On March 10 the FT reported that Johnson & Johnson (NYSE:JNJ), the US pharmaceuticals group, had a month to decide whether to try and claim back full rights over two pivotal medicines as a result of Merck's (NYSE:MRK) $41 billion planned takeover of Schering-Plough (SGP).
Short interest has increased significantly in Merck, from 0.6% of the company to 1.8% since early March, as you can see from this graph below. It looks, too, like investors came to the trade late; after the fall in price from $31 to $21 between early February and early March, and before the recent rebound from $21 to $26 now.
J&J has also seen a rise in short interest, from 0.7% of the company in late February to 1.2% now. Prior to this, there was an increase from 0.8% to 1.2% between early and late January 2009. Investors then held on to the trade as the price fell from $58 to $46, before covering positions and taking profits.
Schering-Plough has seen its short position reduce, from 1.4% to 0.9% of the company on loan, juxtaposed with a rise in share price: from $16 to $24 between March 5 and now.