Who Does Not Know About the Bull Market in Biotech Stocks?

The bull market in life science stocks gathered momentum today as the IBB rallied 2.34% (up 16.6% YTD) approaching its all time high of $122.45. At some point in time we need to have a correction as this rally is approaching 1999 ebullience. I can offer several reasons for the unusual strength in biopharmaceutical stocks but for now the market model is consistent with our previous assumptions: M&A drivers, good clinical and product news, NASDAQ underlying strength, new themes like genomics and targeted therapy, and deep pocketed hedge funds focused in the sector. All of our focus biopharma stocks were up today except Exelixis (EXEL $6.14) flat for the day. Notable movers on volume include include Regeneron (REGN $114.65) up 12.31% on a raised forecast for its eye drug from $250M to $300M in the U.S., also near 52 wk highs are Cubist (CBST $41.51) up 2.67% (up 4.77% YTD, and ViroPharma (VPHM $31.28) up 2.19%(up 14% YTD).

In the Dx and Tools sector one of our value picks Seracare (SRLS $3.94) up 10% and a 25% premium to the 30 day trading average, entered an agreement to be acquired for $81M or $4/sh.by a private equity firm Linden Capital Partners. The plaintiff lawyers were all over the deal whining about fiduciary duty or maybe just trolling for billings. The Board approved the deal and shareholders can vote on it. The stock was trading at about $2.65/sh in November about the time the CEO resigned so there were hints that the Company could be in play.

Our recent value focus pick Response Genetics (RGDX $1.78)  was up 7.8% (16.34% YTD). RGDX was added to the Dx Portfolio last week at a price of $1.50. Most Diagnostics and Tools stocks were in the green today and genomics stocks have been strong since the JPMorgan Conference in January and the Roche bid for Illlumina (ILMN). Leerink Swann put out a note today with an upside to their “tools” model noting that the latest FY Budget Proposal for a $30.7B NIH may escape the worse case scenario of an 8% sequestration mandated cut.

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