Summary
IBB has been under selling pressure since late April, on political and possible governmental cost-cutting concerns.
Top holdings of the IBB, including AMGN, GILD, CELG, BIIB and REGN, are still fundamentally sound, but shares are technically weak.
The political dark cloud over the biotech sector will continue, so it is going to be a hit-and-miss activity to find an entry point.
The iShares Nasdaq Biotechnology ETF (NASDAQ:IBB), which tracks the Nasdaq Biotechnology Index (NASDAQ:NBI), has pulled back sharply since the beginning of June, on concerns about the Fed interest rate hike, the Brexit vote and the political dark cloud hanging over prescription drug prices. In fact, the biotechnology sector has been under selling pressure since late April, possibly after the April 25 report by Tim Anderson, senior analyst at Sanford C. Bernstein, about the government's Independent Payment Advisory Board, or IPAB, a Medicare cost-cutting board created in 2010 under the Affordable Care Act, famously nicknamed the "death panels."
IBB Tehnical Chart
The IPAB will announce spending cut proposals somewhere in the late-May to July time frame. There is uncertainty about what the IPAB could exactly propose for its spending cuts, but the pharmaceutical industry could be in the crosshairs. Here too, there is also uncertainty, said the report.
According to the Brookings Institution, the IPAB would be required on June 23 to submit proposals to reduce Medicare spending in 2018, with the reductions taking place in 2019. Evercore ISI's Mark Schoenebaum said in a note published in Barron's earlier this week that drug spending is an unlikely target, and if any, reforms wouldn't take effect until 2019.
Political Dark Cloud Could Continue Beyond November Election
Presumptive nominees from both parties have continued to ramp up their rhetoric against the pharmaceutical and biotechnology industries, with Congress also jumping into the debate and holding a series of hearings on the issue of drug prices. Both Hillary Clinton and Donald Trump are calling for Medicare to be able to negotiate with pharmaceutical companies to lower drug prices and for allowing drugs to be imported from abroad. The Clinton plan wouldn't allow Medicare to negotiate prices of all drugs, but is limited to biologics and high-cost drugs. The Trump plan, which is the same playbook backed by Democrats, calls for price negotiation of all drugs.
A comprehensive government reform plan for high drug prices isn't likely soon, as significant opposition mounts from lawmakers, the industry, and some patient advocacy groups. It could be up to Congress to decide whether there is enough support for a bill to pass that lets Medicare negotiate prices or alters the way a drug is being priced. In our view, the political process for that could be two or more years away, assuming the next president makes high prescription drug costs a priority.
Pharmaceutical and biotechnology companies, including Biogen (NASDAQ:BIIB), Bristol-Myers Squibb (NYSE:BMY), and AbbVie (NYSE:ABBV) are already in the process of building state-of-the-art, large-scale biologics manufacturing facilities overseas that can export their drugs to countries around the world, including to the U.S., in line with the plans for lowering prescription drug costs proposed by presumptive nominees from both parties. There could be a risk of an increase in drug shortages in the U.S. if the nation becomes far too reliant on medicines manufactured abroad.
From a technical viewpoint, IBB tried, but failed, to bounce off the T1 trendline support during the February-March downturn. The double bottom chart pattern may be re-emerging if IBB can bounce off the T2 trendline support. There is strong technical support at the $248 level if IBB should break below the T2 trendline support. In our opinion, the political dark cloud over the biotech sector will continue until the November election and beyond, while no one can tell if the bottom is in until after the fact. Thus, it is going to be a hit-and-miss activity to find an entry point.
Top Holdings of the IBB are Fundamentally Sound, but Technically Weak
Shares of Amgen (NASDAQ:AMGN), IBB's top holding with a weight of 8.29%, was unable to break out the $164 level despite the company posting better-than-expected results for the first-quarter 2016, driven by strong sales of its flagship rheumatoid arthritis drug Enbrel (etanercept). Sales of Neulasta (pegfilgrastim), its second blockbuster drug, rose due to improved demand and higher pricing in the U.S., while Neupogen (filgrastim) sales declined 13% to $213 million amid increased competition.
