Seeking Alpha

Rod Raynovich's  Instablog

Rod Raynovich
Send Message
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:,Rayno Life Science
View Rod Raynovich's Instablogs on:
  • Hot Sector: Rare Disease Stocks Soar On Regulatory News: BLUE,SRPT

    Update-1 See Chart below of Emerging Orphan drug players in comparison to leaders ALXN and BMRN.


    Big News Day, Market Update

    Trial Design Impacts Stocks?

    Biotech stocks have partially recovered from the recent sell-off but still remain below ""Double top" levels (NYSEARCA:XBI) of 2015. The major ETFs- FBT,IBB and XBI- remain below the March 19 peak but above the April 30 recent low. A lot of selling took place after recent highs and we are currently in a May uptrend (See excellent Yahoo charts).

    • YTD the XBI leads up 24%, compared to 18.7% for the IBB and FBT. See chart below.
    • April 30 low is higher than Feb 4 lows so technicals look good.
    • XBI outperforms during "bull runs".
    • Five star Fidelity Select Biotech Fund (MUTF:FBIOX) tracks FBT and IBB a tad lower.

    Rayno Large Caps are underperforming ETFs up about 10% YTD. Regeneron Pharmaceuticals (NASDAQ:REGN) is the leader up 22% YTD followed by Gilead Sciences (NASDAQ:GILD) up 17.3% and Biogen, Inc.(NASDAQ:BIIB) up 16.4%.

    Outside of the larger caps, small cap biotech stocks are volatile with big moves on seemingly minor news. Mid-caps lead the market driven by clinical news and M&A after the mega-deals from Abbvie (NYSE:ABBV) and Alexion (NASDAQ:ALXN). See our recent post on Valuations of mid-caps driven by M&A. There is a high M&A premium for biopharma pipelines without consideration of clinical development risk.

    Rayno Mid Caps remained strong with Alkermes (NASDAQ:ALKS) up 3.77% and Seattle Genetics (NASDAQ:SGEN) up 1.8%. Vertex (NASDAQ:VRTX) is a laggard but holding up well at $128.31 up 8% YTD.

    High Hopes for Gene Therapy-Novel Regulatory Pathway Cleared

    Today the CAR-T Cell Therapies, and gene therapy stocks soared boosted by bluebird bio (NASDAQ:BLUE) news on the pivotal design of a small 24 month clinical trial, reversing a downtrend over the past few weeks. T-cell genetic therapies are a transformational platform with potential for treatment of severe genetic diseases, cancer and rare diseases. No products are currently FDA approved using CAR-T.

    Rare or orphan diseases are a favored business model and strategy favored by entrepreneurs, bankers and analysts because the cost effectiveness of the drug can be rationalized, even with very high pricing in excess of $100k per year per patient. Think high prices, rare disease and fast track approval. An expedited regulatory path is also possible because of the small patient size in trial. Alexion Pharmaceuticals is the model for "ultra-rare disease" R&D and now the Company has a market cap of $32B with revenues approaching $2.6B.

    • bluebird bio soared 9% to $170 a new high up 84.9% YTD, on accelerated regulatory strategy for bluebird bio strategies in the EU and US for their LentiGlobin BB 305 in BetaThalassemia Major currently in a Phase 2/3 study. Two new trials are planned with 15 patients each with a 24 month follow-up. Price targets were re-iterated or upgraded. The stock is 99% owned by institutions with Fidelity and Capital World are big blue biotech holders.
    • Juno Therapeutics (NASDAQ:JUNO) rocketed off the bottom up 11% to $45.44,but still down 13% YTD. No news except tagging along with BLUE.
    • Kite Pharma (NASDAQ:KITE) was up 10.86% to $51.43, but down 10.5% YTD and hit a low of $45.36 just yesterday! KITE is in a Phase 2 study (CD19 CAR) for B cell malignancies.
    • Ziopharm Oncology (NASDAQ:ZIOP) was also up 5.4% joining the party.
    • Biomarin (NASDAQ:BMRN) a $20B large cap rare disease company did not move. The Company has one of the BMRN-largest pipeline in "orphan diseases" and has been mentioned as an M&A play.

