November 1, 2017 7:04pm

To open up, dump by 11:30 am and close to the downside, yet again

 

As the IBB (-0.63%) and XBI (-1.40%) deserted the sector

It’s not just “earnings” season, resistance extends the downside for risk

 

Pre-open indications: 5 hits and 4 miss

Quarterly results: AXGN, BLUE, JUNO, FATE reviews included

 

How right does one have to be? You could and should be reading this review of the day’s share pricing activity?

 

What’s the gauge of pricing expectation – monetization of information!  Wednesday’s results have implications to Thursday’s sector activity as a daily report may say little or a lot and it serves as insurance that all indications are being examined and evaluated!

 

 

Henry’omics:

From the pre-open’s newsletter, “Q3 quarterly results set the tone and it’s killing the sector. Skepticism has stimulated volatility with the lack of share pricing sustainability is also compounded by the lack of communication to shareholders.”

Reiterating, “Investor’s focus will primarily be on each company’s cash burn, its pipeline updates and whether they need to jump through the offering window ensuring dilution and pricing depreciation.  Some need to finance in FY17 to execute with runways in FY18.”

October was a rough one for sector investors!

I see valuations of some stocks as serious warning signs for the health of the sector as investors are exposed to the frothier edges of risk!

Many investors are just getting out and waiting until the sector comes back, before getting back in - so far that hasn’t turn out so well for them.

 

 

The advance/decline line scenario of 43 SCGT & RT covered companies:   

·         The open was positive with an A/DL of 24/12 and 7 flats;

·         11:30 am was negative with an A/DL of 14/26 and 3 flats;

·         The mid-day was negative with an A/DL of 11/30 and 2 flats;

·         The close was negative  with an A/DL of 14/27 and 2 flats;

 

Pre-open indications: 5 hit and 4 miss

  • Applied Genetic Technologies (AGTC) closed up +$0.15 – miss;
  • Athersys (ATHX) closed down -$0.05 – hit;
  • AxoGen (AXGN) closed up +$0.05 – miss;
  • bluebird bio (BLUE) closed up +$3.85 – miss;
  • Capricor (CAPR) closed down -$0.13 – hit;
  • Cellectis SA (CLLS) closed down -$5.83 – hit;
  • Juno Therapeutics (JUNO) closed up +$3.40 – miss;
  • Stemline (STML) closed down -$0.30 – hit;
  • Verastem (VSTM) closed down -$0.35 – hit;

 

Some of MY working trend lines or indications:

… The greatest volume to the downside:  MDXG, XON, SGMO, IMUC and ADRO  

… Upside volume was weighted to:  RENE.L, JUNO, BLUE, STML and BLCM

… Biggest $ downside: CLLS (-$5.83), RGNX (-$2.45), ONCE (-$2.34), MDXG (-$1.03) and SGMO (-$0.80)

… Largest $ upside: BLUE (+$3.85), JUNO (+$3.40), BLCM (+$0.33), STML (+$0.30) and RENE.L (+$0.20)

… Flat:  NWBO and BSTG

 

 

Quarterly financial results:

AxoGen (AXGN)

·         Revenue of $16 million, up 43% compared to $11.2 million in Q3/16

·         Gross margin of 84.4% compared to 84.9% in Q3

·         Net loss for Q3/17 is $2.1 million, or $0.06 per share, compared with a net loss of $2.3 million, or $0.08 per share, in the third quarter of 2016

·         Adjusted EBITDA loss of $433,000 compared to Adjusted EBITDA loss of $779,000 in Q3 2016

·         Ended the quarter with $22 million in cash, a reduction of $1.8 million from the end of Q2/17

·         Ended the quarter with $25 million of total bank debt, unchanged from the end of Q2 2017

·         AxoGen shares have more than doubled since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $20.60, more than doubling in the last 12 months.

 

bluebird bio (BLUE) …

·         BLUE reported a loss of $78.8 million with a per share loss of $1.73.

·         The results did not meet “street” expectations. The average estimate of nine analysts was for a loss of $1.64 per share.

·         BLUE posted revenue of $7.7 million in the period, which also fell short of “street” forecasts. Five analysts expected $9 million.

·         BLUE shares have more than doubled since the beginning of the year. The stock has nearly tripled in the last 12 months.

·         Cash, cash equivalents and marketable securities as of 9/30/17 were $1.1 billion, compared to $884.8 million as of 12/31/16, an increase of $257.8 million.

·         Total revenue was $7.7 million for Q3 compared to $1.6 million Q3/16. The increase is attributable to the commencement of revenue recognition for the bb2121 license and manufacturing services under BLUE’s agreement with Celgene and revenue recognized under bluebird bio’s out-licensing agreement with Novartis Pharma AG (Novartis).

·         R&D expenses were $61.5 million, compared to $64.0 million for Q3/16. The decrease in research and development expenses was attributable to decreased platform related expenses as a result of a one-time $15 million upfront license payment expensed in the third quarter of 2016, partially offset by increased employee-related costs due to increased headcount to support overall growth, increased clinical trial costs, and increased facility related costs.

·         G&A expenses were $23.0 million for Q3 , compared to $14.6 million for Q3/16. The increase in general and administrative expenses was attributable to increased employee-related costs due to increased headcount to support overall growth, increased commercial-related costs attributable to market research costs, increased facility-related expenses, and increased professional and consulting fees.

 

Fate Therapeutics (FATE) …

·         FATE reported a loss of $10.7 million or -$0.26 per share.

·         The results fell short of street expectations. The average estimate of five analysts was for a loss of $0.25 per share.

·         FATE posted revenue of $1 million in the period, matching Street forecasts.

