January 2nd, 2015

BIIB’s Second Act

imageAre you one of those who missed the biotech burst, especially the 375% run-up from a leader like BIIB (Biogen-Idec) since its breakout on March 11, 2011?  You can’t make up the “opportunity costs” of not having bought but you have an opportunity in what may be left in the stock’s upside move by jumping on the stock as it looks to complete a easily identified year-long consolidation in the form of an ascending triangle, the first since beginning its run almost four years ago (to enlarge, click on image below).

Biogen Idec Inc. discovers, develops, manufactures and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders with such products as AVONEX, TYSABRI, FAMPYRA, FUMADERM and RITUXAN.  One of the reasons for the pause in BIIB’s upward trajectory was the uncertainties surrounding the company’s prospects as it faced expiration of its AVONEX patent at the end of 2013.  Articles like this one from May 2013 entitled “3 Bio Companies Facing The Patent Cliff” didn’t help.

But companies of BIIB’s caliber don’t just roll over when they face a challenge like major patent expirations.  It takes a while for them to regroup and for investors to regain their confidence,  Hence a consolidation in the form of an ascending triangle.  Apparently, the consensus among the majority of the stock’s investors is that BIIB has successfully weathered the storm with sufficient existing products and products in the pipeline that growth can be expected to resume.  Hence, a likely breakout from the consolidation pattern.

Some investors balk at buying and owning stocks with triple-digit price tags because of the fear of less volatility and more limited upside (BIIB is the 10th highest priced stock among the S&P 500 behind such leaders as NFLX (Netflix), ISRG (Intuitive Surgical), PLCN (Priceline) and CMG (Chipotle Mexican Grill).  But those concerns should be alleviated by knowing that BIIB ranks 71th among the S&P 500 stocks in 5-year average annual earnings growth of nearly 25%.

BIIB - 20150102

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April 16th, 2012

HALO: What’s the response?

One of the most difficult and disappointing experiences as an investor/trader is when a stock, recently purchased based on an excellent chart with excellent prospects blows up in your face.  That happened to me today.

I purchased HALO (Halozyme Therapeutics, Inc.) in January for all the right reasons at the time.  The market had been steadily moving higher and biotechs were an Industry Group had been among the highest ranked of all 197 IBD Industry Groups for over a year.When the stock successfully crossed a significant resistance level, it would enter into all-time new high territory, a clear indication of further momentum moves higher.  The chart at the time was:

Everything was going along swimmingly; after following through on the breakout move, HALO advanced to 14.50.  But then it all came to a screeching halt today when the company announced that the FDA was requesting more information to complete its review of the HyQ Biologics License Application. The company expects these requests will require additional time to complete delaying the anticipated regulatory review and approval timeline.  The stock plunged over 25% to 8.50.  What was a nice, quick profit of over 40% turned into a loss.

Was the gap down last week (when the market itself was correcting) that should have been paid closer attention to and reacted accordingly (easy to say in retrospect)?  What is one to do now?  Is the market over reacting?  Are the shares “dead money” and, if so, for how long?  How long will it take for the stock close the gap?  Are there lessons to be learned about buying and selling from a stock like HALO (and an industry like biotech) blowing up like it did today?

There’s no a big supply overhanging on the stock and it even if it did slowly crawl back to the resistance level it would take some time before it could try another assault on that all-time new high territory.

Fortunately, my portfolio is well-diversified and the stock didn’t represent a large percentage share of total.  Today, other stocks in the portfolio more than made up for the loss in the HALO.  But the question remains …. hold or abandon the position and, if so, when?

January 18th, 2012

AMGN: the ship for sailing the coming biotech tsunami

Since the beginning of the year, I’ve featured three different Industry Groups that look to have some potential including: Financials; Big Pharma; Cement, Concrete and Aggregate.  Another that has been in the top of the rankings for at least the 18 months is the Medical-Biotech Industry Group.  Two ways of measuring the group’s performance is through the its ranking according to IBD and the other is an ETF.

Medical-Biomed/Biotech has consistently been among the top 100 (out of 197).  Since last April, the group has ranked among the top 40 and last week, it ranked third.

Another picture of the stock performance of the group is available through the BBH (Holders Biotech) etf:The ETF is a composite of a large number of biotech stocks and, therefore, some individual stocks have performed better and some worse than that average.  Just recently, the group crossed above long-term resistance and moved into new all-time high territory.

According to PharmaPhorum, AMGN (Amgen) is:

“the biggest biotechnology company in the world, but its plush headquarters, global reach and tens of thousands of employees belie its humble origins. Founded in 1980 as Applied Molecular Genetics, it initially resembled the type of Californian start-up more common in the computer industry than the traditional big pharma behemoth. Much like the straightened origins of Apple or Microsoft, Amgen combined a relaxed attitude with determination and flexibility in dealing with limited resources…..Amgen’s innovative and flexible approach seems to be continuing into the new decade; it is widening its research to include small molecules as well as the more traditional biologicals, and it retains one of the highest ratios of R&D spend to income of the Fortune 500 companies. Biotechnology certainly promises many discoveries for the future, and Amgen will surely be as key a player in the next 30 years as it has been in the last 30.”

Stocks like AMGN are the sort that appeared to be at the end of one stage of their life cycles and there are questions as to whether they can be “reborn” and launch into a new life cycle of growth.  Apple went through just that until 2004 but then, through Steve Jobs leadership, it launched iTunes and iPods; the AAPL stock had been caught in a range but the introduction of those products launched it into a new life cycle.  The past twelve years has been anything but profitable for AMGN investors: But the stock is now again on the verge of breaking out of the channel in which it has been trapped since 2000.  A move above 70-75 would clearly signal the launch of a new life cycle move.  Smaller stocks in the industry are already moving higher and represent precursors of that tsunami; AMGN could be the steamship on which you may want to sail that wave.

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