    Hot Stocks (or Not): Orphan Drug Players

    • Alexion and Biomarin are growth companies with product revenues.
    • Aegerion (NASDAQ:AEGR) is small cap growth with revenues of $228M forecasted for 2015.
    • ALXN and FCSC are on the Rayno Biopharma focus list.
    CompanyTickerPrice $Market CapRevenuesP/S$Cash/shClinical Pipeline% Stock 
       $B    YTD Perf 
    Aegerion PharmaAEGR20.20.5580.190.82.922.36HoFH-3.9 
    Alexion PharmaALXN164.432.322.2714.269.655+,MG,NMO,DGF-11.1 
    Biomarin PharmaBMRN128.120.040.803256.2911+ large41.6 
    bluebird bioBLUE165.75.60.0254220.410.24+, ALD, beta-thal80.7 
    Fibrocell ScienceFCSC3.940.163n/a8140.92dysphonia,RDEB52.1 
    Juno TherapeuticsJUNO45.884.11n/an/a4.374+,NHL,AML,Bcell-12.1 
    Kite PharmaKITE522.3n/an/a8.23+,Bcell,NHL,tumors-9.85 
    SareptaTherapeuticsSRPT26.240.6790.0371844.013+, DMD,InfD81.3 
    Ziopharm OncologyZIOP9.621.260.0149031.012+.Ad-RTS, CAR89.7 

    It was a big news day and several other biopharma stocks were movers:

    Achillion (NASDAQ:ACHN) announced after hours Achillon and JNJ in $1.1B Licensing and Collaboration Agreement with Janssen a Johnson and Johnson (NYSE:JNJ) Company for HCV. The stock was volatile after hours. ACHN has been on our focus list for over two years.

    Two other stocks not on our focus list were actively traded:

    Intercept Pharmaceuticals (NASDAQ:ICPT) a high flier was down 16% to $263 on an announcement of their Phase 3 trial design for a liver fibrosis drug an FXR agonist. The trial was larger than expected.

    Sarepta Therapeutics (NASDAQ:SRPT) was up 38% after hours on the FDA filing of their drug for Duchenne muscular dystrophy, a rare genetic disorder.

    Our top picks within the Rayno Portfolio for ASCO are : Clovis Oncology (NASDAQ:CLVS), Roche ADR (OTCQX:RHHBY) and Seattle Genetics but all are up over the past month. ASCO update to follow.

    (click to enlarge)

    Tags: BLUE, KITE
    May 20 5:26 PM | Link | Comment!
  • ASCO Preview: Rayno Stocks-CLDX, CLVS, RHHBY, RXDX

    Rayno Biopharmaceutical Stocks- ASCO Plays or Not

    Large Caps Rule

    Clovis Oncology (NASDAQ:CLVS) up 16.7%, 79% YTD to $100 level!

    Several data CLVS Presentations for ASCO including two oral and six posters for non-small cell lung cancer and ovarian cancer. Also with a valuation of only $3.4B and three platform products in the pipeline including companion diagnostics the Company is on "hit lists" to be acquired. CLVS was added to the Rayno Portfolio on January 13, 2015 at a price of $60.

    Other Rayno Mid-Caps were also green: ALXN up 1.43%, ALKS up 2.55%, SGEN up 1.13% but Vertex (NASDAQ:VRTX) was down 2%. Vertex is on a few acquisition lists but with a market cap of $30B and a limited pipeline in Cystic fibrosis and oncology a deal fit does not seem apparent.

    Our core large cap biopharma portfolio was solid green with best 2%+ moves in: RHHBY, REGN, GILD and AMGN. The portfolio is up 8.9% YTD.

    Rayno Small Caps were red: CLDX down 1%, RXDX down 0.23% and FCSC down 1.96%. Both CLDX and RXDX will have ASCO data.

    The bellwether healthcare sector ETF, the XLV is up 8.38% YTD and at a Triple top for 2015.

    --------Other stock moves-------

    CAR-T cell therapies immunotherapy stocks were all down: BLUE, JUNO, KITE, ZIOP. The momentum for these more speculative plays has been broken. JUNO and KITE are down YTD.

    Former high flier Puma Biotechnology (PUMA) was off 18% to $170.67 on"murky" Breast Cancer Data for Puma for their HER platform breast cancer drug that disappointed investors.The rate of disease-free survival for neratinib was only 2.3% better that placebo.

    The list of potential ASCO plays is too long and we will try to update beyond the Rayno Portfolios. Other companies mentioned are: AZN, BMY, CELG, INCY, MDVN, MRK, and Merck/KG.

