March 29, 2017 8:47pm

 

A is for algorithms, the story of the day to take over stock picking while we experience our owm algorithms/server “glitch”

As money managers seek to let the machines manage investor’s funds, some call it the democratization of information and I believe our sector is in deep trouble!

 

Pre-open indications:  five(5) – 4 SELLS, 1 BUY

 

Critical information ahead of “our” universe’s open! I provide intelligence and analysis for short and near-term investment.

 

The sector is what it is, until it isn’t and even then it doesn’t seem to be…

 

Readership is a team sport, are you on it?

 


 

Expectation is the word for 2017 – meeting the unknowns with the soon to be exposed concerns will be the subject of investing decisions throughout this year.

 

 

Dow futures are DOWN -0.03% and NASDAQ futures are UP +0.12%

 

U.S. stock index futures pointed to a mixed open on Wednesday following a rally on better-than-expected economic data in the previous session.

European stocks were mixed as investors looked to London and Brussels and the start of Britain's much-anticipated Brexit proceedings.

· U.K. Prime Minister Theresa May signed the official letter to the European Council President Donald Tusk on Tuesday to invoke Article 50 of the Lisbon Treaty. The EU will have two days to respond to the letter, after it has been delivered to Tusk on Wednesday at 12:30 BST.

Asia markets finished mixed and sterling slipped as markets await the formal move by the U.K. to start an historic split with the European Union.

 

Data docket: existing home sales for February released at around 10 a.m. ET.

 

 

The stem, cell, gene and regenerative therapy (SCG&RT) closed POSITIVE on Tuesday, Monday, Friday, Thursday and NEGATIVE last Wednesday.

The SCG&RT sector’s record after the last 5 days (of 43 covered companies):

·         Tuesday closed POSITIVE with 19 decliners, 21 advancers and 3 flats;

·         Monday closed POSITIVE with 8 decliners, 33 advancers and 2 flats;

·         Friday closed POSITIVE with 13 decliners, 27 advancers and 3 flat;

·         Thursday closed barely POSITIVE with 18 decliners, 20 advancers and 5 flats;

·         Last Wednesday closed NEGATIVE with 26 decliners, 15 advancers and 2 flats;

 

 

Remembering Tuesday’s closing bell newsletter, “playing the sector for tomorrow’s trade or both…What is the foundation of sector pricing with a neutral open, a negative mid-day and a barely positive close?”

  • Reiterating, “As I keep saying, I wouldn’t depend on algorithms and ETF exposure.  After four (4) positive sessions following two (2) negative closes – I am feeling more than arthritis pain in the sector.”

Risks in development are NOT the only factor that destroys shareholder value — investors must look at the reality of many of these companies.

  • The next largest influence is the management team which investors hope will mitigate the risk of the life cycle of any compound or technology platform.

Next, to get at the root cause of lost value, consider event analysis by going back to news reports, press articles, 10 K and 10 Q filings and brokerage reports for each company before <and after> their loss of value.

 

The first category included major strategic blunders or instances when a company was caught flat-footed by a major clinical initiative – my question is where were they?

In the second category are tactical/operational/execution or as I call them - teething troubles, that cause significant shareholder value destruction.

The third category included financings, share price depreciation and dilution

The fourth category is fraud, accounting problems, ethics violations, and other failures to comply with laws, standards, or ethics.

In the fifth category, I recognize declines resulting from external shocks that are considered regulatory. I narrow these situations down to circumstances in which trial data and clinical results could not be controlled or easily anticipated by the company.

 

About half the time, the loss of value occurred gradually — over many months, if the company takes too long to grasp a changed strategic environment or lacked the agility to react.

  • The other half of the time, the lost value occurred in a matter of weeks, or even days.

Sometimes these sharp shocks were caused by strategic failure (for example, being caught by surprise when a competitor introduced a superior product), and sometimes they resulted from an operational issue, compliance problem, or external event that overwhelmed the company.

  • Often, it is a confluence of events that leads to value destruction.

 

 

You’ve made it to the office, turned on the monitor, having just gotten your coffee and it hits you - what could be today’s trades? 

Watch list:

·         The iShares Nasdaq Biotechnology (IBB) closed  Tuesday down -0.39% and is UP +0.41% in Wednesday’s pre-market;

·         The SPDR S&P Biotech ETF (XBI) closed Tuesday down -0.63% and is NOT indicating  in Wednesday’s after-market;

·         The Health Care Select Sector SPDR ETF (XLV) closed up +0.07% Tuesday is NOT indicating in Wednesday’s pre-market;

·         The iShares Russell 2000 (IWM) closed up +0.78% on Tuesday and DOWN -0.34% in Wednesday’s pre-market

                                                                                   

 

Companies in my headlights:

Asterias Biotherapeutics (NYSEMKT: AST) closed up +$0.05 to $3.55. After the release of Q4 and FY16 financial results - AST reported a Q4/16 loss of $9.3 million or $0.20 per share. Losses, adjusted for non-recurring costs, were $0.18 per share. The results fell short of “Street” expectations. The average estimate was for a loss of $0.17 per share. AST posted revenue of $1.8 million in the period, also falling short of “Street” forecasts of the expected $2.8 million.  For FY16, AST reported that its loss widened to $35.5 million, or $0.83 per share. Revenue was reported as $7 million. AST ended Q4/16 with $19.9 in cash. With the spending as it is; AST will need to raise capital and with a negative aftermarket indication of -$0.35 or -9.86% - I’d SELL;

Athersys (ATHX) closed up +$0.01 to $1.18. The aftermarket indication is +$0.23 or +19.49% as William Blair, initiating coverage with an $11 price target sating MultiStem is a potentially revolutionary stroke treatment.  Based on aftermarket numbers, however I am NOT a believer and after experiencing tomorrow’s new high - I’d SELL for now - BUY;

Regenxbio (RGNX) closed up +$0.15 to $20.50. RGNX recruited a CSO from Biogen (BIIB) whohad made an investment. To me a temporary high which could foretell the drop in tomorrow’s pricing. - SELL;

Cellectis (CLLS) closed UP +$0.08 to $23.98. CLLS has been getting a little too rich for me as the sector carousel revolves and the market music continues to sound - SELL;

Opexa (OPXA) closed up +$0.05 to $0, 84. After Q4 and FY16 financial results, shut down news and lay-offs, OPXA will sputter to the downside – SELL;

 

 

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.

Henry’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your advisor about what is best for you.