Traders -look for a turnaround in small cap biopharma and medtech today. NAZ at 7890.

5/10 1:30p EDT….Well we know now that even biotech stocks are not immune to tariffs.  Risk off. Major ETFS IBB at 104.5 and XBI near 84 are at intermediate support and off lows for the week. But despite a bad week many small and mid-cap stocks have been doing well and today some green is emerging: BOLD ICPT MRNA  NKTR SRPT VYGR XNCR. However the political chat against high drug prices are trashing large caps.

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5/7 2p EDT: Market Sells Off on Geopolitical Uncertainty -S&P Down 2%, NASDAQ Down 2.3%.

XBI Down 2.8% to $85-Previous Support Level

Remarkable Rally Monday after Trade War Talk.

Likelihood of Delayed Trade Talk Deadline but 25% Tariffs Still Coming on Friday

5/6/19 After close: Stocks steadily recovered after the opening today bringing the NASDAQ to 8123 down only 0.50%. Healthcare was in the green with the XLV up 0.51% to $90.62. Apparently more investors are coming to believe that “Medicare for All’ is a long shot politically and the demographics favor growth for medical services.Here is a snapshot of today’s action:

  • ETFS: IBB up 0.85%, XBI up 1.68%, FBT up 0.29%.
  • Medical providers took off after the drubbing of two weeks ago: IHF up 2.11%, UNH up 3.69%, THC up 6.26%.
  • Gene therapy stocks were winners: CRSP, NTLA, VYGR etc.
  • Mid caps were mixed with many winners.
  • Large cap 1% + leaders: BIIB, REGN.
  • REGENERON (REGN) earnings- Reports Tuesday am.

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Biotech Week Ending 5/4/19: Bit of a Rally But Still Down for the Week

Trump’s tweets rattle markets, risk off.

Large Caps rallied last week: BMY,GILD.

Biotech stocks survived a choppy week but ended up pretty much where they started at levels earlier in the week with the IBB at the $108 level below the 2019 triple top of $115. The good news is that the large caps survived Q1 earnings, and despite a reset on guidance, the bearish scenario triggered by the politics of  ‘Medicare for All”. Likewise the XBI perked up to the $86 level on Friday but off the SMA 50 trend line near 89. Clearly biotech stocks need help from a strong NASDAQ considering the headwinds from a weak healthcare sector where the XLV momentum has been weak despite a reversal from the $86 level to $90. You will remember last June 2018 through July 2019 we had big moves in biotech stocks driven by ASCO Clinical news for immuno-oncology drugs. At this .time it is hard to imagine a similar huge move triggered by breakthrough therapies given the new drug pricing paradigm being sought by politicians. Here are some trends that could help drive the sector higher:

  • Clinical data from CAR-T, gene therapy stocks still with big potential for cures.M
  • More M&A deals expected.as well as licensing.
  • Data from blockbuster drugs that can adress important diseases. e.g. NASH (nn-alchoholic steatohepatitis), cardiovascular, neurodegenerative.
  • And of course FDA approvals for rare disease therapies .

Moreover as you review valuations post-earnings we could be reaching a level where large caps offer value plus growth because of attractive dividends. As we mentioned n our Large Cap Biopharma Wrap-Ups last week here are two large caps that offer value at present levels assuming their pipeline offers growth:

BMY: Price $48.60, P/S 3.52, Fw P/E 10.73, ROE 37.3%, Div. 3.37%. Celgene merger potential.

GILD: Price  $67.13, P/S 3.90, Fw P/E 9.68, ROE 25.2, Div. 3.75%.

Heads Up: As of writing this blog the S&P Futures were down 1.74% because of the news that Trump is unhappy with the negotiations with China and will impose additional tariffs.on $200B of China goods. Trump tweets have become the new wild card for markets.

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