Biopharmaceutical Stocks Sell-Off with Large Cap Drug Stocks

High Flyers du jour-AEGR,INFI

10 Year Treasury Hits 2.13 Yield

Caution-no new buys and all portfolio positions on hold

Large cap drug stocks were the surprising loser today along with the healthcare sector in general. Investors have been driven to drug stocks seeking yield while benefiting from restructuring and deals with biotech companies for new products.

All major drug stocks are being hit today down more than 2%: Bristol (BMY), GlaxoSmithKline (GSK), Pfizer (PFE), and Sanofi(SNY). Down more than 1%: Amgen (AMGN), Astra Zeneca (AZN), Eli Lilly (LLY), Merck (MRK) and Roche (RHHBY). The broad-based healthcare sector ETF XLV is down 1.35%, the pharmaceutical XPH down 1.18% and the biotech IBB down 0.75%.

A busted high flier Infinity Pharmaceuticals (INFI) which fell from $50 to under $25 in one month is up 10% today to $28.22. Another hedge fund favorite Aegerion (AEGR) is up 12% today to $68.50 after JPMorgan raised its target to $69. AEGR  is up 67% in one month and many analysts have questioned its $2B market cap with sales of less than $5M. But $2B is a “small cap” in a biotech bull market especially if you are in front of the revenue curve. Cannacord Genuity raised its target to $90 triggering a short squeeze as 12% of float is short.These kind of moves shows the difficulty of shorting biotech stocks who are controlled by hedge funds who have more money than you! (Go back and look at Human Genome Sciences HGSI a high flyer in 1999 and you will see the last bubble.) You would have made money shorting Infinity (INFI) but the pain on the way up to $50 may not have been worth the trouble. Remember in a bull market when indices and funds are all up they will be buying stocks like AEGR just to keep up.

The biopharmaceuticals screen is red so watch MO (momentum) stocks-MDVN, PCYC, REGN, SGEN- for weakness but volume is below average. The ETFS ( FBT, IBB, XBI) are at or near all time highs in May.


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