Sunday, March 29, 2015

Biotechnology Weekly Review: Pharmacyclics, Biomarin, Incyte

What a week!

People who make their money getting investors to trade as often as possible declared that all biotechnology companies are overpriced. Brokers indeed made money as biotechnology sold off.

Even Gilead (GILD) sold off. Which is ridiculous, as Gilead is possibly the most undervalued large capitalization stock on the market right now.

I had been working on the following article for a while, which was published by Seeking Alpha on March 26, 2015:

Pharmacyclics, Biomarin, and Incyte, A Quick Screen

By the time it was published the stocks were all down a few percent from when I started. My basic conclusion was that all are good companies for investors with a long-term view, but at least the results of the next 2 to 3 years from their pipelines is already represented in current market caps.

But hey, if you want a run up a stock, or make money on the brokerage fees when people trade on a rumor, just announce that you think a small company may be acquired by a larger company.

Yes, that happened to Biomarin this week. It could happen to any stock, why not Biomarin? The problem is the price. Only a CEO with a very long term outlook would buy Biomarin at the current price. There are better bargains out there. I know if I wanted to develop orphan drugs based on enzyme replacement therapies like Biomarin does, I would look to license technology, rather than buy the whole company.

Note that the reason I don't just buy more Gilead is that it has already over my portfolio limit rules for a single stock. That is what is forcing me to screen smaller companies to find things to buy.

I am also at or near my portfolio limit for Celgene and Biogen (formerly Biogen Idec), and recent buying of Mylan plus the price rise has put me at a point where I won't be buying more Mylan unless the price dips for no good reason.

I'll be continuing the series soon. You can follow it here or at Seeking Alpha.