On Friday, shares of Biogen Idec (BIIB) popped on news of positive developments in the treatment of Alzheimer’s disease. The news sent their drug from Phase II to Phase III development. Then, Wall Street began jumping on the bandwagon. Note: this morning, Stifel downgraded the stock to a Hold rating from a Buy rating.
| Here Comes the Street… | Piper | Cowen | Barclays | Credit Suisse | Citigroup | Baird | Morgan Stanley |
| Old Target | $421 | $425 | $435 | $400 | $410 | $445 | $418 |
| New Target | $500 | $500 | $500 | $500 | $512 | $498 | $525 |
The news sent the entire biotechnology sector much higher, extending momentum that's made it a strong place to be invested in this year.
BIIB
This is a sector to watch carefully as there were a ton of initial public offerings (IPOs) last year, and while most of the companies aren't earning money overwhelmingly, they have had drugs in at least phase one treatment. Still, considering valuations and past disappointments in the sector, this is the one that can best be labeled as a bubble.
Remember last July when Janet Yellen offered stock advice while trying to play down the notion the entire market was a bubble? Instead, she threw social media and biotechnology stocks under the bus stating:
“Valuation metrics in some sectors do appear substantially stretched — particularly those for smaller firms in the social media and biotechnology industries…"
Obviously this was her Greenspan 'irrational exuberance' moment, but then again she's looking to take the Fed back to Greenspan with more opaque language and less Wall Street influence. I like the latter part, but I just hope she sticks to other parts of the job and leaves asset bubbles to the market.
Biotechnology Sector Index (IBB)
This morning, there was news of adverse reactions with two Gilead (GILD) Hepatitis C drugs, when combined with patients taking heart treatment. Out of nine patients, one died and three needed pacemakers installed. These are the kind of setbacks that would have destroyed the stock in the past and while there will be pressure today; all of these missteps are moments away from treatments becoming better.
The Race is Joined
In 1754, Benjamin Franklin took a British symbol for its holdings in the new world to promote the idea of unity among the colonies. More recently, I've seen that same symbol used to suggest unity among conservatives.
The unite or die approach is how our upstart nation finally fought back the British crown as that chopped up snake became one giant rattlesnake, warning of determination and retribution for those that dare tread on our rights.
The 'Don't tread on me flag' or Gadsden flag flies high among those that see a nation losing its hard fought rights to the government it formed to protect them.
Now that Ted Cruz has formally announced his presidential candidacy campaign, the floodgates could open to a very crowded field of presidential aspirants. But many wonder if this group can survive without releasing so much venom that the eventual candidate is poisoned beyond repair.
Moreover, many experts say to win the general election, the GOP will have to abandon its hard edges and seek to find a message that doesn't rattle the crowd.
It's time for fiscal discipline by our government to unleash the greatness of the country and I hope Americans get and understand this isn't a message to fear, but to embrace.
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