Markets Stable After Major FED Meeting: On Course for Gradual QT(Quantitative Tightening)


Biotech Stocks Rest Near 2017 Highs

  • Healthcare (XLV up 21%) and biotech (IBB up 25%) are leading overall sectors year to date beating the XLK up 21%.
  • Biotech momentum flattish in September and indices are in the red over 5 days.
  • Big winners today include: BLUE, CLLS, HALO, PFE, RARE with NASDAQ down 0.5%, QQQ down 0.59% up 23% YTD.

Biotech momentum is easing with stocks slightly off from their torrid late summer pace and we expect more gains ahead in Q4. We see a lot of day-to-day bullish action in individual stocks and we want to recommend new small and  mid-cap stocks but our Rayno Biopharmaceutical Portfolio has worked well in 2017 with a good balance of large cap dividend plays, ETFs and a few speculative plays.

Today one of our top speculative picks bluebird bio (BLUE) is up over 4% on news that their Phase 1 Study on Anti-BCMA CAR-T Therapy has begun with one patient of an expansion cohort for relapsed refractory multiple myeloma in order to recommend the Phase 2 dosage. bluebird is also developing therapies for beta thalassemia and sickle-cell disease.

Abbvie (ABBV) continues its 30 day run up above $88 from $70 in mid-August, a huge move for a large cap drug Company. ABBV stock was $60 in January and surged this month from positive results in a Phase 2 Study for Atopic Dermatitis with ABT-494 (Upadacitinib).

Our top ETF pick XBI the SPDR S&P Biotech ETF is up 40% YTD but is off September and 52 week highs near $85 with a flattish chart all through this month.

What we missed today: Halozyme (HALO) up 21% on BMY and RHHBY licensing deals for drug delivery technology and laggard Pfizer (PFE) up 1.8% on Top Line results for Xtandi Prostate Cancer drug from Astellas acquisition.

Small caps hot over past month: Array (ARRY) up 20% to $10.81, Cellectis (CLLS) up 28% to $28.35, Ignyta (RXDX) up 17.36% to $11.32.

M&A and positive clinical news is expected to pick up in Q4 to drive the sector to 2017 highs. We missed KITE but snagged some of the win with GILD. We are developing a deal list based on rumor, banker picks and our own ideas and here is an update for your tracking only: AGIO, BLUE, BMRN, CLVS, EXEL, INCY, JUNO, SGEN,PTLA, TSRO, PBYI, VRTX.

Risks for biotech stocks and the healthcare sector in general are with Congress: drug pricing debate and/or lack of progress on tax reform. Proposals for ACA Repeal and replace are also being reviewed initially focused on Medicaid funding. Fundamentals have been good for large cap drug and biotech stocks so early October earnings will be a catalyst.


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