We’d been writing the last few weeks about the “chop” investors were experiencing in the markets, including in healthcare stocks, though this week the sector and broader markets finally made new highs. The Cracked Market blog, which provides concise and poignant commentary on the tehnical side of the markets, put it well this Thursday:
. . . With headlines screaming Greece, Ukraine, rate hikes, falling oil prices, and slowing global growth, it is a big stretch to claim this rally has a tailwind.
It is far easier to make the argument we are stubbornly holding up in the face of a tidal wave of bad news. Bears are dumbfounded by how “stupid” this market is for not breaking down when there are so many obvious reasons we should be plunging. But here’s the thing, these bearish headlines have been around for weeks. Anyone who fears these stories sold weeks ago to buyers willing to own these risks. Once everyone who is afraid of an event leaves the market, then it can no longer hurt us because there is no one left to sell it. And that is exactly what happened. Greek and European negotiations blew up in a spectacular fashion Monday, yet Tuesday we set record highs. Strength in the face of bad news tells us this market still wants to go higher. Short this market at your peril.
We’re not market timers, but Cracked Market’s final word on investors’ tolerance for risk of late is pertinent.
This week at PropThink we published Mr. Deryugin’s assessment of a recently released draft bill, the 21st Century Cures Act, that could profoundly change the way many drugs are evaluated and approved by the FDA. Perhaps most intriguing for investors, the proposed bill, which is still in the early days of discussion, would extend the government-protected exclusivity period (somewhat similar to patent protection, but stronger) for drugs meeting “unmet needs” to a whopping 15 years. Today, New Chemical entities receive just 5 years, and drugs adressing rare (orphan) indications receive 7 years of exclusivity. Biologics, meanwhile, receive 12 years of exclusivity.
Among other major changes, the FDA would allow owners of approved and novel antibiotics to transfer or sell up to 12 months of exclusivity from the antibiotic to another drug product. The regulatory agency would also seek greater input from patients and patient advocacy groups in the approval process. All of these efforts are designed to speed the approval of new therapeutics and encourage innovation among drug developers. Many will be as contentious as they are impactful. For more on the 21st Century Cures Act, read What Investors Should Know about Proposed (& Drastic) Changes to the FDA.
Early this week two small and relatively unknown anti-inflammatory developers were crushed on poor results from their respective clinical studies. Both VBL Therapeutics (VBLT) and Celsus Therapeutics (CLTX) were of the immense 2014 healthcare IPO class. Their stocks are down 90% and 30%, respectively, around a year later. We brielfy highlight these two names because both carry takeaways for investors. VBLT ran into trouble in the IPO process, with its largest investors backing out AFTER the public offering. Days of trading were essentially cancelled while the company and banks renegotiated the offering, and VBLT came public shortly thereafter. That’s a troubling sign, and should have at least given potential investors pause. CLTX, meanwhile, had the backing of some very notable institutional names in its IPO: Baker Bros and Broadfin capital. It’s yet a good lesson that simply following the “smart money” isn’t always a winning strategy. Read the rest here.
