opioids. Meanwhile, Allergan is down by 8.1% this year, and the company has faced pressure from activist investors, and some analysts have called for a breakup of the firm.
But analysts suggest that tides are changing for both firms. Short sellers grew interested over the two pharma giants with the short interest in Allergan rose 43.9% from May 15 through 31, and now stands at 2% of float and Teva rocketed 75.3%, to 3% of the float.
Analysts are saying that the rise comes amidst the risks of opioid legislation and the release of the new drug that would compete with Allergan’s Botox. Furthermore, the companies, especially Teva, has withstood controversies over fixing generic-drug prices in the past.
In the meantime, the shorts aren’t panicking yet. Shares of Teva stock are down 6.3% in Wednesday morning trading, following a 2.3% drop on Tuesday, while Allergan stock is up 0.9% on Wednesday after falling 3% Tuesday.
Both companies are expected to release their quarterly earnings report in August, and analysts are hoping for the company to squeeze in the growing crowd of short sellers.