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Rod Raynovich
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Rod Raynovich is an entrepreneur and executive with a focus on life science companies and medical technology trends.He has over 35 years executive experience including Abbott and JNJ and has been involved three successful start-ups. Before starting Raygent and other companies he was also a... More
My company:
Raygent Capital
My blog:
Raygent.com,Rayno Life Science
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  • Biotech Stocks Are Lagging: Small Caps Hit Hardest

    Market Rallies on FED comments but Biotechs are Left Behind

    FED Expected to Raise Rates as Labor Market Tightens

    The FED stands pat on rates but is on track to raise rates later this year, possibly at the September meeting, as jobs are on track but inflation is still not above 2%. The market began rally at 2P EDT after the FED noted an improving economy. This was confirmed with a Rise of 2.3% in the Q2 GDP while the first quarter GDP was revised upward to 0.6%.

    As of 8:40 am EDT the 10 year bond rate is 2.28%. S&P futures are slightly down 0.29%.

    Biotech Stocks Down on Profit Taking

    Biotech stocks were lagging and could not follow up on a two-day rally. Most mid and small caps were down. Major ETFs were down with the more speculative XBI down over 2% to the $252 level a 5.5% fall over five days. Contributing to the sell-off today was Medivation (MDVN) Down 8.39% after JMP Securities and others cut estimates during July due to lower expected sales of Xtandi. The market cap is still $8.22B with a P/S of 10.93. The stock hit a high of $140 in late March and a low today of $88 before settling in at $95.74.

    Look across your screen and you will see many other "immuno-oncology" losers such as: ARIA down 5.34%, CLLS down 3%, DRNA down 5%, KPTI down 6.37%, NLNK down 3.5% and PBYI down 3.8%.

    One of our top large cap picks Gilead Sciences (NASDAQ:GILD) delivered again beating estimates on sales and earnings with EPS at $3.15 vs average of $2.71, driven by sales of Hep-C drugs of $4.9B. Actual revenues were $8.24B from $6.54B with $7.6B expected. Revenue outlook for 2015 was raised from $29B to $30B. Gilead stock soared to $118 level before a gradual sell-off to $116 still up for the day. GILDstill has a forward PE of only 10.1, a PEG of 0.62 and a P/S of 6 but despite the apparent value it may be over-owned as the stock could not hold the highs of the day. Expectations are very high on the earnings front.

    On the other hand speculative biotechs without revenues nor Phase 2 data are the momentum favorites because valuations are without financial metrics. Case in point is the IPO du jour is NantKwest (NASDAQ:NK) an immunotherapy Company which popped 39% to $35. See the NK S-1 with Celgene (NASDAQ:CELG) as a partner and Patrick Soon-Shiong as Founder and CEO. NantKwest has a proprietary NK (natural killer) cell line for an NK Treatment Pipeline in cancer, infectious disease and inflammatory disorders.

    Rayno Biopharmaceuticals Portfolio

    We last posted on 7/14 near the sector peak of 7/20. Biotechs began a sell-off on JY 24th and are down since despite a brief rally yesterday.

    • Rayno Large Caps are up for the month with following winners: ABBV, ALXN,AMGN, REGN. GILD and RHHBY were flat to slightly up. Biogen (NASDAQ:BIIB) was the only loser down 21% over 30 days. The IBB was up 4.6%.
    • Rayno Mid-Caps are weak today but up over 30 days: ALKS is the leader up 7% over 30 days.
    • Rayno Small Caps started off strong in July but have sold off recently and are very weak today: CLDX, FMI, GLYC. However FibroCell Science (NASDAQ:FCSC) one of our top picks was up 27% over 30 days to $6.36. Ignyta (OTC:RXDX) was down 7.9% since 6/30. Array (NASDAQ:ARRY) was also down 17.8% for the month. The speculative small cap XBI was still up 4.94% for the month despite the sell-off.
    • The health care sector (NYSEARCA:XLV) remained a leader up almost 3% and up 11.6% YTD. The S&P is up only 2.4% YTD. The financials are beginning to gain strength especially if the FED raises rates. The Power Shares Trust (NASDAQ:QQQ) NASDAQ-100 ETF also shows strength up 8% YTD.

    The healthcare sector is a favorite because spending is expected to increase 5.3% this year and average 5.8% in years to come reaching 6% growth in 2024 reaching 19.6% of GDP.

    Biotech stocks has been quite volatile in July so very difficult to trade. Momentum soared in mid July but has been lost and the market reaction to earnings is hard to predict. Disappointment is more likely as in the case of Apple (NASDAQ:AAPL), Biogen and Facebook (NASDAQ:FB). Even with the exceptional results of Gilead (GILD) investors expect more.

    Here are several points to consider for near term trades:

    • Biotechs are rolling over possibly due to valuation concerns and profit taking.
    • Look for rotation out of biotech into stocks that would rally with an improving economy.
    • Small caps are getting risky and hard to pick unless there is strong institutional support.
    • M&A is still the driver but $10B++ acquisitions could be out of reach for many companies.
    • Hold large and mid cap core positions or ETFs but position your portfolio for a Q4 rally.

