Biotech Breakout

Back in mid-July we posted some thoughts on the biotech sector. We suspected that the correction may have run its course and that the worst was over. Recent action gives further evidence that biotech may begin to perform more in line with the market or perhaps even outperform. The iShares Nasdaq Biotech ETF (Ticker: IBB) recently broke out to new 52 week highs. Indeed, the ETF has rallied 10 percent in just the last two weeks and over 25 percent since the beginning of 2017 (fortunately, the ISAW personal portfolio contains this ETF). See chart below:

The components of this ETF obviously are doing well too. Biogen has sprinted from the $270 area to $321, with most of that gain achieved just this week! Successes with new drug launches and their progress-to-date on an Alzheimer’s drug have helped propel Biogen to new 52 week highs.

Celgene, Amgen and others are also doing well and any firm that’s involved in CAR-T cancer therapy is riding high as well. The catalyst: Gilead Pharmaceutical making an offer to buy Kite Pharmaceuticals. Their main product is a CAR-T therapy. CAR-T stands for Chimeric Antigen Receptor (T-cell). It’s a great technique that has proven a life saver for those young individuals stricken with certain forms of Leukemia. T-cells are extracted from the body and they are then genetically modified. The modified T-cells are then put back into the body and allowed to grow. The modified T-cells are better equipped to kill cancerous tumors.

Novartis also received FDA approval for a CAR-T treatment… although the world is balking at its $475,000 cost.

Hence, the news on the biotech front is exceptionally promising. On any pull back, we will consider adding to our iShares Biotech position and perhaps establishing new positions in Biogen—a company we covered back in February of this year. We held back on pulling the trigger on Biogen until we could get a better handle on changes to the affordable care act. Unfortunately, its rallied nicely in the interim. “Ya snooze, you lose!” as they say. But we are still well short of the all-time highs in the Biotechnology sector and a move back to those levels would provide substantial profits from this point.

Stay tuned, enjoy the long weekend and be careful out there!

Dave Lerman / Jodie Warner



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