U.S. Biotech/Pharma Sector Daily Observations Letter: Jan. 18, 2018

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Includes: AFAM, AGRX, BGNE, CLVS, CORI, DERM, DRNA, EDIT, IBB, JUNO, MLNT, OFIX, ONCS, PDSB, PRTK, PRTO, RDY, SGYP-OLD, SNDX, TSRO, TTOO, XBI
by: Bhavneesh Sharma
Summary

Some market nervousness was seen over the debt ceiling issue.

U.S. hospital systems to partner in order to create their own generic drugs business to save rising generic drug costs.

Oncosec announced encouraging early data in triple-negative breast cancer.

More of the day's events are discussed.

Market and sector outlook:

There has been some market nervousness over the debt ceiling issue. The VIX again rose today and is above 12 level. The 10-bond yield is still rising, extended and ripe for a fall.

IBB and XBI are likely to make another high to around $116 and $92, respectively.

Up on >5x volume (excluding penny stocks):

BGNE: 12.6%

EDGE: 8.3%

SNDX: 4.8%

Upward reversal alert:

OFIX, TTOO

Downward reversal alert:

AFAM, RDY, DRNA

Day's events and outlook:

One of the key news items in healthcare today is U.S. hospital systems to partner in order to create their own generic drugs business to save rising generic drug costs. I watched the Intermountain CEO on Bloomberg TV; could be game-changer. Generic drug stocks were down today (TEVA, MYL, RDY, OTCPK:SMPQY).

Oncosec (ONCS) did it again: After promising anti-PD1 refractory advanced melanoma data, they announced 40% ORR in triple-negative breast cancer (similar to PARPs). It was a small, five-subject study, but it's encouraging validation of their technology in another application.

Juno Therapeutics (JUNO) was up more than 3% on high volume. Anything less than $90 will reflect poorly on Hans Bishop, who is most likely going to need a new job soon. Armored CARs, the Editas (EDIT) partnership for gene editing, the Thermo Fisher partnership for its manufacturing technology, solid tumors pipeline, etc. -- Juno is best of breed, despite initial setbacks.

I'm watching PARP inhibitor companies such as Tesaro (TSRO), Clovis Oncology (CLVS). They're too beaten down. Mean reversion should come into play.

I'm also watching Synergy Pharmaceuticals (SGYP-OLD). It pulled back today. Its upcoming PDUFA is on Jan. 24, and options are implying a 75-cent move.

I looked at Dermira (DERM), which has a novel acne therapy. It has upcoming key binary (Phase III) data.

Perceptive buys $5M of Corium (CORI), and pivotal bioequivalence Alzheimer's data is close for Donepezil patch. The real reason looks to be the partnership with Agile Therapeutics (AGRX), which Perceptive bought as well recently (Agile got CRL for Twirla). Corium stock is too extended for my taste.

I'm watching Paratek Pharmaceuticals (PRTK) on the offering-related pullback. The NDA for omadacycline in CABP is under progression and is the key event for them in 2018.

I talked about Proteon Therapeutics (PRTO) yesterday. The stock was down 14% today on 3x average volume.

I'm watching Melinta (MLNT); working on radezolid for bacterial vaginosis. Cempra-inherited 9K patient study is the big burden for them in the near term.

Bitcoin still appears stuck at some key resistance. Unless $13K is breached, the down case remains. ICE is planning a centralized data feed for its quotes for algo funds.

Seth Klarman is looking for value in Amazon (AMZN) disrupted retail stores (JWN, M, TGT).

Once again, kudos to Tim Cook (AAPL) for starting the repatriation trend. The bull seems to have more room to run.

Earnings are not doing well (AA, AMEX, GS, etc.).

China housing market is in trouble once again?

Someone was honest and made a useless cryptocoin.

Next edition will appear on Monday. Enjoy the weekend.

Disclaimer: This article is for educational purposes only and is not investment advice. I/we may have a position in the securities mentioned in this article.

Disclosure: I am/we are long (SEE THE ARTICLE). I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.