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Biotech Bear Market: After The Bubble Burst...

|Includes: Biogen Inc. (BIIB), CLVS, GILD

Caution- Risk Remains High But Opportunities Lie Ahead

Rayno Biopharmaceutical Stocks -see chart below

Obviously all of these stocks were up huge YTD until early August when the correction began then they were hit harder on the second downturn on September 21 with the Hillary tweet on drug pricing hitting biotech bear market technical levels. There is still likely to be headline risk on drug pricing so stay cautious until Third Quarter earnings come out.

Rayno Top Winners YTD

Fibrocell Science (NASDAQ:FCSC) up 69%

Clovis Oncology (NASDAQ:CLVS) up 61.6%

Regeneron (NASDAQ:REGN) up 28.4%

Seattle Genetics (NASDAQ:SGEN) up 21.3%

Gilead Sciences (NASDAQ:GILD) up 5.6%

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Rayno Top Losers YTD

Abbvie (NYSE:ABBV) down 14.6%

Biogen (NASDAQ:BIIB) down 21.5%

Alexion(NASDAQ:ALXN) down 13.6%

GlycoMimetics (NASDAQ:GLYC) down 4.6%

Vertex (NASDAQ:VRTX) down 4.3%

Two stocks to watch when earnings hit are Biogen BIIB) and Gilead Sciences (GILD) both huge winners over five years but technically weak lately. Both should be watched for margins and pricing:

BIIB trades at P/S of 6, Forward PE of 14.87, PEG 1.14, P/FCF 19.27.

GILD trades at P/S of 5, Forward PE of 8.64, PEG 0.62, P/FCF 8.49.

Celgene (CELG) a highly touted stock on CNBC and with several analysts is still up 5% YTD and is recovering nicely to the $117 level from lows of the year near $105. P/S for 2015 are 11 but revenue estimates are $11.29B for 2016.

Biotech stocks are "bobbing" just above the early October bottom with a bit of buying support but still 13% off mid-September highs. Sentiment remains negative because of long term pricing concerns. As we have said before there is still a good chance of a fourth quarter rally assuming the NASDAQ can hold up.

Over the past week there has been a rotation out of the healthcare and life science sector into cyclical stocks like energy and industrials. As earnings roll-out look for growth in telecom, consumer discretionary and financials compared to healthcare (NYSEARCA:XLV). The XLV has rallied but is flat YTD tracking the large cap weighted IBB. Despite the choppy action there are good trades in small and mid-caps every day so look for the XBI to get some momentum.

Rayno Biopharmaceutical Stocks-Performance YTD as of 10/12

Company Ticker Original Price $ 5 Yr High RaynoTotal Price 9/10 YTD 10/12 Price 10/12
    Start     % Perform   % Perform  
          8/12/2015      
Abbvie ABBV 3/25/2014 51.7 70.76 33 59.58 -14.6 55.9
Alexion ALXN* 2/2/2009 17.5 203.3 994 186 -13.6 159.9
Alkermes ALKS 3/22/2013 23 75.17 191 69.67 1 59.1
Albany Molec AMRI 2/10/2011 4.32 23.95 391 21.19 6.9 17.43
Amgen AMGN 2/2/2009 55 173.6 210 153.1 -3.3 154.4
Array ARRY 5/26/2015 7.7 8.59 -22 5.93 5 4.97
Biogen BIIB 2/2/2009 48.5 480.18 552 312.62 -21.5 266.27
Clovis Oncology CLVS 1/13/2015 60 102.28 31.3 104.26 61.6 90.75
Fibrocell Sci FCSC 6/11/2014 3.7 6.4 90.2 5.9 69 4.38
Gilead Sciences GILD* 2/2/2009 25.5 123.37 356 107.25 5.6 99.6
GlycoMimetics GLYC 10/16/2015 6.74 9.68 12.7 7.6 -4.6 6.89
Ignyta RXDX 4/7/2015 10 19.4 37.2 15.57 1 10.05
Regeneron REGN 2/2/2009 17.5 544 3308 531.72 28.4 527
Roche ADR RHHBY* 1/30/2014 33.5 38.54 9.5 33.29 -3 33
Seattle Gene SGEN 2/2/2009 9.5 49.84 471 41.58 21.3 38.9
Vertex VRTX 11/15/2013 62.8 137.5 219 132 -4.3 113.5
  *split              
Acquired       Acq Price % Return      
Astex ASTX   1.63 8.5 421      
Cephalon CEPH   76.5 81.5 6.5      
Cubist CBST   21.5 102 374      
Optimer OPTR   11.8 10.75 -9      
PharmCyclics PCYC   38.2 261 583      
ViroPharma VPHM   12 50 316      
                 
ETFs           P 8/12/15 P10/12/15 Perf %YTD
FBT         128.42 121 102.35 flat
IBB         385.02 370 309.23 1.94
XBI         261.6 236 64.17 3.25

Disclosure: I am/we are long FCSC, GILD, FBIOX.