The Janssen division of JNJ is focused on oncology drugs. They have Doxil for ovarian cancer and multiple myeloma, Procrit for anemia in chemo patients, Zytiga for prostate cancer, and, of course, Imbruvica for MCL and CLL. In fact, almost all of JNJ's growth is coming from this division.
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.
PS This genie, like so many of the sprites who propound this silly stuff, is apparently a big believer in DNDN and Provenge. I am reminded of the 19'th century followers of William Miller, who, after his death, gathered around his body awaiting his resurrection. But even they, after the body began to stink, eventually gave up and left.
Paradoxically, I didn't buy Facebook and now can't find a reason to do so. Bernard Baruch's approach to investing was "Put all your eggs in one basket and watch the basket." But it's been demonstrated to my satisfaction that if you have fewer than 40 stocks in your portfolio, you are overexposed to the risk of one or two faltering.
Good for you. But 25% of your portfolio in one stock seems a bit too much to me. I would be inclined to take the profit on the shares @ 130 today.
Perhaps. But I think it's futile to try to pick an absolute bottom. I doubled up in my taxable account @ 131. The sudden drop at 1PM coincided with a sudden 50 point drop in the Amex Biotech Index. It only took 40,000 shares being thrown into the market to push PCYC down 3 points. However, just as I think that 70 was the arbitraged price for MDVN - a level to which it rebounded today - I think that 140 is the price for PCYC.
Therefore, any price under 132 is a good price.
Okay, now I've rebuilt what I consider a complete position in my IRA at an average price of 131.45. However, if it bounces above 132, I will buy it for a trade.
Again, this sector - and almost everything in it - made their highs on Feb.25. A lot of the selling has already taken place, and I think we are seeing an active bear raid here. I have reestablished a partial position in PCYC in my IRAtoday at an average price of 132.02.
He's not crying - he's into Technical Analysis, and despairing. My crude nontechnical belief is that the market had repriced this stock at 140 after the approval and that it will return there.
JGM, your posts are like the news dispatches in the darkest days of WWII reporting that we'd retaken the Aleutian Islands from the Japanese: a ray of hope amidst the carnage. We appreciate them. Thanks for once again reminding us that we have a great drug here.
Now even Cramer has noted the anti- biotech rotation, and has applied the simplistic analysis: People were chasing the biotechs because that was the only place you could get growth. Now with the prospect of the economy actually improving and interest rates rising, they will move to financials, industrials, etc. This is, to some extent, correct. However, in the case of PCYC, the growth prospects are real. And, of course, the acquisition possibility is still in play (and becomes more likely the lower we go.) So the question is, when do you add shares? I will start to nibble right here at 132. I feel that this is not so much a case of people selling out of these stocks as it is of some hedge funds actively shorting them. Therefore, there is the possibility of a fairly quick reversal. (e.g. MDVN, another acquisition candidate, made a low of 65.50 this morning and has now reversed to 67.70.)
I started to buy GILD back into the IRA at an average of 79.20, figuring there was support at 80. I sold it on 2/28 for 83.61.
With oldline MRK and PFE still up on the day. In fact, PCYC is holding up relatively well amidst what I still maintain is a sector rotation.
Also note that the BTK, the Amex biotech Index, made its high on Feb 25, all of which would tend to support my thesis that this is a sector rotation. You might consider that this stock was 107 at the beginning of January and is just coming off a new alltime high. My historical observation of early phase biotechs suggests that there is a natural falloff in share price after key FDA approvals. However, as the company transitions to profitability, the real price appreciation begins. For the immediate future, I think this stock will be a lot less volatile. If you are expecting one day pops of 4-5 in the share price, I think you will be disappointed.
Also note that FBIOX, the Fidelity Select Biotech, made its high on Feb. 25, as did the sector bellwethers, GILD, CELG, and AMGN. Which suggests that this is a sector move, and thAt perhaps the great biotech bonanza is over for a while. This would not dissuade me from holding PCYC in my taxable accounts, however.
However, observe that both CELG and GILD initially rose with the rallying markets, then fell back, which means that they are being sold into the rally.
The entire biotech sector is topping out for a while, as witness the bellwethers, GILD and CELG. PCYC is being sold into strength. This is not dumping, but a disciplined lightening up of positions on the part of larger holders. Paradoxically, this tends to make the stock fade on days when the markets are rallying. We now wait for news of either strong Imbruvica sales or a pending acquisition.