Biotechs Bounce off Bottom on Novartis Deal but Fades Later in the Day…Updates

Updates 4/11/18 Biotechs Holding Above Recent Bottom 4/6/18

FBT up 2.8% over 5 days, up 6% YTD

XBI up 1.77% over 5 days, up 2.19% YTD

IBB down 0.72% over 5 days, down 3.67% YTD

Busted Biotechs Review

In our “Busted Biotechs” article we said that the XBI trade at 83-84 would be good, now at 89. Also Celgene (CELG) still looks ok long term at $88 but in very choppy trading (see technicals). Large caps are barely holding recent bottom but ABBV technicals are improving.

We believe the action going forward will be in Mid-Caps for deals and clinical news and will update our watch list soon. Many of these stocks are up today like ACAD BPMC CLVS ESPR TSRO etc. The XBI holds many of these stocks and will reflect strength in the overall sector. Top holdings include deal stocks like AVXS as well as ARRY BLUE LOXO etc.

So we were helped by the Novartis/AveXis deal and technical are improving but we cannot sink below April 6 lows.

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Biotechs Bounce off Bottom on Novartis Buyout of AveXis (AVXS)

AveXis (AVXS) soared over 81% on Novartis (NVS) offer to buy the Company for $8.7B in cash and sparked another rally in gene therapy stocks . AveXis’ lead product AVXS-101 is expected to enhance Novartis’  position as a gene therapy and neuroscience leader. The FDA has granted AVXS-101 an Orphan Drug Designation and Breakthrough Therapy Designation for treatment of spinal muscular atrophy or SMA Type 1.

Biotech stocks fell through a critical bottom last Friday but today soared in early trading on this deal. Buyer enthusiasm faded later in the day presumably on macro news that chilled the market overall about 2p EDT ending with the S&P down 37 points to 2613 but still positive.. The XBI was still up 2.67% at the close holding near a downside technical level at $85.11.The FBT was a leader up 5.36% to $132.27 and the IBB was up 1.82% trading near its recent triple bottom at $102.87.

Normally this kind of M&A news would be an opportunity to load up on biotechs, especially gene therapy plays, but technicals are still weak and crosscurrents from economic and macro news create a risk- off sentiment.

Gene therapy stocks rallied on the deal: BLUE up 6.48%, CLLS up 1.07%, CRSP up 3.67%, EDIT up 1.47%, NTLA up 2.54%, ONCE up 13.37% and SGMO up 5%.

Agios Pharmaceuticals (AGIO) soared 9.26%, up 33.7% YTD on buyout speculation as a result of the AveXis deal. Agios and 16 other mid-caps were on our momentum and buyout speculation list. AVXS was also on the list.

FBT First Trust NYSE Arca Biotech ETF daily Stock Chart

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