Update-2… 6/27  2p EDT…Good day for gene therapy stocks My longs CRSP and MGTX are up. Looking better all across the screen in biopharma. Added to ABBV and XNCR yesterday. XBI up but still under $86.

Update-1… Another Big Deal in Biotech in a weak biopharma sector

  • Stock picking more critical.

You have heard for many months about analysts’ concern for Humira sales at Abbvie (ABBV) and today you heard the $63B solution-buy Allergan (AGN) the botox maker. ABBV dropped 16.25% while AGN soared 32.86%. In other news US stocks sold off with NASDAQ cratering 1.5% on FED- speak (quarter pt cut yes, half pt not) and a slightly weaker Consumer Confidence reading,

The biotech tape was a tad better than yesterday but major ETFs were weak ; IBB off 0.21 % in a lackluster large cap group although value play BIIB crawled back up 1.86%.The bellwether XBI was down 0.38% but many mid-cap winners advanced:Gene therapy stocks saw gains especially MGTX up 7% and EDIT up 4.77% but everybody’s fav Sarepta (SRPT) down 2.5%.Mid caps were mixed but Xencor (XNCR) rocketed13.86% to $38.56 on no apparent news.


Biotech Stocks Muddled by Macro-Is the Rally Over Already?

Unusually bad day for biopharma across the board.

The Market is Too Dependent on a G20 Trump/Xi Positive Outcome.

Biotech ETF Momentum Peaked Last Wednesday on a “Deal Day”.

Biotech stocks made good moves last week propelled by the Pfizer (PFE) acquisition of Array Biopharma (ARRY).  But today a tape reversal was probably triggered by news that the merger of Bristol Myers (BMY) with Celgene (CELG) would be delayed by the FTC requirement that Celgene’s blockbuster psoriasis drug Otezla needs too be divested. Both stocks got hammered today. This FTC action could create uncertainty in M&A for other big deals being considered or were under Regulatory review.

Adding to  the uncertainty would be the usual “undertoad” of trade fears, a G20 Meeting and twitter attacks on Iran all of which curbs buyer enthusiasm.  Despite easy money recently confirmed by the FED and help from the tax cuts we still have uncertainty.  For example any financial gains in specific industries can be hurt by a tariff impact such as Home Depot (HD) stock today down 1.86%. Todays’ trading reflected that caution with the NASDAQ down 0.32% awaiting the Trump/Xi Meeting which will dominate the news this week.

Trading is also being roiled by global tensions with precious metals soaring, a dollar index at 3 mo. lows, cryptos rising and bond yields falling.

It is hard for small and mid-cap life science stocks to rally if the NASDAQ and the Russell is down and today many small and mid caps bios were hit hard.

  • The XBI was down 2.74% to $84.87; we traded out of our position at $86. The IBB was down 2% with good volume and unable to clear $110 last week.
  • IWM, IJR small caps are being avoided. The Russell 2000 (IWM) is down 1.21% today.
  • Large cap techs are holding up well today.

Here is a snapshot of biotech stocks by sector today.

Gene therapy: many big losers of more than 4%, VYGR down 7.18%! MGTX up 0.89%.

Mid-Cap Biopharma:all 33 stocks we track are in the red with many 3-4% down.

Large Cap Biopharma: Merck(MRK) was a winner up 1.11% to $85.51. Alexion (ALXN) the hot stock of last week was down 4.09%. Earnings will be announced on JY 24.

We took profits in XBI with the weak tape and the inability to rally past $90 after the great M&A catalyst last week. We would urge traders to limit new positions this week and underweight biotech. Investors may be interpreting the FTC action on BMY as cautionary for 2019 deals.We will publish an update after the close tomorrow.

Disclosure long ABBV, BMY, CELG, MGTX,

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