On a day-to-day basis, healthcare stocks will lead the market in daily performance. In the healthcare sector, there is always a 10% - 20% daily performer, if not several. The healthcare sector always has the most stocks that lead the market in yearly gains, and is also the most disappointing sector as promising stocks do not always materialize. In this article, I am looking at four of Monday's biggest moving biotech stocks. These are stocks that have set the bar for the remainder of the week, and that should be followed closely.
The first stock you should watch rallied by 7.50% on Monday, Spectrum Pharmaceuticals (SPPI). It is the only stock on the list that was driven higher without any news, key developments, etc. There was however, a really good technical article written by thestreet.com that correctly called its breakout if the stock could surpass $12.75. The $12.75 point of resistance is often discussed by SPPI bulls, which can be found by reading the message boards on Yahoo! or on stocktwits.com. This is one of the most heavily shorted stocks in biotechnology, but also one of the more promising long-term plays. I think it's a good watch because, as the short squeeze begins, the stock could rally to new highs, as often occurs. The company is also buying back shares aggressively, projecting revenue north of $300 million, and just completed a very important acquisition that should allow for all of its drugs to grow faster and longer. A definite stock to watch!
Jazz Pharmaceuticals (JAZZ) posted the most impressive rally to new highs with its near 15% gain on Monday. The company won a long-lasting patent fight against Roxane Laboratories regarding Jazz's narcolepsy drug, Xyrem. The Markman ruling gives Jazz's fast-growing drug, Xyrem, protection from potential generic pressure (from Roxane). This is a huge win for JAZZ, as this concern has been on the minds of investors for quite some time. Last week, the stock also rallied following patent news related to Xyrem. Now with patent protection, and it being free of generic pressure, the stock should appreciate and perhaps reach a valuation that properly reflects the fast-growing company. The stock currently trades with a forward P/E ratio of just 9.65, which indicates upside that investors should watch for over the next week, now that a lot of questions have been answered.
Whenever a $47 billion biotech stock rallies 6%, you expect that the reason is related to a crucial patent, an FDA approval, or perhaps an incredible quarterly report. But what you don't expect is for the company to rally 6% following a bullish analyst report. The company I'm referring to is Gilead Sciences (GILD), a great company that rallied 6% after JPMorgan analyst Geoff Meacham raised his price target to $75.00 and issued an "overweight" rating. The rating was driven by his beliefs that sales of Stribild could reach sales of $2.9 billion by 2015. The estimate was based on a survey of HIV specialists that also led to his short-term sales guidance being raised $50 million. GILD is a great company that makes several HIV treatments, and Stribild has great synergy with these other treatments. As a result, the analyst's assessment seems fair, but still it is a very bullish move for one opinion. The stock has now increased in value by 11% over the last five days, making it worth the watch. The high volume, and new highs, could indicate that shares of the company could trade higher; but at this point it could go either way.
The final stock to watch throughout the remainder of this week is the big loser of Monday, Threshold Pharmaceuticals (THLD). This is a stock that lost 20% of its value on Monday following data from its Phase IIb clinical trial of TH-302. Yet despite its 20% loss, the stock is still trading with a YTD gain of 475%. The company announced a very impressive 2.3 month increase in median overall survival in patients with pancreatic cancer. Thus, the stock should be soaring higher ... right? Not really. The stock was already priced for perfection. It had traded higher in anticipation of the data following a partnership with Merck KGaA (MKGAY.PK) and other encouraging developments. The company also announced questionable data, such as its relative risk of death at 4.5%. Also, as several have pointed out, there are questions surrounding patients who crossed over to the control arm after tumor progression, which increased survival. With positives, negatives, and several questions to be answered, this is definitely a stock to watch. Pancreatic cancer is a complicated disease, and results from the trial are complicated, but not disappointing. It is very possible that as the week progresses, the stock could rally to new highs once the market has time to process all the information. Inversely, new information, data, or analysis could lead the stock lower, and its 20% loss may just be getting started.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.