October brings losses for short sellers in U.S. opioid-related shares

NEW YORK (Reuters) – October has been a rough month for short sellers betting against companies at the heart of the opioid crisis, although those traders still have paper profits of almost $600 million for the year, according to data from financial analytics firm S3 Partners.

The data from S3 analyzed changes in short interest and profits related to shares of eight companies named in U.S. opioid litigation. In October, short sellers registered $324 million in mark-to-market losses from those shares. But for the year, they have still gained $593 million in mark-to-market profits.

The list includes U.S. shares of drugmakers Mallinckrodt Plc, Endo International Plc and Teva Pharmaceutical Industries Ltd, drug distributors Cardinal Health Inc, McKesson Corp and AmerisourceBergen Corp, pharmacy chain Walgreens Boots Alliance Inc and healthcare conglomerate Johnson & Johnson.

Of those companies, only Johnson & Johnson’s shares have yielded mark-to-market profits for short sellers so far this month.

October’s losses for short sellers of opioid-related shares comes as several of the companies attempt to settle litigation against them. AmerisourceBergen, Cardinal Health, McKesson and Teva agreed with two Ohio counties to a $260 million deal, averting a federal trial that was to begin on Monday. The parties could resume talks as soon as Tuesday aimed at a broader settlement of thousands of opioid lawsuits brought by states and local governments.

The news of steps towards a broader settlement boosted Teva’s U.S.-listed shares, which rose 8.7% on Monday.

Despite recent losses, short interest remains elevated among shares of several opioid-related companies. Some 58% of Mallinckrodt’s floating shares have been sold short, while 20% of Endo’s floating shares have been sold short. Across the group of eight companies, short interest has grown by $1.8 billion this year despite $71.3 million of short covering in October.

“It might be a slight pull off the throttle,” said Ihor Dusaniwsky, head of predictive analytics at S3 Partners, of short sellers in shares of opioid-related companies. “They’re adjusting temporarily until they see what’s happening with the lawsuits.”