Biotech Buzz Is Broken

Sentiment Shift-Correction Underway

Red Tape Prevails Today as of 11am Trading

Many market pundits seemed shocked at the vicious biotech sell-off. But if you look back over the past six years of this biotech bull market there have been several downdrafts. The current sell-off looks exactly like the correction in the early spring of 2014 after the Q1 mini-bubble. Volatility is the norm. Institutions dominate this market and they are taking profits. Review our recent article on trends in the market and keep in mind that sentiment and momentum are key. Moreover valuations for multi-$B biopharma mid-caps are historically high and difficult to measure except on a relative basis. The speculative fever in “immune-oncology” and CAR-T stocks is broken for example JUNO and KITE are now down YTD.

Some signposts for market direction are:

  • Strength in NASDAQ which hit a high on 4/27 up 6.5% YTD.
  • News or themes that reinvigorate sentiment.
  • Data will be forthcoming from the ASCO Meeting a month away.
  • Healthcare sector leadership up 6.8% YTD.
  • Positive earnings from larger cap biopharmaceuticals- Gilead (GILD) and Regeneron (REGN).

Analysts hate to hear this - technicals rule in the meantime. The bull market is intact but it is time to be cautious. The sector is still up 15% YTD but 10% off highs of just one week ago! We would hold core life science positions and bring cash to the 10% level until the tape improves.

Disclosure: None.

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Comments

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Rod Raynovich 4 years ago Author's comment

Here is the YTD for KITE down 4.7%:

www.google.com/finance

Alpha Stockman 4 years ago Member's comment

$KITE opened pretty good, $JUNO needs a bounce

Wall Street Wiz 4 years ago Member's comment

"For example JUNO and KITE are now down YTD."

JUNO was not traded this time last year.

Jennifer C. Kent 4 years ago Member's comment

YTD=year to date=2015 so far. I believe.

Kevin Cook 4 years ago Contributor's comment

I think he was just making the point that JUNO was down for the year, which is true.

Wall Street Wiz 4 years ago Member's comment

For some reason I am thinking from 14, but technically not true, it was as low 39 earlier this year.

Kevin Cook 4 years ago Contributor's comment

Solid, quick, & clean analysis of the situation.