Update-1... 10:45 am PST Biotech Rally Resumes
- tweets on drug pricing are apparently forgotten
- XBI up 2.63%, IBB up 1.6% Green screen day
- Smaller cap, clinical stage stocks dominate winners.
Trump Tweet Clips Biotech Rally-Drug Pricing Rhetoric Clouds Prospects Again
"Trumpcare" Introduction Creates Uncertainty for Healthcare Stocks
Just as investors were becoming more enthusiastic with biotechnology investing, a barrage of tweets and news stories regarding drug prices and the ACA overhaul by Republicans cooled the market. Trump said in a tweet early Tuesday, "he is working on a new system where there will be competition in the drug industry." We have been through this before and despite many analysts saying that drug pricing concerns are "baked-in" to stock prices a Trump tweet can still rile the market. And still more uncertainty for the healthcare sector was created by the initial announcement of the "Trumpcare" plan that has found many critics on the Left and Right. Conservatives in the GOP are calling it "Obamacare Lite" so don't expect a quick resolution and a clean vote on a bill.
" Nobody knew healthcare was so complicated" as President Trump apparently learned.
Back in 2010 investors were trying to pick winners and losers from the arduous process of Healthcare Reform (HCR) that lead to the Affordable Care Act (NYSE:ACA) only after a grueling political battle. The ultimate outcome was positive-healthcare and biotech stocks went on a five year bull market run. The XLV Healthcare SPDR went from $32 on 1/21/11 peaking around $76 on 7/24/15 before returning to its 2015 highs this month with most gains this quarter. Since Obamacare was approved in this timeframe more patients were covered by insurance and many new blockbuster drugs were launched. The IBB went from $94 on 1/11/11 to a peak of $400 in July of 2015.
Today after a one year consolidation in 2016 with choppy trading we are faced with trying to pick great growth stocks yet making the right sector call with healthcare policies of a new administration in conflict.
Here is what happened today:
- The IBB was down 1.6%, up 11.17% YTD but now at a triple top. The FBIOX was down 1.77% at $202.70 but leads outperforms the IBB up 16.75% YTD.
- The XBI was down 1.61% and up 17.57% YTD at $69.59 after hitting a high of $71.47 on March 1.
- The hot mid-cap sector big losers were Alkermes (NASDAQ:ALKS) down 2.33%, Biomarin (NASDAQ:BMRN) down 2.91% and Intercept (NASDAQ:ICPT) down 3.41%.
- Some large caps fared worse than the IBB: Alexion (NASDAQ:ALXN) down 3.11% and Regeneron (NASDAQ:REGN) down 2.46%.
- Speculative small caps were a solid red except Aurinia Pharmaceuticals (NASDAQ:AUPH) up 32.46% to 7.10. Aurinia announced yesterday that its Voclosporin drug was accepted for presentation at the National Kidney Foundation Meeting on April 18.
- Some Rayno Biopharma Portfolio stocks did well prior to today's sell-off: ABBV,ARRY,FMI, and OTCQX:RHHBY.
We'd expect the rally to stall as traders and investors become more focused on the intense political backdrop and planned legislation. Nonetheless the M&A trend offers some support and clinical news events will still move stocks. Follow technicals.
Disclosure: I am/we are long ABBV, ARRY, FMI, RHHBY.