Biotechs Mired in a Trading Range: Breakout Delayed…Update-3

Update-3…ASCO Movers Today 5/18:  IBB up 1.28% to $292.27, XBI up 2% to $70.

Nice follow through in biotech after a nasty day on 5/17 attributed to ASCO and a move away from the “Trump Trade” (industrials and materials).  Mid-caps and small caps were very strong.

Large Caps: MRK up 1.35%,REGN up 2.38%.

Mid Caps: BLUE up 2.73%,CLVS up 8.18%,INCY up 6.9%, KITE up 2.69%,SGEN up 6.36%, TSRO up 6.7%, VRTX up 3.1%.

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Update-2…After Hours Movers-Data Dump From ASCO

Without analysis and details here are two stocks moving AH today:

GlycoMimetics (GLYC) up 36% to $7.30 on Breakthrough designation for Acute Myeloid Leukemia Drug.

Incyte (INCY) up 9% to $131.70 on combo immunotherapy cancer drug with Merck (MRK) Keytruda for lung cancer.

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Updates this week on: AZN BLUE BMY CELG CLVS JUNO KITE PBYI including CAR-T therapies.

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Update-1…2:30P EDT  Broad Sell-Off Hits Biotech Stocks-Session Lows

NASDAQ is down about 2.3% so it will be hard to rally biotech even with ASCO Abstracts coming up later today. The IBB is down 1.8%, XBI down 2.48%. Bucking the downdraft are: CLVS up 2.11%, EPZM up 2.94%, INCY up 3% and PBYI up 14.8%.

S&P down 1.67%

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Biotechs Mired in a Trading Range with Potential ASCO Catalyst

Bulls Have the Edge

Sector Looks Attractive Despite Volatility

Prices as of 11am PDT May 16

After two attempts at a breakout in 2017 biotech stocks are mired in a trading range with a choppy pattern but off lows of late February. The major biotech indices ETFs are still beating the market YTD: IBB up 12.2% at $294, FBT up 19% at $108.31 and XBI up 18.6% at $70.38. Even though well-known large cap biopharmaceuticals are lagging the sector there are several mid-cap growth stocks with broad pipelines and unique technology that are providing “alpha”: Alnylam (ALNY) up 76%, Agios (AGIO) up 28%, Incyte Corp. (INCY) up 18%,  Seattle Genetics (SGEN) up 19% and Vertex (VRTX) up 57.7%. So the sector remains strong because investors and traders still see the biotech opportunity because of M&A and breakthrough therapies. With ASCO coming up on June 2-6 the potential news catalysts should be there.

Consider the once red-hot CAR-T stocks, covered from the Bio Investor Forum in 2014, that promise lasting cures for cancer through gene therapy:

  • Bluebird bio (BLUE) is up 44% YTD to $88.85. 52 week high was $100.40.
  • Cellectis SA (CLLS) is up 46.6% YTD to $24.80. 52 week high is $34.23.
  • Juno Therapeutics (JUNO) is up 36.76% YTD to $25.80. 52 week high was $49.72.
  • Kite Pharma (KITE) is up 67.62 % YTD to $75.30. 52 week high was $88.58.
  • ZIOPHARM Oncology (ZIOP) is up 36.45% YTD to $7.28. 52 week high is $7.99.

Most of these stocks that were featured in the October 2014 article have 2-3X returns despite some high-profile clinical failures. Kite Pharma (KITE) plunged 10 points from a high of $84 after reporting a cancer patient death from brain swelling. Despite being downgraded by at least 3 bankers the stock has recovered 5 points.The recovery in these more speculative stocks confirms a rising bullish sentiment.

We have passed through earnings season with very few disappointments leaving valuations quite reasonable looking at EPS for the next year despite the slower top line growth. However the barrage of drug pricing articles and “Trumpcare” concerns about fewer patients, investors  apparently still see value in life science innovation.Now that the Trump agenda of tax cuts and regulatory reform has stalled technology has been a winner and healthcare is still up 9.8% YTD.

Investors with a balanced portfolio can hold positions through ASCO at this time. XBI can be added for a more bullish expectation. A break-out from the upward channel and holding above $300 brings us out of the bear market which began with the fall from July 2015 peak. On the downside we need to hold early February lows of $64 to confirm 2017 expectations.The major risk remains political tied to healthcare policies and “repeal and replace” of the Bill recently passed by the House.

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