Update-1 Jan 23, 2018… Biotech Breakout Rally Continues
The biotech rally cruised on to the second day with the smaller cap, equal weighted XBI moving up 2% to $95.82 a 12 month high. The large cap weighted IBB followed up 1.12% to $116.81 also a 12 month high. The media especially CNBC trucked right along with the hot biotech theme driven by M&A. Large caps were more subdued and mixed but ALXN, CELG and REGN were up over 1%. Celgene found support at $100 after the Juno buyout news then moved back to the $104 level today.
We are still below peak valuations for the IBB hit in July 2015 . The values from 7/15 are 132.5 for the IBB and $90.36 for the XBI. The XBI has hit an all time high as of this week.
Mid-caps soared today, being thought of as beneficiaries of M&A. Big movers today were: ALNY up 4.6%, BLUE up 2.85%, BPMC up 3.88%, CLVS up 5.65%, GWPH up 4.46%, SAGE up 7%,TSRO up 6.9%. But be careful because PUMA Biotechnology (PBIO) fell 29.3% after hours from $90.90 to $64 because of a negative trend news from the European Medicines Agency (EMA).
Biotech M&A from Sanofi (SNY)and Celgene (CELG) Deals of $20B Sparks Hot Trading in Sector
- XBI is up 5% to a breakout level, IBB up 2.88% as of 2P trading.
- bluebird bio (BLUE) another CAR-T leader soars over 12%.
- Broad rally with green screen especially with small caps.
Two major deals sparked a broad rally across the sector with almost every stock in the green. M&A is one of the major drivers of the sector and was a bit slow in 2017 so we could be seeing an active year for dealmaking especially with ample financing available.Shelf registrations as of 1/18 show financing robust especially with large cap cash holdings coming back from abroad.
- Sanofi (SNY) will acquire Bioverativ (BIVV) for $11.6B in a cash and debt deal which will be accretive for Sanofi. Bioverativ was a spin-out from Biogen (BIIB) just a year ago and strengthens the Sanofi position in rare diseases and haemophilia with revenues in the $1.1B range.
- Celgene (CELG) will pay $9B for Juno Therapeutics (JUNO) a major CAR-T player with an oncology pipeline utilizing cellular immunotherapy with potential 2019 sales of $3B.
Rayno Biopharmaceutical stock picks including the XBI kept pace with the rally: ABBV AMGN BLUE, but small and mid-caps soared as speculation for the next deal drove all biotech stocks higher. See this post from last February on biotech ETFs for longer term investors.