Update-1… Gilead Sciences (GILD) Sells Off on earnings

Gilead Sciences (GILD) sold off over 4% after hours after releasing second quarter sales of $7.7B and earnings of $3.08/sh. Q2 profit forecast beat. The full year revenue forecast was also cut slightly by $1B to the $29,5B-$31.5B range. Pricing pressures continued on Hep-C drugs and new competition from Merck (MRK) and Abbvie (ABBV) showed an impact. Cash flow from operating activities was $4.9B for the quarter.

Biotech ETFs held near highs at the “triple top” but Celgene (CELG) sold off 3% after hours on disappointing survival data for Revlimid in a lymphoma study.

NASDAQ was flat at 5097


Biotechs Boosted by Biogen (BIIB) Earnings-Breakthrough on Technicals for IBB

After Brexit on June 27 we put in a buy recommendation with a target of 270 on the IBB. After this level was exceeded we gave a second target of 280 reached today. Biogen (BIIB) catalyzed more gains today rising over 7% after it exceeded Q2 forecasts. Revenue climbed 12% over prior year to $2.89B boosted by sales of multiple sclerosis drugs and a hemophilia treatment.Net income grew to $1.05B or $4.79 per share. There are high expectations for an early readout from Phase 3 results for the Company’s Alzheimer’s drug Aducanumab (BAN2401) despite mixed earlier clinical data. Estimates were raised for 2016.Among the large caps BIIB was a big laggard since last summer and is still down 31% over one year and 8.8% YTD.

The XBI is also hovering near its recent triple top in the $59-60 range, Other large cap biopharmaceuticals that are strong today: CELG up 2.35%,REGN up 1.96%. Mid caps were stronger:  INCY SGEN VRTX all up over 2%. Relypsa (RLYP) soared 58% on a $1.53B buyout by the Swiss Company Galencia.

One year ago in July 2015 we were at the peak of the bio-bubble when the IBB hit $400, stabilized at $333 by year end then sold off in January to lows in the $240 range.

  • Pricing concerns remain as a backdrop to the industry but it should be built into current stock prices.Wholesale drug prices are up 6% YoY and have provided much of the industry’s revenue boost. Politicians have criticized pharma companies on drug pricing but no proposals have come forward.
  • Green screen day boosts most biotechs. IWM weakness curbs gains.
  • Global uncertainty remains a risk but central banks provide support.
  • Large cap drug stocks have benefited from investors seeking dividends.
  • Although the healthcare sector has been a laggard it still has top line growth potential.

Risk is on for biotech. Rally would be stronger if NASDAQ was in synch today. Biotech stocks should be higher by year-end. Earnings on major large caps need to support rally.



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