Biotech Rally Ignited By Clinical News and M&A Theme

The biotech sector roared back today with major ETF’s IBB ($122) up 2.4% and XBI ($78.6) up 5.1 % driven primarily by Gilead (GILD $52.23) up 12 % and other large caps like Regeneron (REGN $127) up 2.5%.

Gilead (GILD) was up on clinical results from their Hep-C drug that showed their once a day oral drug GS-7977 in combination with Ribavirin showed early sustained virologic response rates in Genotype-1 patients.88% of patients remained RNA HCV undetectable four weeks after completion of treatment. Bristol Myers (BMY $34.18) is also a partner in the drug development was up 1.5%.

Also propelling the sector was a rejected $2.6B hostile bid from GSK for Human Genome Sciences(HGSI $14.15) up 97%. Glaxo has been a long time partner with Human Genome (HGSI) and speculation on a buyout has driven the stock as high as $30 last year at this time. Human Genome has been exemplary of the biotech boom days and volatility for example in 1999 HGSI reached a high of $100 on speculation of a new paradigm for gene based drug discovery. However the Company’s major products are  Benlysta for Lupus and raxibacumab for inhalation anthrax with six products under clinical development.  HGSI was added as a trade earlier this year around $9 and still can have some upside for current holders now that it is in play.

Our mid-cap biopharma index is up 2% today and this sector is still the place to look for trades and M&A potential. We would stay away from micro-caps and small-caps for now except those on our focus list. Our strategy for part-time biotech investors is a portfolio approach or ETFs. The Biotech sector was up more than 15% in Q1 so this is not a good time to add new positions.

The Rayno Life Science Portfolio is up 2.5% with the following big movers: Astex (ASTX), Cubist (CBST), Gilead (GILD, Seattle Genetics(SGEN) and Sequenom (SQNM). The Diagnostics and Tools sector is less volatile and not driven as much by the M&A theme so these stocks are lagging . They are also more sensitive to sales and earnings.



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