The market has NOT been kind ...

January 12, 2016 12:50pm

... to the stem cell and gene therapy, regenerative medicine (SCGT&RM) sector since January 4th.

YET, “our” universe mounted a come-back to hopefully close higher on Tuesday snapping this losing streak but, chances are weakened at the mid-day

It was UGLY out there however, beauty is still in the eye of the beholder i.e. and maybe investors are hoping the sector is showing signs of finding a bottom.

Seven (7) trading days of merciless losses for the stem, cell and gene therapy & regenerative medicine (SCGT&RM) sector stocks has annunciated the risk of “our” universe!

The Russell 2000 Index fell 0.4% on Monday to pull within six points of a 20% drop from its all-time high in June, closing at the lowest level since 2013.

• Investors are looking to see recuperative performance to re-enter the path to ANY appreciation!

The market in relation to share pricing and market caps is rendering valuations – useless to be achieved in which century, so when will these “target” prices be actualized?

• The stem, cell and gene therapy RegMed sector closed NEGATIVE on Friday, Thursday, Wednesday, Tuesday and last Monday while last, Friday was a holiday.

Although today, Tuesday, I do perceive a recalibration of INTEREST in the oversold!

• The market opened: POSITIVE with 6 decliners, 35 advancers and 2 flats;

• The 1^st hour continued:  POSITIVE; with 9 decliners and 32 advancers and 2 flat;

• The 11:30 AM hour weakened:  POSITIVE with 23 decliners, 27 advancers and 2 flats;

• The mid-day (12:30 pm: dropped NEGATIVE with 23 decliners, 20 advancers and 0 flats

My fear gauge or the CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market traded

·         Monday traded near 24

·         Friday traded near 24;

·         Thursday traded near 25;

·         Wednesday traded down near 20.5;

·         Last Tuesday traded near 19.5 <down from 20.5>;

·         The previous Monday traded near 22 after earlier topping 23 to hit its highest level in two weeks;

·         While last,  Friday was a holiday

Past seven (7) trading days has been shooting through portfolios pain - particularly severe in “our” universe where the majority of our covered 43 (SCGT&RM) sector companies have fallen:

• Monday closed 34 decliners, 7 advancers and 2 flats;
• Friday closed NEGATIVE with 25 decliners, 17 advancers and 1 flat;
• Thursday closed NEGATIVE with 36 decliners, 7 advancers and 0 flat;
• Wednesday closed NEGATIVE with 36 decliners, 5 advancers and 2 flats;
• Last, Tuesday closed NEGATIVE with 22 decliners, 19 advancers and 2 flats;
• The previous, Monday closed NEGATIVE with 33 decliners, 7 advancers and 3 flats;
• Last, Friday was a holiday

Out and about:

MY concern is that global “issues” have overwhelmed speculation that any  strong share price showing will be sold INTO … small- capitalization companies.

• Valuations in small caps also are stretched, with the Russell 2000 trading at 48 times earnings in June. That’s since fallen to 36.6, compared with a valuation of 17.2 for the S&P 500.

While health-care shares have contributed most to losses, they are not the only victims. The group of oil and gas producers has tumbled 53 percent since the index’s record, with all but one of the 94 members in the red. About 40% have fallen by two-thirds.

• Small-caps also fell into a bear market in July 2011 after plunging 24% in a one-month rout that halted a bull run that began 3/9/09. The index re-entered a bull market in 11/11, after a three-week surge of 26%. The rally peaked at 113% with the gauge’s record in June, and has now ended after 51 months <Bloomberg>.

A sharp slide in share pricings has one big plus: it leads to deeper thinking about selective investment in “our” universe.

Riding the indexes and ETFs roller-coaster:

• The iShares Biotechnology Stocks ETF (IBB) is UP at the mid-day +1.49 or +0.51% having closed DOWN on Monday -10.51 or -3.48% following Friday’s decline of -5.58 or -1.81%;

• The NASDAQ Biotechnology index (NBI) is UP +14.01 or +0.48% having closed DOWN on Monday -107.65 or -3.41 following Friday’s decline of  -62.21 or -1.93%;

• The Russell 2000 (IWM) is DOWN at the mid-day  -0.15 or -0.15% having closed DOWN on Monday -0.45 or 0.43% following Friday’s decline of -1.82 or -1.72%;

• The SPDR SD&P Biotech ETF (XBI) is UP at the mid-day at 0.86 or +1,51 having closed DOWN on Monday -3.37 or -5.57% following Friday’s decline of -1.31 or -2.12%

My Tuesday indications are wobbly.  3 hits and 3 miss.  At least I articulate the score. NO one can “pick” this market even where value resides:

• Applied Genetic Technologies (AGTC) is DOWN – miss;
• Bellicum Pharma (BLCM) is UP – hit;
• BioTime (NYSEMKT: BTX) closed DOWN – miss;
• Harvard Apparatus RT (HART) is DOWN – hit;
• Juno Therapeutics (JUNO) is UP – hit;
• Verastem (VSTM) is DOWN – miss;

Who is DOWN at the mid-day – top 5?

• Intrexon (XON) is DOWN -$0.40 to $22.70;
• Avalanche Biotech (AAVL) is down -$0.45 to $6.20 after yesterdays -$0.63;
• uniQure (QURE) is down -$0.53 to $16.05 after yesterday’s -$1.61;
• Applied Genetic technologies (AGTC) is DOWN -$0.26 to $15.75 after yesterday’s -$1.00;
• Histogenics (HSGX) is down -$0.34 to $2.90 after yesterday’s +$0.21;

Who is UP at the mid-day – top 5?

• bluebird bio (BLUE) is UP +2.95 to $47.53 after yesterday’s -$10.80;
• Spark Therapeutics (ONCE) is UP +$1.20 to $31.36 after yesterday’s -$4.13;
• Cellectis (CLLS) is up +$1.01 to $25.05 after yesterday’s -$2.51;
• Aduro Biotech (ADRO) is UP +$0.61 to $22.91 after yesterday’s -$1.29
• ReNeuron (RENE.L) is UP +$0.25 to $3.50

Reiterating, downside volatility caused by fear and uncertainty is still creating TRADING opportunities with investors on the short end – it’s still a casino oriented poker table!

MY opinion is to invest in those companies that understand how to spell communication, guidance, transparency and fiduciary responsibility!  For the eighty-sixth (86) time, my advice to CEOs with a REAL story to tell, you NEED to SELL it by communicating to stakeholders and those who can ENHANCE visibility!   And be straight about it … honor is a reputation that one is worthy of respect, not always admired but, always known to be held to a high moral standard of behavior!

Remember, this New Year - 2016 is all about “short-termism”  And so it goes: news breaks, data is digested; but, beware of the window dressing presented by volatility!

Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.