Technicals Hold

Biotechnology stocks recovered from the recent sell-off and gained 2.5% (IBB) off recent lows on 9/1. The $280 level on the IBB is good intermediate support despite the poor sentiment triggered by the EpiPen pricing flap. We added a small trading position in the XBI around $63 anticipating a near term rally. We still like biotech stocks for Q4 assuming we can hold these technical levels. The broader based health care SPDR ETF (XLV) has lagged biotech over 5 days and is flat. More revenue growth and pricing power is expected from large and mid-cap biotech stocks compared to large cap pharma which really needs M&A to complement internal growth. We also expect to have more product pipeline news that should drive stocks.

Today the “green screen” was prevalent with Alexion (ALXN) and Gilead Sciences (GILD) leading gainers among the large caps and Alnylam (ALNY), Seattle Genetics (SGEN) and Vertex Pharmaceuticals (VRTX) leading the mid-caps. Many small caps stocks saw big gains recently. Within the Rayno Biopharmaceutical Portfolio bluebird bio (BLUE) was up 8.9% today on positive clinical news for their LentiGlobin gene therapy platform for Transfusion Dependent Beta Thalassemia.

GW Pharmaceuticals plc (GWPH) ran up 25 points (28%) this week on buyout rumors after they hired Morgan Stanley as a banker to help manage proposals. The Company now has a market cap of $2.66B and is focused on cannabinoid prescription medicines with clinical stage pipelines for epilepsy, orphan drugs, diabetes and schizophrenia.