Shorts Scramble to Cover as CFO Hire at Savient Bolsters Shares

Savient Pharmaceuticals (NASDAQ:SVNT) got a bump on Monday, up 16% to $2.92, following an announcement that John Hamill will be filling the company’s vacant CFO position. The news has excited many investors as Hamill was part of the $100M sale of PharmaNet Development Group in 2011. He joins the company shortly after some major strategical changes have helped SVNT shares climb by almost four-fold since July. Savient slashed its job force by 35% early that month – hoping for savings of $56M in the long-run – and promoted executive VP Louis Ferrari to the position of CEO and President. Today’s gains, however, may be an overreaction by the market on news that will have only minor near-term effects. For Savient, long-term performance will rely on improving sales numbers for Krystexxa, which has been a disappointment since its approval in 2010.

Despite a two-year old product, Savient is still losing money. It remains to be seen whether the recent cuts and reorganization will be sufficient to turn the company around. Savient posted revenue of $4.6M in 2Q, up from $3.5M in the first quarter, so sales are increasing slowly; Krystexxa, however, is still far from the drug its proponents had expected.  Short covering helped squeeze SVNT higher today, but the 43% short position also demonstrates a serious lack of faith in the company. Third quarter earnings will be more telling of Krystexxa’s performance, and the bulk of the $56M in cost savings won’t be seen until next year. Savient isn’t out of the woods yet, and investors should take Monday’s strength with a grain of salt.