Amgen Technical Chart
Both Enbrel and Neulasta are facing the threat of biosimilar competition from Sandoz, a Novartis (NYSE:NVS) subsidiary, Samsung Bioepis and Apotex, a Canadian pharmaceutical company, as well as from Baxalta, now Shire (NASDAQ:SHPG), and Coherus Biosciences (NASDAQ:CHRS). Sandoz's cancer treatment drug Zarxio, a biosimilar of Amgen's Neupogen, received approval from the U.S. Food and Drug Administration, or FDA, in March 2015, and launched in the U.S. in September 2015 at a discount of 15% to the brand name.
Sales of cholesterol-lowering drug Repatha (evolocumab), approved in August, came in at just $16 million and missed Wall Street's expectations, despite that CVS Health (NYSE:CVS) will provide preferred access to Repatha through its CVS/Caremark commercial formularies. The startlingly slow launch of Repatha could be due to rigorous paperwork required for the patient to fill out and lack of clarity on the drug effectiveness on cardiovascular outcomes.
Earlier this month, Amgen said the top-line results from its FOURIER outcomes trial designed to evaluate Repatha - whether the addition of evolocumab to statin therapy reduces cardiovascular morbidity and mortality in patients with vascular disease - will be available in the first-quarter of 2017.
In March, Regeneron (NASDAQ:REGN) and Sanofi (NYSE:SNY) were found to have infringed on two Amgen Repatha patents related to monoclonal antibodies, or mAbs, that bind PCSK9. In late May, Sanofi urged a Delaware federal judge to toss a jury's verdict finding rival Amgen's cholesterol drug patents valid and order a new trial or enter judgment against Amgen in its infringement row, saying the court erred in excluding evidence and throwing out Sanofi's obviousness defense, according to Law360. Most analysts expect Sanofi/Regeneron to settle and pay royalties to Amgen for U.S. sales of the Regeneron/Sanofi drug Praluent (alirocumab).
Last week, the FDA said it will review Amgen's Biologics License Application, or BLA, for ABP 501, a biosimilar candidate to AbbVie's Humira (adalimumab) with a Biosimilar User Fee Act (BsUFA) target action date of September 25, 2016. Amgen needs to resolve the AbbVie intellectual property issue in court before launching its biosimilar version of Humira, if approved by the FDA, as the USPTO Patent Trial and Appeal Board, PTAB, in January denied institution of two Inter Partes Review challenges brought by Amgen, Inc. against two Humira patents covering stable formulations of anti-TNF-a antibodies.
Shares of Gilead Sciences (NASDAQ:GILD), another of IBB's largest holdings with a weight of 8.23%, got hammered after its first-quarter 2016 earnings report came in below expectations and are now technically supported at the $81 level. The stock could test the lower trendline support of the descending wedge, if the $81 support level can't hold. Investors are worried that top-selling hepatitis C drugs, Harvoni (ledipasvir and sofosbuvir) and Sovaldi (sofosbuvir), which generated sales of more than $31 billion over the last two years, may be on the decline as competition from AbbVie, Merck & Co. (NYSE:MRK) and Bristol-Myers Squibb is heating up. Gilead, however, said it maintains high market share, with more than 90% of all patients treated in the quarter being prescribed either Harvoni or Sovaldi.
Gilead Technical Chart
Many analysts believe that Gilead will continue to dominate the hepatitis C drug market as AbbVie's drug, Viekira Pak, now has a warning label against use in patients with advanced liver disease, and liver-related blood testing is recommended for certain Merck Zepatier (elbasvir and grazoprevir) patients after 8 weeks of therapy, as the drug can elevate liver enzymes to five times the normal range's upper limit. Bristol-Myers Squibb's Daklinza (daclatasvir) is approved by the FDA in combination with Gilead's Solvadi for the treatment of the HCV genotypes 1, 2, 3, and 4 infections. Hence, Gilead will benefit from Daklinza's sales.
