9/4/18 see Biotech Weakness -Profit Taking or Caution for September Swoon? 1 PM EDT
FBT down 1.38%, IBB down 1.55%, XBI down 0.73%
Biotech stocks were extremely weak as of mid-day trading. Large caps were unusually weak given that they should be less volatile: CELG down 3.55%, BIIB down 3.06%, ALXN down 2.66%, GILD down 2.55%, AMGN down 2.2%. Does somebody know something about Q3 earnings?
Mid-caps mixed but better with usual suspects up: NBIX up 1.34% NKTR up 1.88%, SRPT up 2.64%; major losers are ARRY down 2.12%, CRSP down 3.87%, GWPH down 3.43%.
We could have another round of tough talk on drug pricing and government negotiation of drug prices not only for the U.S. but impacting International trade.
Last week we nibbled on Tesaro (TSRO) around $32 near its 52 week low . The Company has a broad pipeline of clinical stage product candidates for ovarian cancer and immuo-oncology. Most analysts have a Neutral or HOLD on the stocks which hit a high of $80 in January.The stock tanked when analysts cut the outlook for the drug Zejula with 2018 revenues guided down to $225-235M. TSRO has a 19.9% short position.
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Biotechs surged in August 2018 taking off on August 15 and never looking back with all major ETFs hitting new highs in a broad rally for both large and small caps. The rally coincided with a strong month for tech stocks with the QQQ up 5.8% and the XLK up 6.6%. The big move really started with an unusually strong move in July for the healthcare sector with the XLV up 6.2% as we wrote in Rayno Biobeat #5. The XLV is now up about 11% YTD matching gains for the large cap weighted IBB.
The FBT is up 23.4% YTD!
August gains: FBT up 6.2%, IBB up 4.9%, XBI up 5.1%
In these times of geopolitical and trade risk Investors appear to be focused on U.S. stocks because of a strong economy and top line growth in healthcare from new products and services for an aging population. Although volatility and risk can be expected from drug pricing rhetoric and the potential for reform, it does not look like there will be near term government action.A favorable regulatory environment and strong leadership from Scott Gottlieb M.D. at the FDA assure a flow of new product approvals and clinical trial updates in the coming months.
As we approach a period of weak seasonality in September and October one issue could result that we have borrowed gains for the historically strong fourth quarter. But if we get a few M&A deals and good top line results from Q3 earnings we can continue to do well. The recent breakthrough approval for RNAi targeted therapies augers well for the sector. Alnylam (ALNY) is up 19% over 5 days (but down 75 YTD) since the announcement of FDA approval of a competitive drug by Pfizer although it gained approval for its patisiran drug on August 13.
Raygent Portfolio stocks had a good month as well even though one of our picks Foundation Medicine (FMI) was acquired by Roche (RHHBY) and up 118% YTD and 7X since picked at $20.
Here are other notable winners in the Raygent Portfolio for August :
Abbvie (ABBV) up 4.1%, Biogen (BIIB) up 5.7%, bluebird bio (BLUE) up 8.7%, Celgene (CELG) up 4.8%,XBI up 5.1%.
Mid-cap momentum stocks were mainly green today with big movers: BPMC up 3%, CRSP up 6%,IMMU up 2.9%, NVCR up 4%. Many mid-caps are at 52 week highs.