Small Caps Hot, Large Caps Not

Curis (CRIS) and Fibrocell Science (FCSC) Lead the Way Up

Biotech stocks could not extend last month’s rally in choppy trading that left major indices up but off mid-week highs. The healthcare sector sold off on continued pricing concerns with bad news Valeant (VRX) still in the forefront and politicians and industry drug pricing getting more scrutiny from the Justice Department and the Senate. And CMS is looking into Medicaid access to expensive hepatitis C (HCV) drugs about the companies’ “value-based” pricing arrangements with  commercial and government health insurers.

Here is a summary on sector and ETF performance for the week:

IBB 330.24 up 1.47% for the week  8.86% YTD

XBI 70.70 up 6.11% for the week 13.76% YTD

XLV 71.75 up 0.57% for the week  4.93% YTD

QQQ 114.79 up 1.29% for the week  11.18% YTD

XBI smaller cap ETF outperformance indicates that large caps are losing ground probably because of sensitivity to earnings and pricing concerns. A case in point on Friday  Celgene (CELG) took a 3% hit on mixed earnings because Revlimid International sales were missed and Abraxane had more competition. Q3 Celgene revenues were $2.313B an 18% increase over the same period in 2014. Celegene is still up 4.36% YTD.

Among large cap biopharmaceuticals there are only two big winners: Regeneron (REGN) is up 37% and Gilead Sciences (GILD) up 15%.

Over the past month technology stocks and the NASDAQ-100 outperformed the healthcare sector by 2-3%. Financials are coming on strong and are up 5.75% the same as healthcare, after the jobs report shifted FED forecasters toward a rate increase in February.

Rayno Small Cap stocks had a good week: ARRY up 0.2%, FCSC up 12.47%, GLYC up 0.88% and RXDX up 1.15%. Our new picks from the recent 15th Annual Bio Investor Forum were strong over the past week: Curis (CRIS) up 22%, Geron (GERN) up 12.4% and Ocera Therapeutics (OCRA) up 4.91%.

Despite a little weakness last week the XBI is at the mid-point of the recent technical bottom and the severe reversal in late September. But overall the XBi is still in a LT downward channel as one would expect in a bear market. So we would to exit the bear we need a Q4 rally to take us above the reversal pivot on the XBI to 80.

Disclosure: :Long FCSC

XBI SPDR S&P Biotech ETF daily Stock Chart




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