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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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  • Roller Coaster Market Creates Biotech Buying Opportunity

    Technical Bottom is in for the Sector-Buying Opportunity for IBB

    Yesterday was one of the craziest trading days of the year triggered by the Chinese Yuan surprise reset. The Dow was down as much as 300 points before finishing flat for the day. Biotech stocks as tracked by the (NASDAQ:IBB) ended up 0.81% to 370 after hitting a low of 357 at around 11a EDT. Biotech stocks have been weak even before the yuan currency slide yesterday and were in a in a steady sell-off losing 10% since the July 20 high. The more volatile XBI also recovered today at about the same magical hour of 11a EDT but still down 7.9% over 5 days.

    NB: review our posts and updates from earlier this week on " broken momentum" in biotech.

    Many of the stocks we track were too volatile to trade recently but there were huge shorting opportunities near the July tops. But we still believe momentum is broken making it much harder to trade small cap stocks over the short-term. For those underweight healthcare or biotech stocks we would recommend the IBB and XLV for a Q4 rally.

    Here is a brief review of Rayno Biopharmaceutical stocks YTD:

    Rayno Large Caps: all except Roche (RHBBY) up 3.2% YTD, rallied today to the green; here is performance YTD after considerable damage in August:

    Abbvie (NYSE:ABBV) up 5%

    Alexion (NASDAQ:ALXN) up 3.2%

    Amgen (NASDAQ:AMGN) up 7.11%

    Biogen (NASDAQ:BIIB) is down 6.69%

    Gilead (NASDAQ:GILD) up 23.3%

    Regeneron (NASDAQ:REGN) up 41.2%

    Rayno Mid Caps recovered today and are doing well YTD:

    Albany Molecular (NASDAQ:AMRI) up 30.4%

    Alkermes (NASDAQ:ALKS) up 15.9%

    Clovis Oncology (NASDAQ:CLVS) up 41%

    Seattle Genetics (NASDAQ:SGEN) up 39.4%

    Vertex (NASDAQ:VRTX) up 15.9%

    Rayno Small Caps are mixed and volatile with some notable winners today:

    Array Biopharma (NASDAQ:ARRY) is way off highs but up 26.8% YTD.

    Celldex Therapeutics (NASDAQ:CLDX) was crushed today and is now down 9% YTD.

    Fibrocell Science (NASDAQ:FCSC) was up 11% today and is up 172% YTD.

    GlycoMimetics (NASDAQ:GLYC) is flattish but holding up 5.5% YTD.

    Ignyta (OTC:RXDX) is off highs for the year but up 37.9% YTD.

    Assumptions for balance of 2015:

    1. Two major 10% corrections have hit the sector in 2015 but the long-term biotech bull market trend is intact.
    2. Large and mid-cap earnings are in with only one negative surprise Biogen, Inc. . Future risk would be related to Q3 earnings misses or currency issues.
    3. Small caps have lost momentum so remain cautious with trades.
    4. Volatility with emerging mid-caps has increased with early stage "immuno-oncology", or platform plays such as CAR-T, cellular therapy and gene therapy.
    5. Major technical reversal yesterday at monthly bottom creates support and a buying opportunity.

    2015 Rayno Biopharmaceutical Portfolio

    CompanyTickerOriginal StartPrice $5 Yr HighRaynoTotalPrice 8/12YTD 
         % Perform % Perform 
             
    AbbvieABBV3/25/201451.770.763368.765 
    AlexionALXN*2/2/200917.5203.39941913.2 
    AlkermesALKS3/22/20132375.1719167.8815.9 
    Albany MolecAMRI2/10/20114.3223.9539121.2330.4 
    AmgenAMGN2/2/200955173.6210170.67.11 
    ArrayARRY5/26/20157.78.59-22626.8 
    BiogenBIIB2/2/200948.5480.18552316.73-6.7 
    CelldexCLDX8/20/20141532.8210.716.61-9 
    Clovis OncologyCLVS1/13/201560102.2831.378.8141 
    Fibrocell SciFCSC6/11/20143.76.490.27.04172 
    Gilead SciencesGILD*2/2/200925.5123.37356116.2523.3 
    GlycoMimeticsGLYC10/16/20156.749.6812.77.65.5 
    IgnytaRXDX4/7/20151019.437.213.7237.9 
    RegeneronREGN2/2/200917.5544330857941.2 
    Roche ADRRHHBY*1/30/201433.538.549.536.683.2 
    Seattle GeneSGEN2/2/20099.549.8447144.7939.4 
    VertexVRTX11/15/201362.8137.5219137.615.9 
     *split       
    Acquired   Acq Price% Return   
    AstexASTX 1.638.5421   
    CephalonCEPH 76.581.56.5   
    CubistCBST 21.5102374   
    OptimerOPTR 11.810.75-9   
    PharmCyclicsPCYC 38.2261583   
    ViroPharmaVPHM 1250316   
           Perform 
    ETFs     P 8/12% YTD 
    FBT    128.4212118.8 
    IBB    385.0237022 
    XBI    261.623626.6 
             

    Disclosure: Long ARRY, FBIOX, FCSC, GILD, GLYC, RHBBY, RXDX

    Tags: IBB
    Aug 13 9:36 AM | Link | Comment!
  • Biotech Momentum Is Broken: XBI

    Broad Rally Breaks 7 Day Slump Led By Energy, Industrials and Materials

    But Momentum in Biotech is Broken

    Momentum stocks are being sold after huge gains year to date. Lock-ups are expiring and the sentiment has shifted as even good earnings news somehow disappoints. No it is not a bear market in biotech just the second big sell-off of the year as biotech focused institutions rake in big gains. With NASDAQ stocks also weak it is hard for biotech to rally.Today the sector is up but off highs hit near the opening. The XBI is the trade to watch down 6.5% over 5 days but still up 28% YTD.

    The April correction (NASDAQ:IBB) took us down about 9% and we are now down about 7.7% (IBB at 368.67) from July highs after correcting 9% at Friday's low. Vicious sell-offs occur even in a bull market. Other than the usual weak seasonality a constellation of events has changed the sentiment:

    • Disappointing earnings from Biogen (NASDAQ:BIIB) and a little too much hype on their Alzheimer's disease drug in Phase 2 development.
    • A shift and possible rebalancing of portfolios out of healthcare (NYSEARCA:XLV) a sector leader into cash, financials or economically sensitive stocks.
    • Concerns about multi-$B cap valuations on newly public stocks with limited late stage pipelines.
    • Big hits on AAPL stock and the sell-off in big media stocks caused by the disruption of cable unbundling.
    • Concerns about possible FED rate hike and what it means for the market. If dollar remains strong multinational shares will remain weak.
    • Disinflation in energy and concerns about China growth.

    Leading the downdraft on Friday were momentum stocks in hot new technologies such as cellular therapy, CAR-T and immune-oncology, all promising breakthrough technologies in molecular medicine but early in the clinical development pipeline.

    To really appreciate the volatility during this current correction look at bluebird bio Inc. (BLUE) down as much as 11% for the day to $137.5 after hitting a high of $194 on June 1. The stock was $167 on August 5. bluebird bio is a high profile, clinical stage biopharmaceutical Company focused in gene therapies for severe genetic and rare diseases. There are three key products in the pipeline but much of the excitement is about their LentiGlobin Beta-thalassemia product candidate in Phase 2/3.

    Despite the rally in biotech stocks today we remain cautious near term until the summer churning runs its course. Hold onto core positions and look forward to a strong year-end rally. But momentum for traders looks broken.

    Tags: BLUE, XBI
    Aug 11 9:21 AM | Link | Comment!
  • 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!
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