Volatile schizoid markets- Not a Good Time to Add Positions in the Life Sciences

It is very hard to focus on biotech stocks with all the financial distress and chaos in the Eurozone dominating the news. Last week it was Greece today it is Italy  and the PIIGS. As debt concerns mount the new collateral again becomes gold getting back to September levels at $1794. Gold stocks are also strong with GDX at $63 up 2.8% for the day. The market was down earlier but as of  3:30P EST the market is recovering with the S&P and DOW up 0.5% .

Within biotech there is news moving stocks especially with  hepatitis C drug developers : Inhibitex (INHX) announced positive clinical data driving the stock up 153% within 3 days while driving down the stock (and the ETF XBI that holds a lot of VRTX) of premier Hep C player Vertex(VRTX $33) 9.8%.  Analysts are concerned that Inhibitex and Pharmasset (VRUS) will become major competition to Vertex even their drug Incivek is already approved.

Amgen (AMGN $58.33) soared 5.7% announcing a major tender offer deal to buy $5B worth of stock between $54 -60 share concurrent with a senior notes offering. So with i rates so low AMGN can raise money through senior notes to repurchase stock. Get that?

Other movers in the Rayno Life Science portfolio are Cardiovascular Sciences (CSII $9.92) up 10% , GenProbe (GPRO $60.44) up 2.89% and SerCare (SRLS $2.90) up 9%. Down are Optimer (OPTR $10.91) and Seattle Genetics(SGEN $16.61). Overall the mid- cap biopharma stocks are off 0.6% and Dx/Tools stocks are up 0.4%. Large Cap drug stocks are up with the market.More analysis on biotech stocks later.

We have recently re-iterated Seattle Genetics(SGEN $16.69) as a buy at 12 but it has taken a hit on a Piper Jaffrey downgrade on Friday. It is time to look at Immunogen(IMGN $13.21) which is cheaper and is also a play in antibody/drug conjugates. The Company recently received a $1M milestone payment from Amgen.

Note: We have noted recently that ETF traders and investors are better off with QQQ compared to the IBB. The divergence is increasing so that in one month the Q’s are up 7.66% (6.88% YTD)compared to the IBB up 2.3% (3% YTD). Power shares NASDAQ-100 have many of the major large cap biotechs such as AMGN BIIB CELG GILD and  LIFE but recently the tech and internet stocks have outperformed large cap biotech and tools.

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