October 13, 2016 8:04am

 

… The iShares Nasdaq Biotechnology ETF (IBB) closed down 2.48%, hitting its lowest level since 7/16

There was similar weakness in the SPDR S&P Biotech ETF (XBI) which ended off 3.4% which has also seen a downtrend since hitting a recent closing high on 9/22.

… Indexes and ETFs: The IBB (-0.71%), IWM (-0.75%) and the XBI (-1.26%) are projected DOWN and the XLV is NOT indicating

 

BUY: AGTC, FATE, KITE, MDXG, ONVO, VCEL and XON

SELL: BSTG,

 

I answer one question; in which company should investors put, keep and commit their money!

 

Where is “our” universe going today?  If you are not a subscriber, you won’t know the morning’s indications and who is in the headlights.

 

 

 

 

The strange case of Dr. Jekyll and Mr. Hyde might make for a great read, but it’s far less fun when the sector acts like it’s a blueprint. Stocks have been alternating between the dreadful and the benign.

Once we get through quarterly financial results <notice I didn’t say – earnings> season, it will be easier for investors to take a short -term view, but my fear is that the Q3 numbers aren't going to look much better than the Q2 numbers.

 

 

Dow futures are DOWN -0.61% and NASDAQ futures are DOWN -0.64%

 

U.S. stock index futures pointed to a lower open on Thursday as traders eyed the release of data and earnings or in fresh Chinese economic data.

  • The minutes, out Wednesday, confirmed that policy makers have differing views, and a “divided Fed is really bad for the market,” said Naeem Aslam, chief market analyst at ThinkMarkets, in a note. Mixed signals make it difficult for traders to craft a strategy;

European stocks were lower after minutes from the U.S. Federal Reserve's September meeting raised expectations of a December interest rate hike and weak China trade data weighed on investor sentiment.

Asian markets were mixed after see-sawing following soft Chinese trade data.

  • China worries resurface: China’s exports last month fell much more than expected, as global demand for goods from the world’s second-largest economy remained sluggish.

 

Data docket: jobless claims and import prices are due to be released at 8:30 a.m. ET, with the Federal budget at 2:00 p.m. Thursday will also see Philadelphia Fed President Patrick Harker speak on the economic outlook at the World Affairs Council of Philadelphia.

 

 

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

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

  • Wednesday closed NEGATIVE with 36 decliners, 6 advancers and 1 flat;
  • Tuesday closed NEGATIVE with 32 decliners, 10 advancers and 1 flat;
  • Monday closed POSITIVE with 10 decliners, 33 advancers and 0 flats;
  • Friday closed NEGATIVE with 28 decliners, 15 advancers and 0 flat;
  • Last Thursday closed NEGATIVE with 32 decliners, 9 advancers and 2 flats;

 

 

Remembering Wednesday’s closing post, “The sector gets shaken for second day. It’s all about the sector’s perception of risk which is wrapped with sentiment; while narrow trading ranges have more to do with the lack of dynamics that makes the IBB depreciate and stocks in tandem go down.”

Despite the recent weakness, investors continue to pour money into ETFs but, NOT sector stocks!

The iShares IBB ETF has seen inflows of $28.8 M over the past day <according to FactSet> however; another selloff extended the ETF’s 2.48% after Tuesday’s decline of 3.8%, making this the worst two-day stretch for the ETF since late June <Dow Jones>.

The SPDR S&P Biotech ETF has seen also inflows of $65.5 M; of the past 14 sessions, The SPDR XBI has fallen in 10 of them, making for a decline of more than 10% since that closing peak <9/22>.

 

I keep track of closes, indexes, pricing as …news lately lacks any energy and the social media impact of RMi reporting stimulates the reality of “our” universe as well as disrupting element in the trading of sector equities!

 

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 Wednesday down -2.48% and is projected  DOWN -0.71% in Thursday’s pre-market;
  • The SPDR S&P Biotech ETF (XBI) closed Wednesday down -3.42% and is projected DOWN -1.26% in Thursday pre-market;
  • The Health Care Select Sector SPDR ETF (XLV) closed down -0.45% Wednesday and is NOT indicating in Thursday’s pre-market;
  • The iShares Russell 2000 (IWM) closed down -0.08% on Wednesday and is projected DOWN -0.75% in Thursday’s pre-market.

 

 

Companies in my headlights:

Applied Genetic Technologies (AGTC) closed DOWN -$0.67 to $8.68 after Tuesday’s $9.35 and Monday’s $9.60, Friday’s $9.45 following last Thursday’s $10.07. Cash of $172.7 M, revenue, no debt, and a named partner – Biogen (BIIB), multiple trials as well as pre-clinical programs and research in a hot universe; a book value per share of $9.87 and NO need for capital markets access. A float of 9.88 M shares with 18.05 M outstanding, with 52.30% held by institutions and a short percentage of float of 2.16%. For Q2/16, AGTC recorded net income of $2.7 M, compared to a net loss of $7.96 M in Q2/15. At 6/30/16, the cash, cash equivalents and investments amounted to $172.7 M.  AGTC believes that these cash, cash equivalents and investments will be sufficient to enable it to advance planned preclinical studies and clinical trials for its lead product candidates for at least the next two years. OVERSOLD – Maintaining BUY;

