Short selling data can help active investors manage risk. Short sellers tend to be well-informed, high-conviction traders. If they’re targeting a stock, there’s usually a good reason they are doing so.
In this report, we are going to analyze the short selling data on Oncopeptides AB (ONCO:SS). Oncopeptides is a Swedish biotech research company that specializes in the development of therapies for difficult-to-treat hematological diseases. The company’s lead product is PEPAXTO, an anticancer peptide-drug conjugate. It is listed in the Stockholm Stock Exchange and currently has a market capitalization of SEK 3.59 billion.
Oncopeptides: Short Selling Activity
An analysis of the short selling data on Oncopeptides reveals that since the beginning of 2021, the stock has seen a significant increase in short interest.
At the start of the year, there was not a single active short position in Oncopeptides. However, on 11 March 2021, Voleon Capital Management LP shorted 360,849 shares, accounting for 0.51% of the company’s total outstanding shares, and since then, the number of shares on loan has risen by a staggering 13.8 times to 5,707,121 shares, which represents short interest of 7.58%.
Currently, eight different managers have short positions in Oncopeptides with the total number of shares on loan worth SEK 263.09 million as of 29 July. Our data shows that Consonance Capital currently holds the largest short position with 1,061,614 shares shorted, representing 1.41% of the total outstanding shares.
As a result of the sharp rise in short interest, Oncopeptides is now the most shorted stock in Sweden and the sixth most shorted stock in Europe.
It’s worth noting that Oncopeptides’ share price has already experienced a significant decline this year. Since the start of the year, the share price has fallen from SEK 165.50 to SEK 46.10, wiping around SEK 7.77 billion from the company’s market cap.
Despite the 70%+ decline in the share price this year, four out of eight managers have increased their short positions in July by a total of 0.62% of the total shares outstanding i.e. 466,809 shares worth SEK 21,519,913. This suggests that they see further downside from current levels.
In terms of why short sellers are targeting Oncopeptides, it is most likely related to recent news in relation to its PEPAXTO drug.
Back in February, the FDA granted accelerated approval of PEPAXTO in combination with dexamethasone for certain adults with relapsed or refractory multiple myeloma but the agency required Oncopeptides to conduct an additional study of the drug as a post-approval requirement.
The FDA was not impressed with the results of the additional study, however, and in July, it advised that it had ordered the company to suspend enrollment in clinical trials due to an increased risk of death observed in the additional study. The FDA also said that it is alerting healthcare professionals to review patients' progress on PEPAXTO and discuss the risks of continued administration.
It’s worth noting that there has been some insider buying at Oncopeptides recently. On 21 July, Gladiator Fund, a Swedish hedge fund owned by Max Mitteregger Kapitalförvaltning AB, bought 175,000 shares worth SEK 10.42 Million. This suggests that the hedge fund believes the share price will bounce back.
However, given the high level of short interest here, we think caution is warranted towards Oncopeptides stock right now. The short selling data suggests that hedge funds expect further share price weakness.