Short selling data can help active investors manage risk. Short sellers tend to be sophisticated, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they are doing so.
In this report, we are going to discuss the short selling data on Veru Inc (VERU:US). Veru is an oncology biopharmaceutical company that is focused on developing novel medicines for breast cancer and prostate cancer. It has also been working on a Covid-19 drug. The company is listed on the NASDAQ Capital Market and currently has a market capitalization of $822 million.
Veru Inc: Short Selling Data
Looking at the short selling data on Veru, we see a couple of red flags.
The first is that short interest is very high. At present, around 20.5 million shares are on loan. That represents about 34.2% of the free float. This tells us that many institutions are short here.
The second is that, as the share price has risen recently on the back of positive news, short interest has risen too. Back at the start of April, only 2.4 million Veru shares were on loan, representing 4.0% of the free float. However, today, 19.0 shares are on loan. That’s a huge increase. It’s worth noting that utilization – a measure of demand on the short side – has risen sharply too. At the start of April, it was 16%. Now, however, it's 100%. This signals that short sellers have been ramping up their downside bets here as the stock has climbed.
Positive Study Results
The reason Veru’s share price spiked in April was that the company announced that an interim analysis showed its oral drug candidate, sabizabulin, led to a 55% reduction in deaths versus a placebo in hospitalized moderate-to-severe Covid-19 patients in a late-stage study. An independent data safety panel unanimously recommended that the study be halted early due to efficacy, and remarked that no safety concerns were identified.
On the back of this study, Veru plans to meet with the FDA to discuss next steps, including the submission of an emergency use authorization application. The FDA granted Fast Track designation to the sabizabulin Covid-19 clinical program in January 2022, which the company hopes will help streamline the emergency use authorization process.
Veru added that it has scaled up manufacturing processes to produce commercial drug supply to address anticipated drug needs following potential FDA authorization.
While this news is clearly a positive development, the rising short interest here suggests that institutions are skeptical in relation to the outlook for the company. The fact that short interest has risen to over 30% indicates that short sellers expect the stock to give up its recent gains.
Of course, with short interest so high at present, we could potentially see a short squeeze here if Veru publishes more positive news. If we hear some good news regarding the company’s FDA application, the share price could pop higher as short sellers scramble to cover their short positions.
However, with short interest above 30%, we think caution is warranted towards the stock right now. The number of shares on loan suggests that short sellers see significant downside risk.