·         Cash, cash equivalents and short-term investments as of 9/30/17 were $69.2 million compared to $92.1 million as of 12/31/16. The decrease was primarily driven by FATE’s use of cash to fund operating activities and to service principal and interest obligations under its loan agreement with Silicon Valley Bank. This use was offset by $7.5 million in net cash proceeds received in July 2017 in connection with the amendment of its loan agreement with Silicon Valley Bank.

·         In the final minutes of trading on Wednesday, the company's shares hit $4.69. A year ago, they were trading at $2.08.

 

Juno Therapeutics (JUNO) …

·         Cash, cash equivalents, and marketable securities as of 9/30/17 were $1.06 billion compared to $801.8 million as of June 30, 2017, and $922.3 million as of 12/31/16.

·         Cash burn, which is cash used in operating activities and capital expenditures, excluding cash inflows and outflows from upfront payments related to business development activities, was $54.2 million in the third quarter of 2017, of which $59.1 million was operating cash burn and $4.9 million was net cash provided by a tenant improvement allowance offset by capital expenditures.

·         For purposes of comparing the operating cash burn and cash burn for capital expenditures for the third quarter of 2017 to JUNO’s financial guidance, a cash inflow of $18.8 million for a tenant improvement allowance was reclassified from operating activities to capital expenditures.

·         Cash burn in the third quarter of 2016 was $59.5 million, of which $53.1 million was operating cash burn and $6.4 million was cash burn for capital expenditures.

·         R&D expenses for the three and nine months ended September 30, 2017, inclusive of non-cash expenses and computed in accordance with GAAP, were $140.3 million and $324.3 million, compared to $60.9 million and $206.9 million for the three and nine months ended September 30, 2016, respectively. The increases in 2017 compared to 2016 were primarily due to increased costs to manufacture Juno's product candidates, execute on Juno's clinical development strategy, expand its overall research and development capabilities, an increase in expense related to its success payment and contingent consideration obligations, expense incurred for the amortization of the intangible asset associated with the AbVitro, Inc. (AbVitro) acquisition, and an increase in non-cash stock-based compensation expense.

·         General and administrative expenses on a GAAP basis for the three and nine months ended September 30, 2017 were $26.3 million and $70.7 million, respectively, compared to $18.4 million and $51.2 million for the same periods in 2016.

 

 

Daily analytics:

U.S. stocks mostly closed higher Wednesday, with the Dow and the S&P 500 ending near record levels after the Federal Reserve stood pat on interest rates but referred to the U.S. economy in positive terms.

·         The Dow rose 58 points, or 0.3%, to 23,435, having hit an intraday record of 23,517.71 in early trading.

·         The S&P 500 climbed 4 points, or 0.16%, to 2,579, and hit an intraday record of its own, at 2,588.40.

·         The NASDAQ bucked the trend to slip 11 points, or 0.2%, to 6,716.5. While the index touched an intraday record of 6,759.66 earlier in the session, it turned lower on weakness in biotechnology.

 

The CBOE Volatility Index (VIX) widely considered the best gauge of fear in the market; Wednesday traded at 10.20, up +0.20%

  • Tuesday traded 10.18 down -3.05% after Monday traded at 10.50, up +7.14% after Friday traded 9.80, down -13.27% after Thursday traded at 11.33, up +0.90% and last Wednesday traded at 11.27, up +0.63% …

 

Welcome to another day of the sector’s roller coaster …

… The iShares Russell 2000 (IWM) indicated:

·         Wednesday was down -0.66%

·         Tuesday +0.72%

·         Monday -1.06%

·         Friday +0.68%

·         Thursday +0.21%

·         Last Wednesday -0.47%

 

… The iShares NASDAQ Biotechnology (IBB) indicated:

·         Wednesday was down -0.63%

·         Tuesday -0.78%

·         Monday +0.17%

·         Friday +0.68%

·         Thursday -2.32%

·         Last Wednesday -1.14%

 

 

The count - decliners versus gainers:

……. look at the differences in the spreads as decliners jump and %

·         Wednesday’s decliners ranged from -1.68% <FATE -$0.08> to -16.65% <CLLS -$5.83> in 27 equities;

·         Tuesday’s decliners ranged from -0.25% <KOOL -$0.01> to -8.11% <AGTC -$0.30> in 23 equities;

·         Monday’s decliners ranged from -0.60% <ADRO -$0.05> to -11.72% <PSTI -$0.29> in 28 equities;

·         Friday’s decliners ranged from -0.30% <CYTX -$0.0013> to -12.37% <VTGN -$0.13> in 12 equities;

·         Thursday’s decliners ranged from -0.25% <AXGN -$0.05> to -9.45% <CYTX -$0.049> in 27 equities;

·         Last Wednesday’s decliners ranged from -0.23% <STML -$0.02> to -13.37% <BLFS -$0.92> in 30 equities;

Versus

… Look at the percentage’s (%) and spreads …

·         Wednesday’s gainers ranged from +0.24% <AXGN +$0.05> to +11.43% <RENE.L +$0.20> in 14 equities;

·         Tuesday’s gainers ranged from +0.05% <IMUC +$0.0002> to +29.38% <STML +$3.10> in 17 equities;

·         Monday’s gainers ranged from +0.25% <AXGN +$0.05> to +0.30% <MDXG +$0.30> in 13 equities;

·         Friday’s gainers ranged from +0.30% <NWBO +$0.005> to +6.82% <FATE +$0.29> in 29 equities;

·         Thursday’s gainers ranged from +0.51% <KOOL +$0.02> to +6.78% <FATE +$0.27> in 10 equities;

·         Last Wednesday’s gainers ranged from +0.09% <NWBO +$0.0001> to +9.09% <CAPR +$0.20> in 11 equities;

 

 

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.  All investments are subject to risks. Investors should consider investment objectives.

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