Biotech Stocks Underperform Market: CELG, EXEL, PBYI, XBI…Updates 5/11…Big Rally on Drug Pricing Speech

Trump Speech on Plan for Lower Drug Prices

5/11 After close. Biotech and healthcare stocks were broadly higher. Key words by HHS Secretary were “complex” and “will take time”; more updates tomorrow. General objectives appear to be to lower list prices and squeeze middlemen like PBMs, offer Part-D type discount with Part-B drugs and promote generic drugs. Here is a brief summary from the New York Times.

IBB up 2.73%

XBI up 2.93%

XLV up 1.43%

XPH up 2.66%

5/11 2:30P …Healthcare and biotech stocks rebounded after President’s speech on drug pricing. Hard speech but light on specifics. Process will take time. Details to follow on market at close. Short covering for sure. Stocks are up: IBB up 25, XBI up 1.9% XLV up 1%, XPH up 2.19%.

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Biotechs Underperform and Lag Market Indices on a Good Day-NASDAQ up 0.89%

Trading Range Requires Good Stock Picking Skills, XBI is down 0.85% to $89.04

Stealth Buyout with Lilly Acquisition of ARMO BioSciences

Biotechs underperformed despite a good opening with the XBI trying to break through the SMA 50 level but fell back around mid-day. Some good news helped at the opening but momentum eased later in the day maybe because of anticipated drug pricing rhetoric in the news or lack of clinical breakthrough news. A Trump “populist” speech on drug pricing is expected tomorrow.

Lilly (LLY) stepped up to acquire ARMO Biosciences (ARMO) for $1.6B, or $50/share to bolster its clinical pipeline in immune-oncology. ARMO’s lead asset is pegilodecakin, a PEGylated IL-10 is being studied in multiple tumor types with a Phase 3 trial for pancreatic cancer. The ARMO stock soared 67% today to $49.81 near its 2018 and 4 month high in the $55 range. ARMO went public this year on 1/30/18 at an IPO price of $17!

Large caps were mixed, IBB was flat, but Abbvie (ABBV) looks strong up 1.65% near the $103 level. Celgene (CELG) is stuck near the 12 month bottom down 0.5% and is becoming. drag on the overall sector. More upside action was printed in the Mid-Caps among usual suspects: AGIO, ARRY, ARNA, BLUE, CLVS, LGND, NBIX,  But a few well known stocks were hit hard: Exelixis (EXEL) was down 13% on a Phase 3 trial results of a Cotellic an MEK inhibitor with Tecentriq an anti-PDL1 antibody that failed to improve survival in metastatic colorectal cancer compared to Bayer’s Stivarga; PUMA Biotechnology (PBYI) sunk 18% on concerns about Nerlynx (neratinib) its first commercial product for early stage HER-2 positive breast cancer. Q1 revenues were $36M .

Disclosure long ABBV, ARRY, CELG

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