Update-1…1/24/17… Bit of a Rally Leaves Out Healthcare Stocks

Markets rallied a bit today but biotech and drug stocks remain stalled by the Trump triggered bashing two weeks ago. Moreover traders are back to nibbling at the infrastructure theme with materials up 2.3% and energy up 1.09%. Large cap drug stock earnings are coming later this week but Johnson and Johnson (JNJ) did not help today down 1.89% to $111.89 on good earnings but tepid guidance. Large cap biotechs were in the red today but a few mid-caps caught bids: BMRN,CLVS,VRTX.

With so little appetite for biotech and drug stocks wait for earnings season to firm up the trend and look for clarification on ACA policy. Smaller caps look like  a better bet than large caps so watch the XBI in a range of $62-66.


Biotech Stocks Hungover After Trump Tweet

Biotech stocks were getting traction until Day 3 of the J.P.Morgan Healthcare Conference when Trump tweeted out his attack on drug prices suggesting Medicare negotiate for a better deal on drug prices.Trump said on Jan.11 the industry is “getting away with murder”. Although selected stocks have made big moves recently on deals and buyouts the sector has been languishing over the past several days but so has NASDAQ.

  • The IBB has not recovered from the downdraft last Wednesday down 1.58% over five days.NASDAQ is up slightly 0.43% over the same period.
  • The XBI is a tad better flat to up over 5 days holding the $63-65 range.
  • Biotech stocks are mixed today with strength in selective mid-caps:RDUS SGEN VRTX
  • Today CoLucid (CLCD) was up 32% on a $960M buyout from Eli Lilly (LLY). The all cash transaction will bolster Lilly’s pain management portfolio for migraine treatments. A Phase 3 readout of the CoLucid oral 5-HT agonist drug is expected in H2 2017. 36 million people suffer from migraine in the U.S. alone.The drug was previously out-licensed to CoLucid in 2005.
  • Yesterday the Danish Company Forward Pharma settled a patent dispute by entering into a licensing  agreement with Biogen (BIIB) for their Tecfidera MS drug getting a $1.25 B cash fee and a 10-20% royalty on net sales. Biogen stock was stable at $284 but flat YTD after hitting $300 prior to the Trump Tweet. Analysts estimate top line sales growth of 7.1% for 2017.

The next policy issue affecting the drug sector will be the repeal or revision of the Affordable Care Act (ACA) by the Trump administration expected in Q1.

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