Update-1 2/3…3:30p EST…  Biopharma stocks firm up after a bad week

  • Large caps are strong with Gilead Sciences  (GILD) up over 5% on a story about an experimental antiviral therapy for coronavirus China. GILD is one of the leading antiviral companies for HIV and HCV.
  • Mid-caps in green screen mode with XBI up 2.3% to $91 handle.
  • The XLV is recovering up 1% today now down only 2.2% over days.

Focus in market today remains coronavirus in China and Iowa caucus with potential disruption in healthcare policy from a left leaning progressive candidate.Some analysts and writers thought the hit to healthcare stocks last week was not earnings guidance but a concern about a Sanders election. This political fear seems premature with an election 10 months away but volatility will continue on news bytes.. UNH recovered today but is down 4% over past 5 days. Anthem (ANTM) also recovered today up 0.43% to $266 after dropping last Wednesday on an earnings miss and  guidance ($22.30 EPS full year) disappointed the market.

So we can say that healthcare policy will return as a major election issue with the costs of care  increasing and drug pricing in the forefront. The IHF needs to hold the $190 level.

We will publish  financial  metrics or major biopharma stocks after Regeneron reports.


Bearish Pattern Emerging Triggered by Coronavirus Angst

U.S, Declares a Public Health Emergency (although U.S. citizens not yet at risk they say)

S&P 500 down 1.77%, DOW down 2.09%, NASDAQ down 1.59%.

  • Good reason for coronavirus sell-off with possible hit on global growth by China.
  • Earnings reports are good but guidance is neutral.
  • Combination of high PE on market with record highs brings on profit taking.
  • The FED rally runs out of steam–Is “TINA” done? i.e. no alternative to stocks.
  • Sentiment may have reached unsustainable highs, now turning to fear.

The constellation of bad news has triggered the market correction many analysts  and pundits anticipated. Some stocks reacted to earnings season much earlier than the coronavirus news. For example as we posted in mid-January momentum was easing from the Q4 2019 run and we suggested to hold off adding new positions until we get earnings from several large cap drug stocks .On 1/25 on our post we saw the beginning of the sell-off with Amgen (AMGN) taking a 6% hit before earnings. AMGN is down another 4.47 % today after earnings despite a revenue and earnings beat because of a tepid outlook.Product sales declined 2% globally reflecting the impact of generic competition. GAAP earnings decreased 5% to $2.85 in Q4 driven by higher operating expenses. Repatha sales increased 26% in Q4 and 20% for the year to $125M. Yahoo Finance reports 14 out of 24 analysts have a HOLD on AMGN.

Here are results of major healthcare and biotech ETFs for the day:

IBB down 1.5%, IHI down 2.56%,XBI down 1.39%, XLV down 2.02%,

Vertex Beats and New Product for CF Soars

We will add other earnings reports on updates but Vertex (VRTX) earnings and guidance beat and stock was down only 0.9% after an early-run up. Vertex full year non-GAAP revenues were $4.00B a 32% increase compared to full year 2018. Full year 2020 total product revenue guidance is $5.1-5.3 B. The new cystic fibrosis product called Trikafta exceeded forecast by 5x to $420M. Non-GAAP net income per share, diluted was upon 31% or $5.33. The shares were up after hours from $230.31.

But valuation could become an issue because the stock is trading at a P/S of 16 and a FWD PE of 33.82 with a PEG of 3.41.

—Update coming on other earnings in biopharma.


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