Both names are on the short-sale restricted list today
Aralez Pharmaceuticals Inc (NASDAQ:ARLZ) this morning reported a wider-than-expected first-quarter loss, withdrew its guidance, and said it was suspending all U.S. operations to shift sole focus to its Canadian business. The maker of Toprol-XL also warned it could run out of cash over the next 12 months. In reaction, ARLZ stock have plummeted 58.9% to trade at $0.63 -- fresh off a record low of $0.62, and on track for its worst day since June 2006.
The shares have now sliced through long-term support at $1.30, which had served as a floor since last October, and are staring at a 55% year-to-date deficit. This has put short sellers in a winning position, as well. While the stock is short-sale restricted (SSR) today, 3.3 million ARLZ shares are sold short -- 5% of Aralez Pharmaceuticals' available float.
Fellow pharma stock Nevro Corp (NYSE:NVRO) is also spiraling today, down 14.6% to trade at $78.77, after the chronic pain specialist reported a wider-than-forecast first-quarter loss on lower-than-expected revenue. Analysts have had mostly bearish reactions, too, with Wells Fargo and Northland Capital downgrading the shares to "market perform." And while Canaccord Genuity was one of three firms to lower its price target -- to $102 from $110 -- the brokerage said it could be time to buy the dip.
In fact, today's weakness runs counter to the stock's longer-term technical performance, with NVRO surging more than 45% from its December lows near $65 to yesterday's annual high of $94.34. Plus, today's bear gap is being contained near $76.10 -- a 61.8% Fibonacci retracement of this rally.
Short sellers, meanwhile, are likely cheering today's drastic drop. While the stock also landed on the SSR list, there are currently 3.67 million shares dedicated to these bearish bets -- a healthy 12.7% of Nevro's available float.