Gilead could launch a more powerful hepatitis C drug for the treatment of chronic HCV genotype 1-6 infections as early as June 28, 2016, pending FDA approval, and put more pricing pressure on AbbVie's, Merck's and Bristol-Myers' hepatitis C franchises.
Regeneron Techncial Chart
Shares of Regeneron Pharmaceuticals, another IBB top holding with a weight of 6.85%, have been under selling pressure on concerns about the growth prospects of eye drug Eylea (aflibercept) and increased competition in the wet age-related macular degeneration, or AMD, market, as well as the legal battle with Amgen over patent infringements of Repatha (evolocumab). The stock has been trading in a range between $350 and $419 since the beginning of the year and now is threatening to break below the $350 level.
Last week, analysts at Canaccord Genuity, John Newman and Andrew Lam, sent out a note and warned investors to tread cautiously regarding positive Phase 3 trial data from Ophthotech Corporation's (NASDAQ:OPHT) Fovista Anti-PDGF therapy. From our viewpoint, investors may want to remain skeptical about Fovista, as the therapy requires two-intravitreal injection visits to the ophthalmologist every month until maximum visual acuity is achieved, one injection of Novartis' Lucentis (ranibizumab) and one injection of Fovista. Dual injection therapy would most likely be more expensive than Eylea's single-injection treatment every four weeks for the first twelve weeks, followed by a single-injection every two months.
In early April, Regeneron received a big boost after announcing that its experimental drug dupilumab for the treatment of atopic dermatitis, a debilitating skin condition, met all of its major treatment targets in two late-stage Phase 3 studies. According to some Wall Street analysts, dupilumab, co-developed with Sanofi, could have peak annual sales of more than $3 billion for that disease alone. The drug, which is designated as a "breakthrough" therapy by the FDA, is also being studied for asthma and other allergy-related inflammatory diseases.
Sanofi owns a 22.40% stake in Regeneron, or about 23.55 million outstanding shares, and it could raise the stake as high as 30%. In a SEC Form 4 filing on June 16, 2016, Regeneron said Sanofi purchased 64,731 shares of the company on June 14, 2016 at $364.22 per share for a total value of $23,552,858. If Regeneron shares remain undervalued, Sanofi could either increase its stake in Regeneron or take over the company outright.
Shares of Celgene Corp. (NASDAQ:CELG), an IBB top holding with a weight of 8.04%, sold off after its first-quarter 2016 earnings report came in below expectations, but it raised its lower-end of ranges for 2016 net product sales and adjusted diluted EPS. For 2017, Celgene forecasts net product sales to be between $12.7 billion and $13 billion, and lowered EPS to between $6.75 and $7.00 from their previous target of $7.25. The company said it is on track to more than double its hematology and oncology sales in 2020, to $20 billion, with an EPS of $12.5 per share.
Celgene Technicial Chart
Since mid-2015, the stock has been trading in a bearish descending triangle chart pattern and is supported by the $96 technical level. The stock can bounce off this level or break down to the $90 level, if investor sentiment continues to be pessimistic. Barron's thinks the stock is cheap, as it is traded at 17.6 times this year's earnings forecast, while Celgene can grow much faster than Bristol-Myers Squibb, which trades at 28 times this year's earnings forecast.
From our viewpoint, significant revenue generation could come from the new oral drug Ozanimod (RPC1063) for the treatment of ulcerative colitis, or UC, and multiple sclerosis, or MS, with estimated peak annual sales of $4-6 billion. The drug was developed by Receptos Inc., a company that Celgene acquired in July 2015 for $7.2 billion.
Apart from Receptos, additional revenue generation could come from a 10-year global collaboration with Juno Therapeutics, Inc. (NASDAQ:JUNO). So far, Celgene has paid $1 billion, $150 million in an upfront payment and $850 million in purchases of Juno's common shares, in exchange for the development and commercialization of immunotherapies focusing on Juno's Chimeric Antigen Receptor Technology, or CAR T, and T Cell Receptor, or TCR, technologies.
