Rayno Biobeat #3 2017 Biotech Breakout Coming-Update-2

Update: Big Down Day in Biotech XBI down 3%

Article to follow: big movers down CELG,KITE, PBYI, TSRO, XLRN etc

Update-1… 5/8/17Biotech Sector Losing Momentum

  • XBI down 4.3% over 5 days although still up 15.5% YTD.
  • IBB very weak today down over 2%.
  • NASDAQ Composite and QQQ holding near highs mainly because of strength in  large cap technology stocks.
  • Update on large cap biopharmaceutical metrics and performance coming later.
  • Concerns are developing about the impact of American Health Care Act (AHCA) i.e.Trumpcare, on industry overall with lighter patient utilization and lower drug prices.

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Biotech Now Approaching Breakout Levels From February

Tech and Biotech Lead the Market: NASDAQ up 0.73% to 6091.60

We expect a biotech breakout to 52 week highs in the coming months because of new products, good clinical news and M&A. Biotech has survived several tweet storms from Trump and many negative articles on drug pricing. Product pipelines look favorable for growth in 2017. Look for sentiment to improve on the realization that biotech drugs for cancer and inflammatory diseases are more cost-effective than traditional therapies.

Here is the performance for the past 30 days and for 2017;

  • Our top trading pick as of 1/31/17 in the Rayno Biopharmaceutical portfolio, the XBI is approaching a new 52 week high over $72.58. The XBI is up 21.86% YTD but failed to close at a new high in March 2017. The 2015 “bubble high” was $90.36.
  • Large caps are lagging the sector. But some large caps have announced earnings and have traded up over 30 days since mid-April lows: ABBV up 2.19%, BMY up 4.41% and REGN up 2.91%. GILD remains a laggard down 4.68% YTD but selling at a forward PE of 9.11 and a P/FCF of 6.66.
  • The triple top on the IBB is at the $300 level about where it is today up 12.92% YTD and 2.18% over thirty days.
  • Technology stocks are very hot right now and the QQQ is up 15.83% YTD and 3.67% over 30 days.The XBI is tracking the QQQ in 2017.
  • Mid caps are near 52 week highs driven by M&A talk: BMRN up 17.86%,INCY up 23%, SGEN up 29% YTD,VRTX up 64.3% YTD.

The next big driver for news should be the 2017 ASCO Annual Meeting in Chicago, June 2-6. In the meantime technicals look good and volatility is minimal. We will update financial metrics on large cap biopharmaceuticals after all earnings have been reported. Here is the last financial review in 2017.

Disclosure: Long ABBV, FBIOX, GILD

 

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