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Acadia, Biogen, Celgene, Regeneron In Focus – A Look At The Week Ahead
The stock market will look to build on last weeks gains, and it will be a week filled with economic data and Fed talk.
The one segment of the market rally that has been missing has been the biotech sector, and it is no wonder when stocks like Celgene, Biogen, and Regeneron have been in the gutter. Acadia gets a shot at breaking the negative news cycle this week and perhaps giving the group a boost.
Fed Chair Powell will speak to the House on Tuesday starting at 10 am while talking to the Senate on Thursday at 10 am. Fourth quarter GDP will come on Wednesday, and the consensus is looking for a reading of 2.5 percent. But the significant reading will occur on Thursday when we get Personal Income and Outlays. Personal Income is expected to have a reading of 0.3%, while PCE is expected to show a y/y gain of 1.7 percent, while core y/y is supposed to rise by 1.5 percent.
Biotech has been a weak group, and the internals for the leadership is nothing to write home about. Shares of Celgene, Biogen, and Regeneron have fallen on hard times, with these three stocks accounting for nearly 25 percent of the Nasdaq Biotech ETF (IBB) it is hard to imagine the group can advance much without them.
Celgene shares have seen a disastrous fall from grace, shares have fallen by an astounding 35 percent from a high near $147 to almost $95.50. The company has made a number of moves to help bolster the pipeline and calm nerves around the dependence on Revlimid, recently announcing it would buy Juno, but still, shares have suffered. Admittedly, this one has gone against me, and I’m not thrilled with the outcome.
The good news is that the stock has managed to hold support around $94. The bad news is that every time it has shown a sign of life over the past few months the stock just goes the other way.
Despite the recent acquisitions, analysts have yet to up their revenue targets, remaining reasonably flat, while trading at Gilead type of valuations of 9.3 times 2019 earnings estimate of $10.22.
Biogen shares are in the same camp, having fallen from nearly $370 to $283, a decline of 23 percent. On February 7, the company announced it would stop developing Tysabri to treat acute ischemic stroke patients. Then adding insult to injury, one week later the company announced it would be adding patients to its trial in Alzheimer’s disease drug for aducanumab, creating more fear.
The chart like Celgene shows the stock has gotten to critical support to $282. It had seemed for some time that Biogen was destined to reach $400, but the negative news flow has just changed that direction.
Regeneron shares have broken down, and what had been a failed breakout attempt, now puts shares in of danger of heading lower to $273.
Acadia will post fourth-quarter results on Tuesday. Analysts are looking for the company to report that revenue climbed by over 275 percent in the fourth quarter to $45.18 million, on a loss of $0.57. More important will be any commentary on 2018 guidance, where analysts are looking for revenue of $253 million.
When looking at the current run rate of quarterly revenue growth, we can see the growth has been relatively linear. Should revenue come in at analysts estimates or higher, it would continue to put the company on pace to have revenue of $300 million in 2018, about $50 million more than expectations, but we will surely find out more details
The stock has been a bust for years now, and it seems that every piece of positive news has been met with selling pressure.
Will something change soon? Hopefully, but at this point frustration with this stock runs deep. It feels as though every time I think the stock is about to breakout, it fails. My expectations for revenue growth are solid when it comes to the quarter and next year. But when it comes to how the stock will perform, I at a loss, and tired of guessing, getting my hopes to only be met with disappointment.
If the fundamentals continue to improve, one has to believe one day it will be reflected in the stock price.
Good luck his week.
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Michael Kramer and the Clients of Mott Capial own shares of CELG and ACAD
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
© 2018 Mott Capital Management, LLC. Use, publication or reproduction in any media prohibited without the permission of the copyright holder.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.
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