Biogen Inc., a 7.05% weight in the IBB, reported mixed first-quarter 2016 earnings results, as sales of multiple sclerosis drug Tecfidera (dimethyl fumarate) came in below Wall Street estimates. Investors are concerned about Biogen's reliance on its top-selling drug, Tecfidera, which accounted for 34.65% of the company's total revenues for the quarter.
Biogen Technical Chart
The stock could get a boost, as Biogen will launch three new products this year, including Benepali (etanercept), a biosimilar referencing Enbrel, Inflectra, a biosimilar version of Remicade (infliximab) and Zinbryta (daclizumab). Zinbryta, which received FDA approval on May 27, is a multiple sclerosis drug jointly developed with AbbVie.
According to the Biogen's first-quarter 2016 earnings report, it launched Benepali, co-developed with South Korea-based Samsung Bioepis, in the U.K., Germany, Denmark, Norway, Sweden, and the Netherlands. Benepali has generated about $2 million in revenue since its launch in February, after the drug received approval in January from the European Medicines Agency for all of Enbrel's approved indications.
Earlier this month, shares of Biogen plunged 12.76% to the $254 support level, after the company's experimental drug for multiple sclerosis, opicinumab (Anti-LINGO-1), missed its primary endpoint in a phase 2 study. The stock is now bumping into the trendline support of the descending wedge chart pattern, where it may bounce.
Conclusions
IBB has pulled back sharply since the beginning of June, and in fact, has been under selling pressure since late April, on political and possible governmental cost-cutting concerns.
Top holdings of the IBB, including AMGN, GILD, CELG, BIIB and REGN, are still fundamentally sound with new results from drug trials and FDA approvals pending, but shares are nonetheless technically weak. The double bottom chart pattern may be re-emerging for IBB, if it can bounce off its trendline support.
The political dark cloud over the biotech sector will continue until the November election and beyond, while no one can tell if the bottom is in until after the fact. Thus, it is going to be a hit-and-miss activity to find an entry point.
IBB has been under selling pressure since late April, on political and possible governmental cost-cutting concerns.
Top holdings of the IBB, including AMGN, GILD, CELG, BIIB and REGN, are still fundamentally sound, but shares are technically weak.
The political dark cloud over the biotech sector will continue, so it is going to be a hit-and-miss activity to find an entry point.
The iShares Nasdaq Biotechnology ETF (NASDAQ:IBB), which tracks the Nasdaq Biotechnology Index (NASDAQ:NBI), has pulled back sharply since the beginning of June, on concerns about the Fed interest rate hike, the Brexit vote and the political dark cloud hanging over prescription drug prices. In fact, the biotechnology sector has been under selling pressure since late April, possibly after the April 25 report by Tim Anderson, senior analyst at Sanford C. Bernstein, about the government's Independent Payment Advisory Board, or IPAB, a Medicare cost-cutting board created in 2010 under the Affordable Care Act, famously nicknamed the "death panels."
IBB Tehnical Chart
The IPAB will announce spending cut proposals somewhere in the late-May to July time frame. There is uncertainty about what the IPAB could exactly propose for its spending cuts, but the pharmaceutical industry could be in the crosshairs. Here too, there is also uncertainty, said the report.
According to the Brookings Institution, the IPAB would be required on June 23 to submit proposals to reduce Medicare spending in 2018, with the reductions taking place in 2019. Evercore ISI's Mark Schoenebaum said in a note published in Barron's earlier this week that drug spending is an unlikely target, and if any, reforms wouldn't take effect until 2019.
Political Dark Cloud Could Continue Beyond November Election
Presumptive nominees from both parties have continued to ramp up their rhetoric against the pharmaceutical and biotechnology industries, with Congress also jumping into the debate and holding a series of hearings on the issue of drug prices. Both Hillary Clinton and Donald Trump are calling for Medicare to be able to negotiate with pharmaceutical companies to lower drug prices and for allowing drugs to be imported from abroad. The Clinton plan wouldn't allow Medicare to negotiate prices of all drugs, but is limited to biologics and high-cost drugs. The Trump plan, which is the same playbook backed by Democrats, calls for price negotiation of all drugs.
