Biotech Bull Market: Trends to Watch in 2015… #3

Biotech Sector Moves Up In Tiny Steps

Risk Remains On

AACR Next Week Will Move Cancer Stocks

Biotech indices and ETFs are trying to hit new highs but momentum is easing and trading is choppy. Nonetheless we are moving up from the brief correction near channel lows at the end of Q1. Sentiment remains strong.

Here is a review of the Five Trends we outlined on February 13, 2015.

1.  Momentum of “immuno-oncology” stocks

Most of the stocks we track are approaching new highs and the soaring Aduro Biotech (ADRO) IPO up 38% in 2 days confirmed this strength. On the other hand the recent Cellectis SA (CLLS) is off 18.5% since going public. Aduro Biotech is a clinical stage cancer immunotherapy Company with two technology platforms to stimulate T-cell mediated immunity for pancreatic cancer and glioblastoma. Cellectis S.A. has a CAR-T platform for treatment of leukemia and solid tumors.We reviewed the CAR-T companies from a BIO Investor Forum last October. Some of the hot “immuno-oncology” companies to watch are : AGIO, BLUE, CLDX, CLVS, JUNO, KITE, NLNK, ZIOP. All are clinical stage,with multi$B market caps. These stocks are a good barometer of market strength.

2. Technicals on Major ETFs: FBT,IBB,XBI.

The XBI is the leader up 26.2% YTD handily beating the other two up about 19% YTD. Lows were hit near the end of March after highs in mid-March. Look for a topping pattern in all three trying to reach all time highs. The largest biotech fund Fidelity Select Biotech Fund (FBIOX) is tracking the IBB up about 21% YTD. Volume is on the low side compared to March.

 

3.Large Cap Biotech and Q1 Earnings

Many of the large cap pharma stocks will report this month and will guide earnings for the year. The Rayno Large Cap Portfolio (ALXN,AMGN,BIIB,GILD,REGN,RHHBY), is up 11% YTD but trails Rayno Mid and Small Caps as well as major ETFs. Gilead Sciences (GILD) is up 9.6% YTD compared to Celgene (CELG) up only 4.2% YTD. Undoubtedly there will be a shift in the large cap performance after Q1 financial reporting.

4. IPO Market Continues Strong in April

Renaissance Capital shows a good flow in April with five healthcare offerings mostly doing well. 2015 is slower than the record year 2014 however with 34 IPOs raising $5.4B the least active since Q1 2013. Tickers to watch: KMPH, ADRO, CDTX, XBIT,CBYL.

5. Healthcare Sector (XLV) Strength

Over the past two weeks there has been a slight shift to other sectors notably energy and materials. Healthcare stocks have been resilient during MACRO events and market sell -offs. THe XLV is up 8.25% YTD compared to the S&P (SPY) up only 2.6% YTD. The QQQ is up 4.45% YTD. Energy (XLE) has  been the best performer over one month up 10%.

Summary

All five of our trend indicators support the bull market in biotech. Speculation in clinical stage companies shows institutions have reserve funds and clientele for aggressive trading. Large caps are lagging patiently waiting for Q1 earnings. Drivers are the same as past five years: M&A, more patients, new products, positive clinical data and breakthroughs in molecular medicine.

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