Shares of Moderna Inc. (MRNA) are up 26% in mid-day trading on news that its mRNA vaccine performed well in a small Phase 1 trial. Moderna is the 5th largest short in the domestic Biotech Sector with $1.63 million of short interest; 24.48 million shares shorted; 11.76% short interest % of float; and a 0.30% stock borrow fee.
Shorts in the Biotech Sector have not fared well in 2020 with year-to-date mark-to-market losses, as of 5/17, of -$2.81 billion, -5.78% on an average short interest of $48.59 billion. In May shorts have incurred heavy losses, down -$4.55 billion in mark-to-market losses, -9.24% on an average short interest of $49.26 billion.
Todays +26% price move in MRNA will add -$427 million of additional mark-to-market losses to its totals, bringing year-to-date losses to -$1.52 billion and May month-to-date mark-to-market losses to -$914 million.
The best performing Biotech Sector shorts as of 5\17 are:
The worst performing Biotech Sector shorts as of 5/17 are:
With today’s rally, MRNA is the primary short squeeze candidate in the Biotech Sector with nearly a billion dollars of month-to-date mark-to-market losses and just over $1.5 billion of year-to-date mark-to-market losses. Additional stocks on the sector that may be squeezed if the overall sector rally continues are Abbvie Inc (ABBV) with mark-to-market losses nearing -$700 million in May; Sarepta Therapeutics (SRPT) with nearly -$300 million worth of losses in May; Allogene Therapeutics (ALLO) and Portola Pharma (PTLA) with -$200 worth of May losses. With May losses of “only” -$100 million, but year-to-date mark-to-market losses of over -$400 million, Immunomedics (IMMO) and Regeneron Pharma (REGN) short sellers may be squeezed out of their positions if losses continue to mount.
Short interest in the Biotech Sector had decreased significantly from the end of February to mid-March but has been on a steep upward trend with a +47% increase since mid-March. Short Interest in the sector has now hit a year-to-date high of $47.8 billion. A vaccine led rally in the sector could lead to a broad short squeeze as many shorts have already incurred significant mark-to-market losses. Expect short side buy-to-covers to nudge up biotech stock prices alongside the strong long buying we are seeing in this rally.
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Managing Director Predictive Analytics, S3 Partners, LLC
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