A comprehensive government reform plan for high drug prices isn't likely soon, as significant opposition mounts from lawmakers, the industry, and some patient advocacy groups. It could be up to Congress to decide whether there is enough support for a bill to pass that lets Medicare negotiate prices or alters the way a drug is being priced. In our view, the political process for that could be two or more years away, assuming the next president makes high prescription drug costs a priority.
Pharmaceutical and biotechnology companies, including Biogen (NASDAQ:BIIB), Bristol-Myers Squibb (NYSE:BMY), and AbbVie (NYSE:ABBV) are already in the process of building state-of-the-art, large-scale biologics manufacturing facilities overseas that can export their drugs to countries around the world, including to the U.S., in line with the plans for lowering prescription drug costs proposed by presumptive nominees from both parties. There could be a risk of an increase in drug shortages in the U.S. if the nation becomes far too reliant on medicines manufactured abroad.
From a technical viewpoint, IBB tried, but failed, to bounce off the T1 trendline support during the February-March downturn. The double bottom chart pattern may be re-emerging if IBB can bounce off the T2 trendline support. There is strong technical support at the $248 level if IBB should break below the T2 trendline support. In our opinion, the political dark cloud over the biotech sector will continue until the November election and beyond, while no one can tell if the bottom is in until after the fact. Thus, it is going to be a hit-and-miss activity to find an entry point.
Top Holdings of the IBB are Fundamentally Sound, but Technically Weak
Shares of Amgen (NASDAQ:AMGN), IBB's top holding with a weight of 8.29%, was unable to break out the $164 level despite the company posting better-than-expected results for the first-quarter 2016, driven by strong sales of its flagship rheumatoid arthritis drug Enbrel (etanercept). Sales of Neulasta (pegfilgrastim), its second blockbuster drug, rose due to improved demand and higher pricing in the U.S., while Neupogen (filgrastim) sales declined 13% to $213 million amid increased competition.
Amgen Technical Chart
Both Enbrel and Neulasta are facing the threat of biosimilar competition from Sandoz, a Novartis (NYSE:NVS) subsidiary, Samsung Bioepis and Apotex, a Canadian pharmaceutical company, as well as from Baxalta, now Shire (NASDAQ:SHPG), and Coherus Biosciences (NASDAQ:CHRS). Sandoz's cancer treatment drug Zarxio, a biosimilar of Amgen's Neupogen, received approval from the U.S. Food and Drug Administration, or FDA, in March 2015, and launched in the U.S. in September 2015 at a discount of 15% to the brand name.
Sales of cholesterol-lowering drug Repatha (evolocumab), approved in August, came in at just $16 million and missed Wall Street's expectations, despite that CVS Health (NYSE:CVS) will provide preferred access to Repatha through its CVS/Caremark commercial formularies. The startlingly slow launch of Repatha could be due to rigorous paperwork required for the patient to fill out and lack of clarity on the drug effectiveness on cardiovascular outcomes.
Earlier this month, Amgen said the top-line results from its FOURIER outcomes trial designed to evaluate Repatha - whether the addition of evolocumab to statin therapy reduces cardiovascular morbidity and mortality in patients with vascular disease - will be available in the first-quarter of 2017.
In March, Regeneron (NASDAQ:REGN) and Sanofi (NYSE:SNY) were found to have infringed on two Amgen Repatha patents related to monoclonal antibodies, or mAbs, that bind PCSK9. In late May, Sanofi urged a Delaware federal judge to toss a jury's verdict finding rival Amgen's cholesterol drug patents valid and order a new trial or enter judgment against Amgen in its infringement row, saying the court erred in excluding evidence and throwing out Sanofi's obviousness defense, according to Law360. Most analysts expect Sanofi/Regeneron to settle and pay royalties to Amgen for U.S. sales of the Regeneron/Sanofi drug Praluent (alirocumab).
