Update 1   Mid-day Trading -June 29 Bulls Back in Charge on EU Bank Bailout

The market has forgotten about Obamacare and reverted to the number one market issue-Euro debt resolution.

Here is a healthcare sector update from today’s trading and our take:

Biotechnology: Stocks have resumed their run to all time highs and even mid-caps are up 2% and much more. The Rayno Life Science Portfolio is up 2%. High flying MO stocks like MDVN and REGN are back. So the damage yesterday appears to be macro related not Obamcare.  Large pharma and biotech still needs to access biotechnology company pipelines for future revenues. Biotech ETF’s are tracking tech the QQQ which is strong today up 2.5% .

Large Drugs: Large cap drug stocks are up 1-2% but not as much as NASDAQ up 2.6%.  Since the $80B pharmaceutical “settlement” was embedded in Obamacare there should be minimal impact on the industry and investors will seek yield and relative safety as companies focus on controlling costs.

Healthcare facilities and Hospitals: Continue their run from yesterday with some stocks up 4-6% . See HCA and WLP.

Diagnostics and Tools: These stocks are more dependent on the economy and follow tech stocks. Obamacare should provide a boost with more people insured and this was the case yesterday with Quest (DGX) and LabCorp (LH) and  they are up today. Diagnostic companies should rally near term and in Q4. Within our focus group Alere(ALR) , Exact Sci (EXAS) and Illumina(ILMN) are big winners today.


Preliminary Analysis: Biotech and Pharma neutral, Hospital Facilities Up, MedTech down

The long awaited and debated Supreme Court ruling on ObamaCare is in 5-4 in favor of the mandate as a tax proving many analysts, pundits and betting sites wrong. The response from Romney and the GOP is predictable -that they will fight to repeal the law despite earlier support for the mandate as a key economic element of healthcare reform. Many less political analysis think it is time to move on now that the constitutionality has been settled and deal with the  practical implementation of the law and find ways to control healthcare costs especially Medicaid which is  a huge problem for the States. And with 30 million more Americans insured there will be many companies that benefit from the law. For example  since more than 40% of healthcare costs are lifestyle related there will be opportunities for wellness programs and the treatment of chronic diseases like diabetes. Look for disruptive business models to shake up the industry.

With respect to the biotechnology industry the ruling appears to be neutral as James Greenwood President and CEO of the Biotechnology Industry Organization (BIO.org) issued a statement and an interview saying that the biotechnology industry’s main concern with respect to HCR has been biosimilars and the protection of Intellectual Property and innovation with  12 year exclusivity after FDA approval. A biotechnology drug can take more than  10 years of R&D and clinical trials and over $1B investment. But Mr. Greenwood added that “ObamaCare (or HCR) will be  a political football for some time to come”.

One major beneficiary should be hospital stocks as more people are presumably insured and stocks are up. Insurance stocks are down as costs will be the focus with all plans and today Calpers already stated they would rebid its insurance with premiums rising 9.6% next year.

A quick analysis of stocks by sector is difficult as the market is down for other headline reasons such as the European debt crisis, weakness in financial stocks especially JPMorgan’s trading loss and the Barclays LIBOR scandal, and weakness in consumer spending affecting the growth outlook.

With techs and financial stocks very weak, here is  a brief sector review of healthcare stocks with NASDAQ off 1.58% and the S&P down 1%:

Biotechnology: Down over 2% with major ETFs’ IBB (IBB 126.32)  and XBI (86.9) both off 2.8% after reaching new all time highs all time this week.Mid cap biotechs were all red with the index down a tad over 2% but I found one green VVUS (28.98) up 2.25,  an obesity drug stock at new highs.

MedTech: large cap medtechs were not that hard hit only  considering negative outlook from some analysts as they face a 2.3% excise tax next year now that the healthcare law is upheld. But Boston Scientific (BSX), Intuitive  Surgical (ISRG) and Varian (VAR) were all down over 2%.Diversified JNJ was off only 0.3%.

DX and Tools: Down comparable to the S&P about 1.3% .We will focus more on the DX area as we approach the AACC Meeting in mid-July. Personalized medicine and companion DX is  along term trend that should drive news in this sector. As more people are insured testing volume should grow and indeed Quest Dx (DGX $58.98) and LabCorp (LH $91.90) are both up over 2%.

Major Drugs:large pharmaceutical stocks are down slightly with BMY, JNJ and MRK doing better than PFE and GSK. But AstraZeneca(AZN $44) is  a winner up 0.64%. The broad based healthcare SPDR XLV ($37) is down 1%.

Healthcare Facilities: are the major winner today with the Google index up 3.54%. Winners include Merge Healthcare (MRGE), Community Health (CYH) and Tenant (THC) all up big.


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