Update-1 March 10… http://fiveonenine.ca/tag/macro-photography/ Broad Rally Continues Through The Week
QQQ Up 4.3%
IBB up 4.3%
click XBI up 4.8%
Biotech stocks soared along with the market as fear about interest rates, tariffs and global politics subsided helped considerably by economic sentiment and jobs. Moreover the employment report showed wage gains revised downward so inflation concerns are muted.
Biotech and tech remain sweet spots in the market and investors piled on expecting top line growth. We are at or near 52 week highs for biotechnology stocks reached in late January before the dark days of February and the 10% sell-off. There is a broader story in biotech helped not only by the M&A theme but emerging technologies at the clinical stage like gene therapy. We first wrote about CAR-T and gene editing in 2015 and added our first pick bluebird bio(BLUE) in February 2016 at the time of the Editas (EDIT) IPO. It seemed early stage at the time but less than three years later two of the Companies Kite Therapeutics and now Juno Therapeutics (JUNO) is being acquired.
We picked BLUE at the $44 level and it has more than quintupled since 2016 up to $231.95 this week. All gene editing stocks rocketed up this week so we need to find more time to follow this emerging technology. One month performance: Crispr Therapeutics (CRSP) up 62.6% at $56.72, Editas Medicine(EDIT) up 30.8% to $44, Intellia Therapeutics (NTLA) up 48.85% to $34.95 and Sangamo Therapeutics (SGMO) up 34.4% to $26.35. Keep in mind none of these gene therapy companies have products on the market and the stocks are volatile. We have traded most of them and currently hold Intellia (NTLA) a gene editing Company focused on liver diseases currently at the pre-clinical stage and partnered with Novartis and Regeneron.
Whaaat? Even Celgene (CELG) is catching bids up to $92.75!
Biotechs Buffeted By Trade Talk, Rising Rates and Political Drama
Technicals Look Favorable for H1 2018
Remain Bullish Despite Uncertainties of the News Cycle
Biotechs outperform in 2018 having recovered most of their losses from last week’s volatility caused by dire tariff talk and higher interest rates, raising concerns about the impact on global growth. Tariffs are basically taxes and can create many losers in the U.S. economy especially autos, energy and even the defense industry. Should trade war talk and other political concerns ease, investors will get back to the basics of life science investing particularly M&A, product pipelines and clinical milestones. In the meantime technology and biotechnology are poised for a rebound off February lows. Here is performance over the past five days and YTD for key ETFs, outperforming most major indices:
- FBT up 0.59%, up 11.78%
- IBB up 0.16%, up 3.83%
- QQQ up 0.2%, up 7.75%
- XBI up 0.91%, up 10.03%
- XLV down 1.09%, up 2.08%
Yesterday biotech rebounded across the board with not much significant news and the Rayno Biopharmaceutical Portfolio continues to do well despite the February sell-off.
Large caps rallied with Amgen (AMGN) up 2.73%, Roche ADR (RHHBY) up 2.4% both on our focus list. Gilead Sciences (GILD) was down 0.98% but was up after hours on a Phase 3 study with Biktarvy (R) on adult women with HIV infection.
Celgene (CELG) is still struggling at the $89 level but off its recent lows. Three analysts have downgraded the stock to “hold” over past 3 months.There is value here for long-term investors but we first need to get through another quarter of earnings to shake out any more bad news. Keep in mind that the Celgene tender offer at $87 for Juno Therapeutics (JUNO) has closed on Friday.
Many mid-caps were strong today which is a bullish sign:ALNY BLUE INCY NBIX SGEN TSRO. bluebird bio (BLUE), our top speculative pick in gene therapy and CAR-T technology, was up 4.5% and is now up 21% YTD. Small caps were in a green screen mode. We recently added Karyopharm Therapeutics (KPTI) and the XBI as trades.
We follow the technicals on XBI and expect a move to the $95 level assuming no intervening shocks from the macro news cycle. Maybe the Cowen Annual Healthcare Conference next week on March 12 in Boston can provide positive news to override the political drama that is likely to continue.
Disclosure long CELG FBIOX GILD KPTI NTLA RHHBY SGEN XBI