    We will review the Rayno Dx and Tools Portfolio after Q2 earnings. The sector has been weak due to slower revenue growth. Sector is underperforming except Hologic (NASDAQ:HOLX), Illumina (NASDAQ:ILMN), Neogen (NASDAQ:NEOG) and ThermoFisher (NYSE:TMO). Hold off on new buys until earnings cycle completed.

    (click to enlarge)

    Tags: GILD, NK
    Jul 30 2:39 PM | Link | Comment!
  • Biotech Mania: Another Deal, Another Rally To New Highs

    MACRO Concerns Aside, Biotech Mania Led By M&A

    None of the problems with China and Greece have been solved but the market swoon from last week has been moved aside. The NASDAQ composite is at highs hit in June 2015 and biotech indices hit new highs as tracked by the IBB and XBI ETFs. The biotech mania shows up in the small cap speculative XBI up 9% over five days! As has been the pattern in the past a big M&A deal reinforces one of the underlying drivers of the market. Celgene CELG) announced a $$7.3B Celgene deal to buy Receptos (NASDAQ:RCPT) at $232 a share. This acquisition beefs up the Celgene pipeline in inflammation and immunology including a Phase III drug Ozanimod, an S1P receptor modulator, for ulcerative colitis and relapsing multiple sclerosis with potential for IBD. The Receptos pipeline positions Celgene for growth in 2019 with 2015 guidance for Celgene reaffirming 2020 net product sales at $9-9.5B and EPS of $4.75-4.85 an increase of 29% over 2014. The guidance now balances out the Celgene pipeline with 2020 guidance from immunology and inflammation at $4B up from $3B. Hematology revenues for 2020 are expected at $14.8B and Oncology at $2.2B. CELG stock at $134.71 is up 20.4% YTD trailing the IBB up 30% YTD.

    We missed Receptos, Inc. RCPT) despite it being in the sweet spot of the market, a mid-cap with a strong product pipeline. Six of our portfolio picks have been acquired over the past two years including Pharmacyclics (NASDAQ:PCYC) purchased by Abbvie (NYSE:ABBV) in Q2 for over $21B. There are so many hot small and mid cap biotech stocks we admit to being challenged in trades and new picks.

    We reiterate the key biotech trends of 2015:

    • Many biotech stocks are at new highs and momentum is furious.
    • If you are overwhelmed by all the potential stock trades an ETF trade such as IBB or XBI will keep you ahead in the game.
    • Healthcare stocks remain an important defensive holding with the XLV is up 12.8% YTD.
    • Large cap biotechs slightly lag the market up about 12% due to dependency on earnings. However Gilead (GILD is up 26% and Regeneron (NASDAQ:REGN) up 34%. Earnings coming soon.
    • Valuations do not matter because of M&A and pipeline potential for growth.

    The market mentality now is that by the end of the year more multi-$B deals will be struck so companies with later stage biotech pipelines will outperform the market. For now don't fight momentum don't fight the FED.

    Tags: CELG, RCPT
    Jul 16 11:20 PM | Link | Comment!
  • Biotech Bull Market: Dealmaking And Fast Money Fuel Stocks

    XBI is the ETF Leader up 12% in a Volatile Quarter

    Despite a major down trend at the end of April and the recent sell-off, the sector outperformed in Q2 of 2015. The S&P was down 1% and flat YTD.

    • The XBI Biotech ETF continues to be the sector ETF leader up 12.41% compared to 5% for the IBB and 2.51% for the FBT.The XBI has more speculative small caps in its holdings.
    • The XLV Healthcare SPDR ETF was flat up only 0.83% over 3 months.The QQQ was also flat after a late May sell-off.
    • The Five Star Fidelity Select Biotechnology Portfolio (MUTF:FBIOX) lagged most ETFs this quarter up only 3.5% probably due to overweighted large caps.

    The quarter saw a vicious sell-off in April when the sector was briefly negative, recovered up until ASCO in early June followed by the blow-off top in late June that sold off with the crisis in Greece. The blockbuster Celgene/Juno $1B immunotherapy deal sparked the markets.

    M&A and licensing was a big driver in 2015 with 29% of total in healthcare with $293B in transactions. With genomic and immunological technology exploding there appears to be unlimited opportunities for growth.

    A portfolio of Rayno Large Cap stocks was surprisingly volatile ending up only 7.37% because of a 3% hit this week. Gilead Sciences (NASDAQ:GILD) was a leader up 16.28%.Regeneron (NASDAQ:REGN) was up 10.95%.

    Rayno Mid Caps performed well after ASCO with Clovis Oncology (NASDAQ:CLVS) up 17.25% in Q2, and Seattle Genetics (NASDAQ:SGEN) up 34%. ALKS and VRTX held up as well.

    Rayno Small Caps were extremely volatile with plenty of profitable trading opportunities: Celldex Therapeutics (NASDAQ:CLDX), FibroCell Science (NASDAQ:FCSC), Foundation Medicine (NASDAQ:FMI) and Ignyta (OTC:RXDX). We recently added Array Biopharma (NASDAQ:ARRY) now at $7.21. Albany Molecular Research (NASDAQ:AMRI) remains a long-term hold in our portfolio.

    Sign up now to receive our Diagnostics and Tools review after Q2 earnings release.

    Jun 30 7:17 PM | Link | Comment!
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