Last week, the FDA said it will review Amgen's Biologics License Application, or BLA, for ABP 501, a biosimilar candidate to AbbVie's Humira (adalimumab) with a Biosimilar User Fee Act (BsUFA) target action date of September 25, 2016. Amgen needs to resolve the AbbVie intellectual property issue in court before launching its biosimilar version of Humira, if approved by the FDA, as the USPTO Patent Trial and Appeal Board, PTAB, in January denied institution of two Inter Partes Review challenges brought by Amgen, Inc. against two Humira patents covering stable formulations of anti-TNF-a antibodies.
Shares of Gilead Sciences (NASDAQ:GILD), another of IBB's largest holdings with a weight of 8.23%, got hammered after its first-quarter 2016 earnings report came in below expectations and are now technically supported at the $81 level. The stock could test the lower trendline support of the descending wedge, if the $81 support level can't hold. Investors are worried that top-selling hepatitis C drugs, Harvoni (ledipasvir and sofosbuvir) and Sovaldi (sofosbuvir), which generated sales of more than $31 billion over the last two years, may be on the decline as competition from AbbVie, Merck & Co. (NYSE:MRK) and Bristol-Myers Squibb is heating up. Gilead, however, said it maintains high market share, with more than 90% of all patients treated in the quarter being prescribed either Harvoni or Sovaldi.
Gilead Technical Chart
Many analysts believe that Gilead will continue to dominate the hepatitis C drug market as AbbVie's drug, Viekira Pak, now has a warning label against use in patients with advanced liver disease, and liver-related blood testing is recommended for certain Merck Zepatier (elbasvir and grazoprevir) patients after 8 weeks of therapy, as the drug can elevate liver enzymes to five times the normal range's upper limit. Bristol-Myers Squibb's Daklinza (daclatasvir) is approved by the FDA in combination with Gilead's Solvadi for the treatment of the HCV genotypes 1, 2, 3, and 4 infections. Hence, Gilead will benefit from Daklinza's sales.
Gilead could launch a more powerful hepatitis C drug for the treatment of chronic HCV genotype 1-6 infections as early as June 28, 2016, pending FDA approval, and put more pricing pressure on AbbVie's, Merck's and Bristol-Myers' hepatitis C franchises.
Regeneron Techncial Chart
Shares of Regeneron Pharmaceuticals, another IBB top holding with a weight of 6.85%, have been under selling pressure on concerns about the growth prospects of eye drug Eylea (aflibercept) and increased competition in the wet age-related macular degeneration, or AMD, market, as well as the legal battle with Amgen over patent infringements of Repatha (evolocumab). The stock has been trading in a range between $350 and $419 since the beginning of the year and now is threatening to break below the $350 level.
Last week, analysts at Canaccord Genuity, John Newman and Andrew Lam, sent out a note and warned investors to tread cautiously regarding positive Phase 3 trial data from Ophthotech Corporation's (NASDAQ:OPHT) Fovista Anti-PDGF therapy. From our viewpoint, investors may want to remain skeptical about Fovista, as the therapy requires two-intravitreal injection visits to the ophthalmologist every month until maximum visual acuity is achieved, one injection of Novartis' Lucentis (ranibizumab) and one injection of Fovista. Dual injection therapy would most likely be more expensive than Eylea's single-injection treatment every four weeks for the first twelve weeks, followed by a single-injection every two months.
In early April, Regeneron received a big boost after announcing that its experimental drug dupilumab for the treatment of atopic dermatitis, a debilitating skin condition, met all of its major treatment targets in two late-stage Phase 3 studies. According to some Wall Street analysts, dupilumab, co-developed with Sanofi, could have peak annual sales of more than $3 billion for that disease alone. The drug, which is designated as a "breakthrough" therapy by the FDA, is also being studied for asthma and other allergy-related inflammatory diseases.
