Update 7/23

Biogen Idec (BIIB) Soars 11% on Earnings

EPS at $3.49 vs est $2.83; Sales of MS drugs were $2.42B vs $1.72B last year.

Our large cap portfolio is now up 15% YTD with less risk than mid and small caps.

One analyst thinks PBYI will be acquired but watch out with a market cap near $7B with no product revenues. Why didn’t Pfizer buy the Company? The last big biopharmaceutical acquisition was Onyx Pharmaceuticals at $10B at 17X Sales. Here is Adam Feuersteins’s take.

In the meantime BIIB and PBYI is fueling a run in the sector with the XBI up 5.7% and the IBB up 1.33%. Keep in mind that downside risk with XBI is greater than with FBT and IBB.

NB: somebody bought 1000 calls at strike price $75 of PBYI one week prior to the stock launch. Hmmm.


Biotech and NASDAQ Rally Amidst Global Conflicts

Puma Biotechnology Inc. (PBYI) Soars 180% In After Market on Breast Cancer study Results

Puma announced top line results from the Phase III clinical trial of PB 272 (neratinib) for the extended adjuvant treatment of early stage HER2 positive breast cancer on patients who had undergone surgery. Regulatory approval will be filed in H1 2015. Neratinib will face competition from Roche’s Herceptin already on the market.

The Company also announced an amendment to their licensing agreement with Pfizer requiring Puma to pay the ongoing costs of furter clinical trials which will be approxiamtely $30M. Upon commercialization of neratinib, Puma will pay a fixed lower royalty rate in the low to mid-teens.

We have no coverage of Puma but some ETFs/ Funds should get a small boost tomorrow. Fidelity is holding over 2M PBYI shares in various funds but any other funds have reduced their positions after ASCO and other data. XBI is also up 3.61% in today’s after market. 

Anyone who thought they understood the dynamics of biotech trading will be totally confused by this huge move, especially those who short individual stocks. PBYI had a small short position of 6%. We have no positions in PBYI and  no recommendation.

Yellen Benchmark of 7/15

Last wednesday we wrote about the sell-off on biotechnology shares after the Yellen comment on “small cap valuations being stretched”. In other market commentary in early July and after the bubble burst on March 31, 2014 we urged investors to overweight large cap biopharma stocks and avoid MoMo speculative stocks without revenue. Our large cap portfolio is up 10% YTD with our favorite ETF FBT ($81.40) up 17.66% YTD. Since the Yellen comment five days ago the sector is flat to down 2% but should improve a bit tomorrow.

A few analysts stood their ground on Yellen’s comments last week. Mark Schoenebaum of ISI Group, wrote a letter  to Yellen armed with charts and PE data showing the current ratio roughly in line with Russell- 1000 stocks. However the priciest small caps with no revenues nor earnings would not have been included in this group. Of course nothing compares to the 1999 tech and biotech bubble.

Rayno Life Science Movers:


Alexion (ALXN) up 2.8%, Amgen (AMGN) up 1.75%, Albany Molecular (AMRI) up 2.62%, Genomic Health (GHDX) up 1.51%, Quidel (QDEL) up 4.65%, Vertex (VRTX )up 1.48%.


Nanostring (NSTG) down 3.42%, Neogen (NEOG) down 4.65%.

Our index of over 50 small and mid-cap biopharmaceutical stocks was mixed but green overall.

We urged investors to raise cash levels to 15-20% depending on risk tolerance and wait out a choppy summer market. Overweight large caps among Rayno Portfolio picks. Q2 earnings for larger caps are on their way this week and next week: ALXN, AMGN, BIIB, GILD, RHHBY etc.

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