Biostage (BSTG) closed DOWN -$0.014 to $0.90 after Tuesday’s $0.92 (+$0.02) following Monday’s $0.90 (-$0.04) after last Friday’s $0.94 (-$0.16). The FDA’s approval <IND> delay is behind them; GET the required studies completed.  What’s going to propel the share pricing? To go forward, this CEO needs support to actualize a financing, so when are the warrants from the recent financing being registered?  It will be harder to revitalize pricing without some change in perception that might engage sentiment but, unlocking the shackles that bind its value is questionable to the future - Maintaining SELL;

Intrexon (XON) closed DOWN -$1.81 to $27.56. Florida Gov. Rick Scott said Florida will spend an additional $7.4 M to fight the Zika virus in Miami-Dade County, which has the largest number of Zika cases reported by any county in the state. A new case of locally acquired Zika infection was reported in Miami-Dade; the county has reported 156 mosquito-borne and 237 travel-related cases so far. XON has suffered these past sessions, Tuesday’s $29.37, Monday’s $30.49, Friday’s $29.69 and last Thursday’s $28.53 – BUY;

Fate Therapeutics (FATE) closed DOWN -$0.26 to $2.69. Bad days should come to an end; Tuesday’s $2.95, Monday’s $2.94 Friday’s $2.86 and last Thursday’s $2.97. I have liked the management of this company, so I am partial but, share pricing speaks for itself. OVERSOLD – BUY;

Kite Pharma (KITE) closed DOWN -$3.71 to $51.66. KITE has felt the pain of this roller-coaster market with Tuesday’s $55.37 , Monday’s $57.74, Friday’s $55.72 and last Thursday’s $55.66. KTE-C19 treatment has shown a 47% complete remission rate in patients with the most common form of Non-Hodgkin lymphoma. The stock quickly backed off to end the week with a 2% gain, up 45% from a February low.  As we approach Q3 financial results/ earnings release hopefully some news will motivate share pricing. OVERSOLD – BUY;

MiMedx (MDXG) closed DOWN -$0.15 to $8.35 after Tuesday’s $8.50 (-$0.64). Where is the competition lately? OSIR has YET to file years of Qs and Ks – as NASDAQ hovers, the SEC is the “sword of Damocles” hanging over its future as a public corporation. A private company, Organogenesis has its own problems.  MDXG’s Q3/16 revenue of $64.4 M is a 31% increase over Q3 2015 revenue, Q3/16 revenue exceeds $64.0 M upper end of guidance, Q3/16 revenue beats analyst's estimates of $63.1 M and revenue for the nine months ended 9/30/16 is a 29% increase over same 2015 period. Reiterating, MDXG recorded record revenue for Q3 of $64.4 M, a $15.4 M or 31% increase over Q3/15 revenue of $49 M. For the nine months ended September 30, 2016, MDXG recorded record revenue of $175.1 M, a $39.7 M or 29% increase over revenue of $135.4 M recorded in the same nine month period of 2015 – Maintaining BUY;

Organovo Holdings (ONVO) closed DOWN -$0.10 to $3.83 after Tuesday’s $3.93 (+$0.12). Any company that “guides” early in this environment deserves to be bought – this management is polishing the apple and should be applauded. ONVO’s preliminary fiscal Q2 total revenue was approximately $1.4 M, consisting largely of product and service revenue.  This result reflects a 357% increase in total revenue versus the comparable period of fiscal 2016 and a 54% increase versus Q1/17.  Product and service revenue was approximately $1 M, up 400% from the prior-year period, largely driven by an increase in customer contracts for ONVO’s tissue research services. Collaborations and grant revenue totaled approximately $400 K, primarily supported by a milestone achievement from ONVO’s agreement with Merck & Co. to develop multiple custom tissue models.  ONVO’s preliminary cash and cash equivalents balance was approximately $51.7 M as of the end of the fiscal Q2, which compares to $53.5 M for Q1.  ONVO’s preliminary net cash utilization during the period was approximately $6.8 M.  During the fiscal Q2, ONVO generated net proceeds of approximately $4.5 M from the issuance of 997,181 shares of common stock in at-the-market (“ATM”) offerings at a weighted average price of $4.67 per share and approximately $500 K from the exercise of stock options and warrants. ONVO updated its full-year fiscal 2017 outlook for total revenue and net cash utilization - total revenue of between $4.5 M and $6.2 M for fiscal-year 2017 with fiscal 2016 total revenue recorded at $1.5 M; net cash utilization of between $31 M and $34 M for fiscal-year 2017.  ONVO had cash and cash equivalents balance of $62.1 M for its fiscal year ended March 31, 2016 – Maintaining BUY;        

Vericel (VCEL) closed DOWN -$0.12 to $2.44 after Tuesday’s $2.56 (-$0.45). As I stated, I haven’t been a personal fan but, in this case, with NO capital market access – the use of an ATM is a stopgap to the future. Cowan and Company is a great banker to have as an advisor. They now have cash via access to stock sales, not a traditional offering but, an at-the-market move?  OVERSOLD, the aftermarket indication is positive +$0.09 – Maintaining BUY;

 

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.