Biotech Buzz Is Broken…Update 4/30…#2

Gilead (GILD) Gilead Beats Q1 Estimates: $7.4B Sales HCV , EPS $2.94, stock up 2% after hours

XBI Down Another 4% Down 12.84% in Five Days

Weak Tape and Sell-Off Continues…4/30…NASDAQ at 4991

  • XBI down 1.6% now at 2/24 lows at 212
  • High fliers hit with profit taking…ADRO, AGIO, JUNO, KITE etc.
  • Large cap Celgene Corp. (CELG) down 3.4% on CELG Revenue miss with Product Sales of $2.05B
  • Our top large cap pick Gilead Sciences (GILD) is up 8% YTD vs CELG down 2.4% YTD
  • Look for healthcare sector (XLV) to stabilize near $72

Sentiment Shift-Correction Underway

Red Tape Prevails Today as of 11am Trading

Many market pundits seemed shocked at the vicious biotech sell-off. But if you look back over the past six years of this biotech bull market there have been several downdrafts. The current sell-off  looks exactly like the correction in the early spring of 2014 after the Q1 mini-bubble. Volatility is the norm.Institutions dominate this market and they are taking profits.Review our recent article on trends in the market and keep in mind that sentiment and momentum are key. Moreover valuations for multi-$B biopharma mid-caps are historically high and difficult to measure except on a relative basis.The speculative fever in “immune-oncology” and CAR-T stocks is broken for example JUNO and KITE are now down YTD.

Some signposts for market direction are:

  • Strength in NASDAQ which hit a high on 4/27 up 6.5% YTD.
  • News or themes that reinvigorate sentiment.
  • Data will be forthcoming from the ASCO Meeting a month away.
  • Healthcare sector leadership up 6.8% YTD.
  • Positive earnings from larger cap biopharmaceuticals- Gilead (GILD) and Regeneron (REGN).

Analysts hate to hear this-technicals rule in the meantime.The bull market is intact but it is time to be cautious. The sector is still up 15% YTD but 10% off highs of just one week ago! We would hold core life science positions and bring cash to the 10% level until the tape improves.

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