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When a firm announces that it is being taken over or acquired by another firm, the target’s stock often jumps in price to reflect the takeover premium paid by the acquirer. This is why analysts speculate about potential takeover/leveraged buyout targets.

We compiled a universe of rumored potential takeover/LBO targets from various sources including Minyanville and Seeking Alpha and screened this universe for those from the biotech industry. From these rumored biotech takeover targets, we searched for stocks also seeing bullish short trends, with significant decreases in shares shorted month-over-month.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Do you think these firms are likely to be taken over? Use this list as a starting point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. Exelixis, Inc. (EXEL):
Biotechnology Industry. Market cap of $1.11B. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 13.83M to 12.61M month-over-month, a change representing 0.98% of the company's 124.60M share float. The stock is a short squeeze candidate, with a short float at 11.08% (equivalent to 8.79 days of average volume). It has been a rough couple of days for the stock, losing 5.53% over the last week.

2. InterMune Inc. (ITMN): Biotechnology Industry. Market cap of $2.14B. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 4.39M to 3.93M month-over-month, a change representing 0.89% of the company's 51.72M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.26). The stock has gained 257.81% over the last year.

3. Dendreon Corp. (DNDN): Biotechnology Industry. Market cap of $5.71B. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 16.87M to 15.90M month-over-month, a change representing 0.67% of the company's 144.68M share float. The stock is a short squeeze candidate, with a short float at 11.64% (equivalent to 5.84 days of average volume). The stock has gained 20.62% over the last year.

4. Savient Pharmaceuticals, Inc. (SVNT): Biotechnology Industry. Market cap of $542.04M. Takeover/LBO rumor sourced from Minyanville. Shares shorted have decreased from 22.06M to 21.71M month-over-month, a change representing 0.59% of the company's 59.81M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.15). The stock is a short squeeze candidate, with a short float at 31.42% (equivalent to 11.09 days of average volume). The stock has lost 46.27% over the last year.

5. Acorda Therapeutics, Inc. (ACOR): Biotechnology Industry. Market cap of $1.19B. Takeover/LBO rumor sourced from Seeking Alpha. Shares shorted have decreased from 4.89M to 4.69M month-over-month, a change representing 0.57% of the company's 35.11M share float. The stock is a short squeeze candidate, with a short float at 13.19% (equivalent to 5.73 days of average volume). It has been a rough couple of days for the stock, losing 6.6% over the last week.

*Short data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Biotech Takeover / LBO Targets With Bullish Short Trends