2/5/16 …11:20 AM Biotechs Can’t Hold Gains …Drop Back Near 52 Week Lows Hit Wednesday

IBB $261  XBI $48

Update-2 At Close 2/4/16… Nice Rally But Off Earlier Highs-Very Stock Specific

A nice snap-back rally with a lot of green screen across the board. A tradeable rally but we need follow-through next week. Your favorite stock should be up today or you need re-balancing. Notable winner Intrexon (XON) up 12%; notable loser Ultragenyx (RARE) down 7.18%. First IPO Editas Medicine (EDIT) focused in genome editing up $2.50 from $16 opening raising $94.4M Wednesday.

IBB up 0.26%, holds technical bottom near $262, XBI up 2% to $50, 52 week low at $46.86.

Rayno New Picks: ABBV flat, GILD up 0.34%, BLUE up 8.79%.


Update-1… 11 am EST… Broad Biotech Rally Underway 

IBB up over 2%, XBI up over 4%

Technical Bottom of $262 on IBB Holds


New Buys in Biotech: Two Good Values ABBV, GILD and One Speculative Play BLUE

Biotech Stocks Are Still Risky But Are Due For A Rally

Yesterday we published our first installment of the Rayno Life Science Portfolio for 2016. We believe large cap biopharmaceutical stocks will be less volatile and will outperform small caps as the sector bottoms in Q1 2016. The biotech sector is down over 20% YTD and has been in a bear market since September 2015 despite a Q4 rally. Unlike market trends in 2015 the biotech downdraft has coincided with negative macro news flow and even correlation with crude prices. A strong dollar remains a major risk for multinationals. One assumption is that the negative sentiment on future drug prices is already reflected in the market.

  • Technicals: risk remains in the sector and an intermediate bottom cannot be certain until the IBB stabilizes near $260.
  • Abbvie (ABBV)…$56.49… offers good value has a robust product portfolio, a forward PE of 10.73, a PEG of 0.85, a P/S of 3.86 and pays a 4.23% dividend. Revenue growth is expected in the +13% range for 2016.
  • Gilead Sciences (GILD)…$85.80… has exceptional value but the stock has been hammered by concerns about competition for its HCV product franchise. Revenue is expected to decline by 2.95% in 2016. Forward PE is estimated at 6.84 with a PEG of 0.52. Dividend is 2%.
  • bluebird bio (BLUE)…  $43.75…is a speculative play in gene therapy with the potential to cure two blood diseases beta thalassemia and sickle cell disease with its lentivirus (LentiGlobin) technology. BLUE’s T cell therapy (CAR-T) ex-vivo gene therapy platform has potential for treatment of hematologic and solid tumors such as multiple myeloma. Stockholder equity is $889M with about $700M in cash and investments (as of 12/31/15).

The Rayno Life Science Portfolios are under review pending 2015 earnings reports/guidance and general market conditions in particular the strong dollar.

Next a review of the Rayno Diagnostics and Tools Sector.

Disclosure: Long all three stocks ABBV, BLUE, GILD.

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