Update-4 Early am trading shows weakness in COVID vaccine stocks ; Investors are focused on BIG TECH.XBI down 2% to $109 level.
- Vaccines require constant feeding with news flow: AZN BNTX INO MRNA NVAX all in the red.
- Merck (MRK) up 1% on earnings, vaacines and antiviral development (Ridgeback Bio) despite slow growth.
- More Big GOV funding for vaccines as GlaxoSmthKline and Sanofi get $21B.More competition with 7 major players!
teetering on SMA20 line…..
IBB breaks SMA20 and SMA50 support.
Update-3 Coronavirus Trades Shows Resilience with Many Dx Winners HOLX GNMK QDEL
- More promising animal data on COVD vaccine by JNJ.Single dose objective using adenovirus vector elicits neutralizing antibodies with Phase 1/2a to begin in September.
- IBB flat at $137 handle, bellwether XBI catches bids up over 1.4 % at SMA 50 level about 8% below July highs.
- Our top picks and core holdings had big moves today: AZN up 2%, GNMK up 4.7%, HOLX up 8.7%, TDOC up 8.5%.
- Vaccine plays: BNTX up 1.96%, INO up 6.4%, NVAX up 0.9%, MRNA down 2.3%.
- Gene therapy stocks strong with Sangamo (SGMO) up 14% on Novartis genomics deal in Neuro. Added to SGMO long.
- Gilead Sciences miss on Q2 but raises guidance; Quidel up 6% on earnings with revenue up 86%
Update-2 Jy 28…Market weak in late day trading over concerns about coronavirus relief bill with focus on liability shield for businesses. NASDAQ down 1.27%
- Moderna seeking premium vaccine pricing despite $1B government funding.
- Biotechs weak with XBI down 2.94% to $112 handle.
- Coronavirus movers: NVAX up 6.45%, GNMK down 2.825,QDEL down 1.82%,
- Large caps mixed but BMY, MRK and RHHBY eke out gains. IBB down 1.35%.
- Amgen (AMGN) beats with non-GAAP earnings of $4.25, but stock drops 7/29
- Stephen Weiss on CNBC Halftime Report “pumping” MRNA this am 7/29 at $79.
Update-1 Jy 27…A good day for the Market and Biotech IBB up 2.67%, Semis Very Hot SMH up 4.03%!
- XBI up 2.59% to $115.14, 5% below 2020 highs.
- Moderna (MRNA) regains momentum on old news up 9.15% to $79.91.
- Other vaccine movers NVAX up 4.23%, INO down 3.79%, BNTX up 2.8%.
- Diagnostics stocks up GNMK QDEL. Added to Hologic (HOLX) because of 1100 systems in major labs.
- Gene therapy winners: BLUE,CRSP, EDIT, FOLD, NTLA, QURE, SGMO etc.
- Large caps to watch 5% movers: ALXN, BIIB.
Biotech Traders Will Face Strong Headwinds
- COVID cases spiking juxtaposed with vaccine news buffets market daily..
- Speculation in coronavirus stocks will get tempered.
- Seasonality is Unfavorable for biotech stocks.
We have had a good year thus far in biotech and life science stocks but it may get a lot harder in the days ahead. Here are some of the headwinds we will face even in a bull market which is expected to continue through year-end:
- Macro issues for the economy are creating concerns. Monetary stimulus from the FED will continue but the July 31 cutoff for the Cares Act jobless benefits requires new Congressional action or the pandemic recovery could stall.
- Trump has raised the issue of drug pricing again and may pursue legislation and Executive Action as part of an election campaign issue.
- We are in a market driven by momentum traders which makes it susceptible to wild swings of profit taking.Some companies appear “promotional” in vaccine news releases?
- Escalation of China-U.S tensions hits dollar, now at 16 mo. low.
- Seasonality is not not good for biotech and tech stocks with a 10% sell-off likely over the next 2 months.In recent years August/September marked an intermediate top in the IBB. In the great bull market of 2015 the IBB top was hit in mid-July never to be exceeded until the recent month.
Watch technicals for weak price action as many stocks sold off over the past week.Here is a brief scoreboard for this past week’s performance:
IBB down 6.4%, XBI down 6.91%, XLV down 0.72%, QQQ down 3.68%.
XBI-We Need to hold the SMA 50 line at $109. Now 10% off 2020 highs.
The Coronavirus stocks we cover took an even bigger hit this week as you can review in our previous posts. Expectations for a COVID vaccine have improved because of preliminary safety data and good neutralizing antibody responses. COVID vaccine development has been supported by massive government funding. But major efficacy milestones still lie ahead with data coming from larger clinical trials this fall. Many scientists and economists see the coronavirus vaccine as the only solution to the pandemic with news headlines daily.. Speculators and investors are creating a lot of volatility. Everyone agrees that the market potential for a vaccine is huge but pricing and rollout are still uncertain.
We have traded many of these vaccines stocks but currently hold only AstraZeneca (AZN), partnered with Oxford University. We currently view the following companies as leaders in this race: AstraZeneca (AZN, BioNTech (BNTX), Moderna (MRNA) and Novavax (NVAX). Trading in these stocks is driven by the big guys who may have a very low entry price. All of these vaccine stocks are within 20 % of their 52 week highs, but most started at a very low price at the beginning of 2020. All coronvirus plays were hit hard on Friday so next week should give us an important trend line for August. A less risky trade would be to diversify your biotech portfolio with companies focused on antivirals: Gilead Sciences (GILD) and Vir Biotechnology (VIR) but both have underperformed the vaccine stocks YTD.
Our new trades over the past 30 days took a hit last week but are still in the money: Hologic (HOLX), Vir Biotechnology (VIR), We sold XBI and XNCR with a profit. Next we want to focus on Gene Therapy stocks: BLUE,CRSP, EDIT. We are still very bullish on biotech stocks relative to the market.
We will post daily updates on biotech trading trends. Big earnings week coming up.
We urge caution over the next 30-60 days and trim back positions on weakness. Review our portfolio models from a previous post, and hold 10%in cash.