    Update 5/15

    May 15 10:05 AM | Link | Comment!
  • Hot Biotech Sector: Mid-Caps Have Both M&A And Pipeline Premiums

    Valuations Step-Up With More Deals

    Prior to the acquisition of Pharmacyclics (NASDAQ:PCYC) by Abbvie (NYSE:ABBV) for $20B, the top price paid for an emerging biotech company was in the $10B range. Two additional companies among the mid-caps were acquired in prior years: Cubist by Merck in December 2014 and Onyx by Amgen in 2013. M&A has been a major driver of biopharmaceutical stocks and the buyout of Syngeva (NASDAQ:GEVA) by Alexion for $8.4B last week showed that there is a lot of value in pipelines that fit with the acquirer. Financial engineering began with "roll-up"companies created by strategic acquisitions such as Activis plc (NYSE:ACT) and fortified by so-called "inversion deals" whereby a company's headquarters could be moved to a lower tax domicile such as Ireland (17% vs 35% in U.S.) or Luxembourg.

    Another serial acquirer is Valeant Pharmaceuticals (NYSE:VRX) created by the acquisition of Bausch and Lomb, Medicis and Warner Chillcott but failed in a merger with Activis in 2013. Both Activis and Valeant have been very profitable to shareholders with 2 year returns of 200% for ACT and 300% for VRX. But ACT and VRX are growth companies that have exploded through financial engineering with synergies in marketing and sales, cuts in corporate expenses and favorable tax advantages.

    The success of these deals and others has caused more companies to aggressively look outside for sales growth. But the biotech model is unique in that the deals are for earlier clinical stage products and new relatively unproven technology.

    Large cap pharma has always looked to biotech for pipeline and technology and that has recently hit a new level with the $700M deal for Rare Disease Drugs that Sanofi (NYSE:SNY) agreed to pay Alnylam Pharmaceuticals (NASDAQ:ALNY) for access to rare disease drugs utilizing RNAi technology.

    In previous posts we summarized some of the additional factors driving this dealmaker mentality.

    • Strong demand for new products and R&D pipeline. Competition for deals and technology.
    • Plethora of companies being funded bring more opportunities for "recombination".
    • Low interest rates and debt market liquidity. Easy money courtesy of the FED.
    • Revenue growth trumps earnings.
    • Pipelines are getting generous valuations with a low risk mentality.

    In October of 2013 we compared the valuation models of emerging biopharmaceutical stocks from an M&A perspective and all of these stocks but two, Ariad (NASDAQ:ARIA) and Seattle Genetics (NASDAQ:SGEN) have beat the market. The following four companies within the mid-cap list have had huge returns and are included among the Rayno Mid Cap Portfolio Picks. Our top ETF pick the First Trust NYSE Arca Biotech FBT up 16% in 2015 is up 16% YTD.

    Rayno Mid Cap Picks -2015 Performance

    Alkermes (NASDAQ:ALKS) Up 0.3% YTD

    Celldex (NASDAQ:CLDX) Up 41.75% YTD

    Seattle Genetics Up 24.9% YTD

    Vertex (NASDAQ:VRTX) Up 12.7% YTD

    Here is a complete list of all Rayno Biopharmaceutical Portfolio Picks. Two companies among our picks that were acquired: Cubist had a 4.9X return and Pharmacyclics had a 6.7X return since added to the portfolio. The challenge now is to find new mid-cap picks.

    Below find a list of well-known mid-caps that have strong pipelines and technology in oncology, orphan/genetic diseases and cystic fibrosis. The latest frothy market area is rare diseases so look for more M&A but valuations are now a bit stretched in what is a niche market.

    Our next biopharma review will be in the immunotherapy and CAR-T area where companies without Phase II data now have multi-$B valuations.

    CompanyTickerPrice 5/12Market Cap2015 RevP/SBV/ShPerform 
      $$BEst $B  %YTD 
    Celldex Ther.CLDX25.92.550.037688441.75 
    Clovis OncologyCLVS85.82.950.013n/a9.7753.3 
    Seattle GeneticsSGEN40.134.960.32816.71.724.9 
    *FDA news 5/12        
    ETFFBT118.53.31   16.15 
    Cubist Pharm.CBST101.99.51106.312/14 deal4.9X return
    OnyxxONXX123.690.8717.51.1410/13 deal 
    PharmacyclicsPCYC256.619.51.1226.7310.953/15 deal6.7X return

    We have no positions in any of the above stocks.

    Tags: ALNY, PBYI
    May 14 10:08 AM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.