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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:,Rayno Life Science
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  • Biotech Bear Market Trends #5

    Bear Market Mentality Hits Biotech

    FBT 110.5 down 1.23% YTD

    IBB $296 down 2.3% YTD

    XBI $61.8 flat YTD

    XLV down 4.74% YTD

    Fidelity Select Biotech Fund (MUTF:FBIOX) $212 down 4% YTD

    Review Previous Articles on Biotech Market Trends

    The vicious three month sell-off with the IBB down 20% over one month in the six year bull market has created so much psychological damage that a bear market could prevail at least until third quarter earnings gives us clarity. Add new positions with caution keeping in mind that selling prevails.Biotech stocks have been driven to extreme valuations by large hedge funds, investment banks and mutual funds who are primarily momentum investors with huge cash coffers.

    We will continue with the "Biotech Market Trends" series adding some new elements to our model now that we have entered a bear market. Four out of five market trends turned negative as we wait earnings in October.The drivers of the 5 year biotech bull market have been: strength in the healthcare sector, M&A, growth from product sales and positive clinical developments. Now we have a change in fundamental factors to consider such as the following:

    • The healthcare sector (NYSEARCA:XLV) and biotech does not have relative immunity to macro economic news and the overall market and certainly is not considered defensive. Biotech and healthcare stocks are now a laggard sector due a scary change in sentiment. Political uncertainty and a FED decision creates a pall that inhibits buyers.
    • Pricing was a "sell" catalyst but five-year returns of over 232% drove profit taking on a massive scale.
    • Looking ahead toward 2016, M&A may slow as valuations will be scrutinized and the potential for funding will slow with higher interest rates and a nervous high yield bond market. Our biggest winners in 2014-15 were buyouts: Astex (NASDAQ:ASTX), Cubist (CBST) and Pharmacyclics (NASDAQ:PCYC).
    • Valuations now do matter and pipelines may be downgraded to a higher risk level.Emerging companies need to be concerned about long-term cash requirements.
    • Life Science ETFs have created more volatility with rapid fire trading long and short.
    • Time can cure a bear market and bullish seasonality is ahead. Wait for more clarity and buying interest.

    We will not review our Biopharmaceutical Portfolio for new buys until we see a turnaround in technicals or positive earnings announcements for large caps.The following Rayno Biopharma stocks are up YTD as of 9/28: CLVS up 61%, FCSC up 51.7%, GILD up 3.1%, REGN up 12.1% and SGEN up 16%. Most others are down or flat. Stock picking will be more important with sector weakness.

    We are hopeful that a Q4 rally will offer some recovery from this bear market turn. Retail investors and generalist funds are likely to avoid the sector until a solid trend develops. The large number of huge specialized funds would need to step in to reverse the course. At the bottom of the last bear market in biotech valuations were at venture capital levels but revenues from the major companies were still very low and most large cap biotech companies are on a solid financial footing.

    Biotech stocks are prone to bubble behavior for many reasons primarily because medical breakthroughs such as molecular medicine and genomics are exciting with huge product potential. Low interest rates and fast money created speculative momentum which now has ebbed. In 2012 nobody knew about the bull market in biotech stocks and its underpinnings,but now all investors know about the bear market.

    Tags: IBB
    Sep 29 6:54 PM | Link | Comment!
  • Biotech Stocks Crushed On Pricing Issue: Caution

    Biotech Pricing Issue Raises Concerns About Business Model

    Turing Pharmaceuticals Astronomical Price Hike Gives Hilary A Campaign Issue

    Major ETFs Down 4-5%-Red Screen Across the Board

    We have written many times before about the biotech bull market and how drug pricing weakness could be the major issue to derail stocks. Many rare or orphan drugs are the most expensive, upwards of $100k per year per patient. Specialty drugs consume over 30% of the total Medicare budget. Hilary now has drug pricing as a major campaign issue to leverage.

    Clinton Tweeted in response to the Turing ~5000% hike, "Price gouging like this in the specialty drug market is outrageous".

    Healthcare leadership in the market has waned recently so this could be the turning point.

    Update and follow-up tomorrow.

    Tags: IBB
    Sep 21 5:46 PM | Link | Comment!
  • Rayno Life Sciences Diagnostics And Tools Update: Volatile Stocks And Slower Growth Ahead

    Slower Growth with Same Themes: Sequencing (NYSE:NGS) and Molecular Testing Platforms

    Turnaround and restructuring stories still big winners

    The life science clinical diagnostics and tools sector underperformed in the third quarter and many stocks have not fully recovered from the August correction. In 2015 value stocks have outperformed growth stocks with some huge winners and several big losers. NexGen (NGS) sequencing and molecular diagnostics are prevailing growth sectors with new testing platforms being introduced in 2016. Earnings are less important than revenue growth and potential for M&A. Indeed most of these companies have weak earnings as measured by PEG (Price earnings to growth). We will await third quarter earnings then try to make more value calls for a strong Q4 finish. Many of the losers were strong trades nonetheless before the August correction took its toll. Here are five top winners YTD:

    • Hologic,Inc. (NASDAQ:HOLX) up 52.9%. Restructuring and turnaround focused in women's health.
    • Alere, Inc. (NYSE:ALR) up 41.6%. Value play with ongoing restructuring.
    • Qiagen NV (NASDAQ:QGEN) up 15.7%. Value play with broad product line in diagnostics and tools.
    • Illumina, Inc. (NASDAQ:ILMN) up 12.1%. Leading company in Next-Gen (NGS) sequencing.
    • Neogen Corp.(NASDAQ:NEOG) up 9.84%. Growth and value in food and animal safety products and services.

    Top losers YTD are: PACB down 43.9%, EXAS down 27%, CSII down 21%, GHDX down 21%. Note the volatility and range of these stocks because all were much higher and near their 52 week highs. As momentum waned these stocks could not hold up without revenue growth.

    Here are three emerging companies with unique platform technologies and strategies poised for revenue growth and product growth in 2016. They are not on our focus list but we will track product news over the coming months.

    • Accelerate Diagnostics, Inc. (NASDAQ:AXDX). Rapid diagnostics platform for detection of infectious pathogens. Revenue estimates of $2.6M in 2016.
    • GenMark Diagnostics, Inc. (NASDAQ:GNMK). New platform for molecular diagnostics with revenue forecast of $53M in 2015.
    • T2 Biosystems, Inc. (NASDAQ:TTOO). Magnetic resonance platform for detection of candida is sepsis with revenue forecast of $20M in 2016.

    We will review Q3 financial results and ongoing product news to discern growth trends and themes for 2016. Niche testing areas for future growth are rapid microbiology tests such as Antibiotic Susceptibility and Bacterial identification (AST/ID) and non-invasive pre-natal testing (NIPT) for fetal aneuploidies (trisomies 13,18 and 21).

    2010/15 OriginalPrice5 YrRayno9/15/2015MarketPrice/PEGSales Q/Q 
    Dx and ToolsSymbolStart$High $% PerfP $CapSales % 
    CardioVasc SysCSII11/5/20107.241.2534723.770.7644.21-22.5 
    Exact SciEXAS12/10/20105.632.8535319.81.88135-- 
    Foundation MedFMI11/17/201425.8654.28- 
    Genomic HealthGHDX2/26/20132937.74-13.825.920.8223.04-0.1 
    **acquired byHOLX          
    iShares RussellIWM3/1/20094212927611625.6    
    Sep 16 4:34 PM | Link | Comment!
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