Lower open expected; RMi’s analysis, who’s paying the price?

May 23, 2016 6:46am

Watch the short positions, the trend argues in favor of the downside

Indexes and ETFs: the IBB, XBI and IWM are down and the XLV is FLAT

Companies mentioned: BLUE, BSTG, HSGX, KOOL, KITE, NWBO and ONCE

I say today what others won't, so you can do what others can't; whether information or intelligence is good, bad or somewhere in between – it defines the who, when, where, which and what of it …

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Where are today’s markets going? 

Dow futures are DOWN -0.15% and NASDAQ futures are DOWN -0.11%

Stock futures showed little movement on Monday, against backdrop of a weakening dollar and oil prices, as investors got ready to listen for rate-hike clues in a busy week of Federal Reserve speakers.

European stocks seesawed as investors digested a mixture of a fall in oil prices, positive data out of France and Germany and the prospect of a U.S. rate hike in June.

Asia markets closed mixed, with Japan's shares dropping amid renewed strength in yen as fresh data showed the country's exports continued to fall.

Data docket: Markit purchasing managers’ index flash data for May, due at 9:45 a.m. ET.

The stem, cell and gene therapy regenerative medicine (SCGT&RM) sector closed POSITIVE on Friday, NEGATIVE on Thursday, POSITIVE on Wednesday, NEGATIVE on Tuesday and POSITIVE on last Monday.

The stem, cell and gene therapy regenerative medicine sector’s record after the last 5 days (of 43 covered companies):

• Friday closed POSITIVE with 10 decliners, 31 advancers and 2 flats;
• Thursday closed NEGATIVE with 35 decliners, 5 advancers and 3 flats;
• Wednesday closed POSITIVE with 15 decliners, 25 advancers and 3 flats;
• Tuesday closed NEGATIVE with 26 decliners, 13 advancers and 4 flats;
• Last, Monday closed POSITIVE with 12 decliners, 27 advancers and 4 flats;

Remembering Friday’s post, “It's much easier to get “screwed” doing what everyone else is doing … than to make the tough decision to sell and then buy back in.  But, it’s easier than you think – look at the market for what it is — a voting mechanism for buyers and sellers!

• After being one of the worst-performing sectors since the beginning of the year, the stem, cell and gene therapy regenerative medicine firms have shown few encouraging signs.

The NASDAQ Biotechnology Index declined 17.5% year-to-date.

• High risk and high returns are the terms associated with the biotech sector!

Rather than investing, the ETFs offer instant visibility and low fees and since their strategies are linked to a set of rules, like an index or a model of some sort, E.T.F.s have been attracting large sums of money from lagging mutual funds that rely on a portfolio manager to outsmart the broader market.

• Exchange-traded funds account for as much as a third of all publicly traded stocks.

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? 

The SCGT&RM sector stocks closed higher Friday.

• The Dow failed to recover gains for the week after stocks fell amid renewed concerns of a rate hike sooner rather than later. The NASDAQ rose 1.1% for the week and is down 4.75% for the year so far.

• The NASDAQ closed Friday +1.21% points higher, with Stemline (STML +16.09%), StemCells (STEM +10.11%), BioTime (NYSEMKT: BTX +9.56) and Spark Therapeutics (ONCE +7.78%) contributing the most percentage gains. I’d be prepared for a reversal!

• The bottom list and those on the losing side on Friday were Cesca Therapeutics (KOOL -$0.47 or -13.06%) - expect more of the same from a one patient trial in New Delhi, India; BioLife Solutions (BLFS -$0.07 or -4.28%) - expect a penny or four); Histogenics  (HSGX -$0.03 or -1.63%) – trading under cash value of $2.34, should be up and Vericel (VCEL -$0.03 or -1.01%) - total Carticel and Epicel net revenues increased 31% over Q1/15, with Carticel revenues increasing 24% and Epicel revenues increasing 46%, compared to Q1/15, even though it needs a financing, VCEL should be trading higher.

Watch list:

• The iShares Nasdaq Biotechnology (IBB) closed Friday up +2.04% and is DOWN -0.07% in Monday’s pre-market;

• The SPDR S&P Biotech ETF (XBI) closed Friday up +2.66%  and is DOWN -0.09% in Monday’s  pre-market;

• NASDAQ Biotechnology (NBI) closed up Friday +2.07%;

• The Health Care Select Sector SPDR ETF (XLV) closed up Friday +0.93% and is FLAT in Monday’s pre-market

• The iShares Russell 2000 (IWM) closed Friday up +1.68% and is DOWN -0.05% in Monday’s pre-market.

Companies in the spotlight;

• Biostage (BSTG) closed UP +$0.10 to $1.51. After announcing a secondary unit offering with warrants priced and closed at $1.76, the stock had dropped dramatically to as low as $1.41. Since the offering was projected to close on 5/19/16, the stock price should be picking-up but, so will the short position. BSTG was enlightening to see a board director, Thomas Robinson buying 18 K shares at $1.3556 before Friday’s close – BUY;

• bluebird bio (BLUE) closed UP +$1.77 to $40.60. Thursday’s price was $38.83, following the rest of the weeks, $39.39, $38.91and the previous Friday’s $38.46. Every time we see a good rise in the shares it’s like a carousel buy in, sell out, and buy in again.  Friday’s aftermarket was DOWN -$0.16 – SELL;

• Cesca Therapeutics (KOOL) closed DOWN -$0.47 to $3.14 following Thursday’s UP of +$1.60 on the basis of one (1) patient treated. One patient does NOT make a TRIAL a success … but, it has made the company a target for a sell-off!  Be ready for a downward SLIDE … Maintaining  SELL;

• Histogenics (HSGX) closed DOWN -$0.03 to $1.81 after Thursday’s -$0.13. HSGX is trading for less than its cash position of $2.34. Oversold – Maintaining BUY;

• Intrexon (XON) closed UP +1.52 to $28.05. The Zika virus scare continues; just last week, even though the number of people reported to have the virus in Brazil has topped 1.5 million and the World Health Organization has declared Zika a global health crisis. The risk is real, the closest we are to a vaccine is a P1 as announced by Dr. Tony Fauci, the head of the NIH/AID – then we have to rely on the spraying and many are up on arms about that but, I don’t see any more immediate applications to stop the progression of the Zika virus.  The after-market indication was +$0.13 - BUY;

• Kite Pharma (KITE) closed UP +$1.52 to $47.00. The week progressed from $45.04 on Monday to Wednesday’s $45.56 to Thursday’s $45.48 with May’s 2’s $47.80. Friday’s after-market indication was +$0.27, hoping or dreaming?  – BUY;

• Northwest Bio (NWB) closed UP +$0.03 to $0.80. NWBO has had its share of difficulty since the share price has been decreasing since January’s $3.06. The latest nuance of the H.C. Wainwrights’ 3/3/16’s offering is damning to the future.  The aftermarket indication was +$0.03 – BUY;

• Spark Therapeutics (ONCE) closed UP +$3.67 to $50.84 after Thursday’s+$5.94, Wednesday’s +$4.11. The week has provided an appreciative run after Thursday’s $47.17, Wednesday’s $41.23, Tuesday’s $37.12 and last Monday’s $36.76.  Traders could be taking profit as the after-market indication is down – Maintaining SELL;

• Verastem (VSTM) closed UP +$0.06 to $1.43. The stock is trading for less than its value of $2.69 - BUY

Opinions expressed are those of the author and are subject to change, and are 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.