Any thoughts on value of pre chemo and if it is priced in? Given the success of the phase III trial, it seems a foregone conclusion it will be approved, and as I understand likely sometime in Q3. Also, any thoughts on why biotech in general seems to be down last week or so?
This stock, like virtually every other biotech, made its high on Feb 25'th. There is a general rotation out of this sector underway. If you look at the bellwether of the sector, GILD, you will note a weakening after Feb 25, even in the face of an S&P advance. It took Cramer almost a week to notice what was underway, and when he did, he had a facile explanation ready: Biotech was a safe haven from the vicissitudes of the overall market - it offered the prospect of growth, even in a stagnant economy. This would suggest a rotation into financials and industrials, which may have begun, if somewhat timidly. I think this is a partial explanation; the other part is that the sector is overextended, with virtually every stock and the biotech indexes needing a pause. For example, FBIOX, the Fidelity Select Biotech Fund, has quadrupled over the past 4 years. I don't think this means that one should abandon the stocks with real prospects. But certainly this was a time to reposition yourself in some of these, particularly in your IRA's, where there are no real tax consequences for taking profits. I sold CELG, GILD, and some others out of my IRA's on 2/28, and am now rebuilding those positions somewhat gingerly.
As for pre-chemo, some of the analysts obviously expected more off-label usage than they got. Particularly Credit-Suisse and Jeffries, who were the two biggest cheerleaders. So, at this point after the post conference call drop, it's fair to say that pre-chemo has been priced out of the stock ... at least for the short term. What has not been priced out, I believe, is the acquisition premium.
Bear, thanks for the insight. I knew biotech had been on a several year tear, but did know it was as significant as you state. Stocks in general, seem ripe for a correction. A lot of high fliers out there, which have great stories, and could pan out in the future, seem too risky. Tesla is a good example. Could end up being tremendous, but have a huge road to go to justify their valuation. Others such as whole foods, middle by, etc. are also priced for perfection. No bargains here. Any body have other thoughts on the market and how to find "undervalued" or "reasonably valued" stocks with some underlying cash flow in this market? Would be interested in anyone's thoughts.