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.