Update-2… 945 am EDT… Biotechs Hold Support 

IBB up 1.55% to $285 holding support at $280; XBI up 2.99% to $61.95 holding support at $60.

Update-1…More Fallout from Mylan (MYL) EpiPen Drug Pricing

MYL stock was down over 4% today on news that the EpiPen was mis-classified as a generic drug and that Medicaid was overcharged. The media firestorm continued and lawmakers promised (once again) to scrutinize drug prices. Sen. Klobuchar was on CNBC today making the case that Mylan overpriced the EpiPen in the State of MN because of generic classification.

The healthcare sector is languishing since early August so we will need time to digest the negative news. Compare sector stock rotation to see when generalist investors add to healthcare holdings.

NASDAQ was up about 0.40 % today but the IBB was off 0.5% holding $280 support and the XBI was off 0.25% holding support at $60.

XLV Health Care Select Sector SPDR ETF daily Stock Chart


Healthcare Stocks Lag the Market

Hangover from EpiPen Pricing  May Take Time to Clear

The healthcare sector was one of the worse performers YTD and down 3.24% in August as tracked by the XLV Health Care SPDR ETF. This underperformance lowers the YTD to only a 1% gain. Among the leading sectors YTD are Telecom (IYZ) up 11%, Energy  (XLE) up 13.6%, Utilities (up 11%) and Materials (XLB) up 12%.

Biotech stocks (IBB) were also down 2.94% for the month despite a nice recovery through most of Q3 until getting hit as collateral damage by the Mylan (MYL) EpiPen media downdraft.  The IBB rallied from $250 to the $300 resistance level settling today at $280 near term support.

The XBI tracked the IBB down 3.19% for August and down 14.4% YTD.

  • Bellwether Celgene (CELG) was off 4.86% to $106.74 for August after hitting highs of $116 in early August. $106 is a key support level.
  • M&A is still a bullish factor in the market, maybe more so with price increases limited and inversions stopped.
  • Large caps earnings for Q2 were OK with no big surprises. Is there value?
  • Gene therapy stocks got hit today perhaps because large cap Novartis AG (NVS) is dropping  development and cutting 120 jobs. BLUE, JUNO,and KITE were down.
  • Risk remains off but there is a good possibility that large fund managers will rotate money into healthcare where there is more growth potential.We are still betting on a fourth quarter rally so Rayno Portfolio stocks including IBB are still a  hold.
  • Here is an excellent summary of the recent drug pricing issues .

Drug pricing is a recurrent theme in the healthcare sector and was in the background until the Mylan story hit.

Disclosure long: BLUE,FBIOX


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