Sanofi owns a 22.40% stake in Regeneron, or about 23.55 million outstanding shares, and it could raise the stake as high as 30%. In a SEC Form 4 filing on June 16, 2016, Regeneron said Sanofi purchased 64,731 shares of the company on June 14, 2016 at $364.22 per share for a total value of $23,552,858. If Regeneron shares remain undervalued, Sanofi could either increase its stake in Regeneron or take over the company outright.
Shares of Celgene Corp. (NASDAQ:CELG), an IBB top holding with a weight of 8.04%, sold off after its first-quarter 2016 earnings report came in below expectations, but it raised its lower-end of ranges for 2016 net product sales and adjusted diluted EPS. For 2017, Celgene forecasts net product sales to be between $12.7 billion and $13 billion, and lowered EPS to between $6.75 and $7.00 from their previous target of $7.25. The company said it is on track to more than double its hematology and oncology sales in 2020, to $20 billion, with an EPS of $12.5 per share.
Celgene Technicial Chart
Since mid-2015, the stock has been trading in a bearish descending triangle chart pattern and is supported by the $96 technical level. The stock can bounce off this level or break down to the $90 level, if investor sentiment continues to be pessimistic. Barron's thinks the stock is cheap, as it is traded at 17.6 times this year's earnings forecast, while Celgene can grow much faster than Bristol-Myers Squibb, which trades at 28 times this year's earnings forecast.
From our viewpoint, significant revenue generation could come from the new oral drug Ozanimod (RPC1063) for the treatment of ulcerative colitis, or UC, and multiple sclerosis, or MS, with estimated peak annual sales of $4-6 billion. The drug was developed by Receptos Inc., a company that Celgene acquired in July 2015 for $7.2 billion.
Apart from Receptos, additional revenue generation could come from a 10-year global collaboration with Juno Therapeutics, Inc. (NASDAQ:JUNO). So far, Celgene has paid $1 billion, $150 million in an upfront payment and $850 million in purchases of Juno's common shares, in exchange for the development and commercialization of immunotherapies focusing on Juno's Chimeric Antigen Receptor Technology, or CAR T, and T Cell Receptor, or TCR, technologies.
Biogen Inc., a 7.05% weight in the IBB, reported mixed first-quarter 2016 earnings results, as sales of multiple sclerosis drug Tecfidera (dimethyl fumarate) came in below Wall Street estimates. Investors are concerned about Biogen's reliance on its top-selling drug, Tecfidera, which accounted for 34.65% of the company's total revenues for the quarter.
Biogen Technical Chart
The stock could get a boost, as Biogen will launch three new products this year, including Benepali (etanercept), a biosimilar referencing Enbrel, Inflectra, a biosimilar version of Remicade (infliximab) and Zinbryta (daclizumab). Zinbryta, which received FDA approval on May 27, is a multiple sclerosis drug jointly developed with AbbVie.
According to the Biogen's first-quarter 2016 earnings report, it launched Benepali, co-developed with South Korea-based Samsung Bioepis, in the U.K., Germany, Denmark, Norway, Sweden, and the Netherlands. Benepali has generated about $2 million in revenue since its launch in February, after the drug received approval in January from the European Medicines Agency for all of Enbrel's approved indications.
Earlier this month, shares of Biogen plunged 12.76% to the $254 support level, after the company's experimental drug for multiple sclerosis, opicinumab (Anti-LINGO-1), missed its primary endpoint in a phase 2 study. The stock is now bumping into the trendline support of the descending wedge chart pattern, where it may bounce.
Conclusions
IBB has pulled back sharply since the beginning of June, and in fact, has been under selling pressure since late April, on political and possible governmental cost-cutting concerns.
Top holdings of the IBB, including AMGN, GILD, CELG, BIIB and REGN, are still fundamentally sound with new results from drug trials and FDA approvals pending, but shares are nonetheless technically weak. The double bottom chart pattern may be re-emerging for IBB, if it can bounce off its trendline support.
The political dark cloud over the biotech sector will continue until the November election and beyond, while no one can tell if the bottom is in until after the fact. Thus, it is going to be a hit-and-miss activity to find an entry point.
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