Biotech Bounce-Caution on New Positions

IBB up 2% at 340 support level

Most biotech stocks are green as of early trading on May 1. Although the sector has taken a beating since April 23 most ETFs and funds are outperforming the market year to date up more than 10%. As we posted earlier this week the reversal began near the IBB top last Friday and headed south all this week. The XBI hit a double top in the $240 range and could not break through to new highs. Earnings from both Biogen Idec (BIIB) and Celgene (CELG) were good but the growth rate disappointed investors. Gilead Sciences Gilead Sciences Chart and News (GILD)), our top large cap pick, is helping the market today up 4.3% with  outstanding earnings and revenue growth announced yesterday.

Here are a few of the speculative excesses of 2015:

  • Arduro BioTech (ARDO) an April 16 IPO priced at $17 soaring to $49 now down 40%.
  • Juno Therapeutics (JUNO) hit $65 in mid April and is now at $44 down 15.8% YTD.
  • Kite Pharma (KITE) a clinical stage CAR-T company soared to $89 in January and is now at $50.

The biotech bull market has been damaged but life science stocks should outperform in 2015 because the key drivers remain intact: M&A, revenue growth, molecular medicine/genomics and relative insulation from macro events. Nonetheless the manic momentum mode of this six-year-old bull has been curbed.

Review again our Trends to Watch in Biotech from 2/13. All five points are relevant to this correction.

Here is a brief summary of 2015 performance including most of our picks:

ETFs Compared To Funds April YTD

FBIOX up 11.23% at $236.82, IBB up 10% at $333.66, XBI up 10.66% YTD at $206.33

Rayno Large Cap Motif

Alexion (ALXN) off 8.5% YTD at $169

Amgen (AMGN) off 0.87% YTD at $157.9

Biogen (BIIB) off 3.94% YTD at $379.9

Gilead Sciences (GILD) up 6.63% YTD at $100.5

Regeneron (REGN) up 11.5% at $457.5

Roche ADR (RHHBY) up 5.56% at $35.9

Rayno Mid Cap Motif

Alkermes (ALKS) down 5.45% at $55.37

Clovis Oncology (CLVS) up 43.5% at $80.36

Seattle Genetics (SGEN) up 6.88% at $34.44

Vertex Pharm (VRTX) up 3.77% at $123,3

Cubist and Pharmacyclics were both acquired.

Recent Small Cap Picks


Disclosure: I am long FBIOX, GILD, RHHBY as core holdings. Long FCSC and RXDX as trades.





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