Weakness in NASDAQ and Earnings Miss Gives an Excuse To Sell

The Blistering 14% July Run in Biotech Comes to an End

It was inevitable that something would cause biopharmaceutical stocks to falter. Today it was overall weakness in the market and a miss by the highest of high fliers Regeneron Pharmaceuticals (REGN $253) off 6.8% on double average volume, but still up 48% YTD. The stock hit a double top at the $280 level.Q2 Sales of Eyelea Injection for wet age-related macular degeneration were $426M with the Net Forecast for 2013 raised to $1.3-1,35 B. Net Income for Q2 was $198M or an EPS of $1.73. Some analysts expected $1.81 on Sales of $458M.  Many analysts just reiterated outperform and raised their targets based on the pipeline such as Eyelea for DME. Regeneron (REGN) has been on our buy list since 2/2/09 at a price of $17.50

Goldman jumped on the negativity with a list of 40 overvalued stocks including Celgene (CELG) down 3.5% but up 80% YTD!

A comparison of Celgene and Regeneron:

Price              Market Cap            P/S                PE            PEG

CELG                  $141.75         $60.8B             10.25         41         1.86

REGN                  $253              $26.2B             16.55         36.6     1.46

We all know that valuations are a bad metric in biotech but Celgene (CELG) was an under performer until early January when a few major analysts “discovered” the laggard. Looking at the technicals of CELG it looks like in a sell-off mode  it could back down the $130 level.

Try to do a financial analysis on this biotech focused on a rare disease for hypercholesterolemia which costs almost $300k/year to treat one patient: Aegerion (AEGR $91.84) with a market cap of $2.65B and forecasted 2013 $7.7M in Sales. The stock has tripled YTD and will lose $2.16/share in 2013. The bulls are betting on Sales of $176M in 2014.

The biopharmaceutical sell-off is gathering steam as we head to the close with many 2%+ movers down. High fliers down are : Albany Molecular (AMRI), Clovis Oncology CLVS) and Pharmacyclics (PCYC).

We will update this post after the close.

Our mid-cap index of 50 biopharma stocks was down over 2% with only four winners: ARQL,PBYI, PCRX and TRGT. Tools and diagnostics stocks were less impacted in this sell-off. The last correction in biotech was June after a mid-May high nera $187.

We are at all time highs (IBB $200) as of last week. No change in our portfolios but have a 10% cash position.



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