3 Biotech Stocks Short-Sellers Have Targeted the Most

DMD is a disease that currently has no cure or FDA-approved treatments, so a first-in-class treatment would likely come to market with minimal competition and a high price point, considering that DMD is a rare disease. But as you can see, there are a lot of concerns heading into the February 2016 PDUFA decision by the FDA.

Source: Sarepta Therapeutics.

To begin with, Saretpa and the FDA haven't always seen eye-to-eye. Sarepta's management team, including its now-former CEO, often misinterpreted what the FDA believed was needed to demonstrate the efficacy of eteplirsen in clinical trials. The miscommunication between both parties wound up delaying the filing of eteplirsen's new-drug application with the FDA, and there are no guarantees that another breakdown in communication won't occur.

Also, Sarepta's valuation is strongly swayed toward its exon-skipping drug development platform for DMD. If eteplirsen misses the mark in ongoing late-stage studies, or if the FDA fails to approve eteplirsen, it could cast doubt on a big chunk of Sarepta's remaining pipeline and crush the stock.

So who's right? Honestly, it's a coin flip at the moment, which is why this is a stock the faint-of-heart investor shouldn't own. Sarepta's phase 2b extension study has showed statistically significant improvement in the 6-minute walk test over 168 weeks (that's more than three years), but the patient population of the study is fairly small. With an FDA decision that could swing either way, short-sellers will either be popping open the champagne or the antacid -- along with their wallets to meet a margin call.

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The article 3 Biotech Stocks Short-Sellers Have Targeted the Most originally appeared on

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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