Biotech Bear Market: After the bubble burst…Update-1… 10/15 Rally

10/15 After the Close… XBI Up 7.26%…Green Screen…MOmentum is back

Biotech stocks soared today in a broad rally showing a good appetite especially for small and mid-cap stocks. This could be a counter-trend rally in a biotech  bear market but there is a lot of money on the sidelines ready to be put to work.

  • The small cap more speculative XBI rose 7.26% well above the late September bottom in $60 region. This is a good bellwether for a continuing Q4 rally.
  • Large caps moved up across the board with the IBB up 4.37% and our favorites ABBV, AMGN, REGN, and GILD doing well.
  • The healthcare sector returned as a leader today and the XLV was up 2.23%.
  • This has been a good market for traders because the volatility can offer 10-20% moves in a few days. e.g. ACRS up 40%+, NVCR up 36%+ both recent IPOs. We did find two down stocks today Serepta Therapeutics (SRPT) with an upcoming advisory meeting on January 22, 2o16. And well known Valeant Pharmaceuticals (VRX) down 4.75%.
  •  Large cap company earnings will start coming out during the last two weeks of October.

A new biotech ETF was launched today with symbol CNCR, focused on immununotherapy which holds an equal weighted portfolio of 30 large and small cancer therapy (immuno-oncology) stocks such as AMGN, BLUE, BMY, CELG, CLDX, JUNO, KITE etc. If this ETF is successful no doubt it will move the underlying smaller stocks. We still favor XBI for trading and overweighting  a portfolio because of its track record you should track the performance vs CNCR.

Technicals are looking much better and the tape action is robust. The FED appears on hold. The IBB is now up 3.76% YTD a little better than NASDAQ up 2.83%.

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Caution- Risk Remains High But Opportunities Lie Ahead

Rayno Biopharmaceutical Stocks -see chart below

Obviously all of these stocks were up huge YTD until early August when the correction began then they were hit harder on the second downturn on September 21 with the Hillary tweet on drug pricing hitting biotech bear market technical levels. There is still likely to be headline risk on drug pricing so stay cautious until Third Quarter earnings come out.

Rayno Top Winners YTD                   10/15 Update

Fibrocell Science (FCSC) up 69%            up 6.55%

Clovis Oncology (CLVS) up 61.6%           up 9.38%

Regeneron (REGN) up 28.4%                   up 1.98%

Seattle Genetics (SGEN) up 21.3%           up 7.6%

Gilead Sciences (GILD) up 5.6%               up 3.3%

One of our biggest movers today was Ignyta, Inc. (RXDX) up 13.76% today and 13.87% YTD.

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Rayno Top Losers YTD

Biogen Idec (BIIB) down 21.5%….down again today in pre-market

Abbvie (ABBV) down 14.6%

Alexion(ALXN) down 13.6%

GlycoMimetics (GLYC) down 4.6%

Vertex (VRTX) down 4.3%

Two stocks to watch when earnings hit are Biogen BIIB) and Gilead Sciences (GILD) both huge winners over five years but technically weak lately. Both should be watched for margins and pricing:

BIIB trades at P/S of 6,  Forward PE of 14.87, PEG 1.14, P/FCF 19.27.

GILD trades at P/S of 5,  Forward PE of 8.64, PEG 0.62, P/FCF 8.49.

Celgene (CELG) a highly touted stock on CNBC and with several analysts is still up 5% YTD and is recovering nicely to the $117 level from lows of the year near $105. P/S for 2015 are 11 but revenue estimates are $11.29B for 2016.

Biotech stocks are “bobbing” just above the early October bottom with a  bit of buying support but still 13% off mid-September highs. Sentiment remains negative because of long-term pricing concerns. As we have said before there is still a good chance of  a fourth quarter rally assuming the  NASDAQ can hold up.

Over the past week there has been a rotation out of the healthcare and life science sector into cyclical stocks like energy and industrials. As earnings roll-out look for growth in telecom, consumer discretionary and financials compared to healthcare (XLV). The XLV has rallied but is flat YTD tracking the large cap weighted IBB. Despite the choppy action there are good trades in small and mid-caps every day so look for the XBI to get some momentum.

IBB iShares Nasdaq Biotechnology ETF daily Stock Chart

 

Rayno Biopharmaceutical Stocks-Performance YTD as of 10/12

Company Ticker Original Price $ 5 Yr High RaynoTotal Price 9/10 YTD 10/12 Price 10/12
Start % Perform % Perform
8/12/2015
Abbvie ABBV 3/25/2014 51.7 70.76 33 59.58 -14.6 55.9
Alexion ALXN* 2/2/2009 17.5 203.3 994 186 -13.6 159.9
Alkermes ALKS 3/22/2013 23 75.17 191 69.67 1 59.1
Albany Molec AMRI 2/10/2011 4.32 23.95 391 21.19 6.9 17.43
Amgen AMGN 2/2/2009 55 173.6 210 153.1 -3.3 154.4
Array ARRY 5/26/2015 7.7 8.59 -22 5.93 5 4.97
Biogen BIIB 2/2/2009 48.5 480.18 552 312.62 -21.5 266.27
Clovis Oncology CLVS 1/13/2015 60 102.28 31.3 104.26 61.6 90.75
Fibrocell Sci FCSC 6/11/2014 3.7 6.4 90.2 5.9 69 4.38
Gilead Sciences GILD* 2/2/2009 25.5 123.37 356 107.25 5.6 99.6
GlycoMimetics GLYC 10/16/2015 6.74 9.68 12.7 7.6 -4.6 6.89
Ignyta RXDX 4/7/2015 10 19.4 37.2 15.57 1 10.05
Regeneron REGN 2/2/2009 17.5 544 3308 531.72 28.4 527
Roche ADR RHHBY* 1/30/2014 33.5 38.54 9.5 33.29 -3 33
Seattle Gene SGEN 2/2/2009 9.5 49.84 471 41.58 21.3 38.9
Vertex VRTX 11/15/2013 62.8 137.5 219 132 -4.3 113.5
*split
Acquired Acq Price % Return
Astex ASTX 1.63 8.5 421
Cephalon CEPH 76.5 81.5 6.5
Cubist CBST 21.5 102 374
Optimer OPTR 11.8 10.75 -9
PharmCyclics PCYC 38.2 261 583
ViroPharma VPHM 12 50 316
ETFs P 8/12/15 P10/12/15 Perf %YTD
FBT 128.42 121 102.35 flat
IBB 385.02 370 309.23 1.94
XBI 261.6 236 64.17 (s) 3.25

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