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Biotech Forum Daily Digest: Biotech Stalwarts Start To Report Results, Kite Pharma Gets Some Love From Analysts, Cerulean Pharmaceuticals In The Spotlight

Biotech has had a bit of a roller coaster ride so far this week. The sector posted an over one percent gain on Monday and gave it all back Tuesday.

Kite Pharma and Teva Pharmaceuticals receive positive analyst commentary. Theranos fall from grace continues and Valeant's ex-CEO gets grilled on Capital Hill.

Today's spotlight is on a small oncology concern Cerulean Pharmaceuticals whose stock is up some 80% in two months but still is an attractive high risk/high reward play.

The biotech sector has opened the week in a seesaw fashion. The sector was up over one percent on Monday despite a big early fall in oil prices, which has throughout most of 2016 knocked the high beta sectors of the market down as well. Tuesday the space gave up Monday's gains and we are pretty much where we started the week as far as the major indices are concerned.

Earnings are starting to come from some of the major players in the industry. Swiss drugmaker Roche (OTCQX:RHHBY) beat expectations when it reported Monday. Growth was powered by three main drugs: Herceptin and breast cancer meds Perjeta and Kadcyla, which combined saw sales rise by 9% year-over-year. Cancer and autoimmune therapy MabThera/Rituxan remains its biggest seller and saw sales rise four percent from the same period a year ago. The European drugmaker is counting on eight new drugs it plans roll out over the next few years to stem losses from patent expirations.

Johnson & Johnson (NYSE:JNJ) largely met the consensus with its quarterly results. Sales from its hepatitis C drug Olysio fell off a cliff and posted only $32 million of revenues in the quarter. However, its oncology franchise posted a 22% increase in revenues to over $1.3 billion in the quarter. The faster growing part of this business is Imbruvica which saw sales increase 125% from a year ago to $261 billion. The company owns this compound 50/50 with AbbVie (NYSE:ABBV).

AbbVie reports its results next week along with biotech stalwarts Amgen (NASDAQ:AMGN), Celgene (NASDAQ:CELG) and Gilead Sciences (NASDAQ:GILD). Barron's had a good article late last week on what to expect from these large cap titans. I expect earnings to largely beat expectations which could provide a nice little tailwind to the sector next week.

The saga at Theranos keeps taking new twists and turns. This privately held "revolutionary" medical testing firm whose claim to fame was that could perform hundreds of different types of tests each from just a drop or two of blood; is now being investigated by U.S. Attorneys and the S.E.C. Previously health care regulators had been looking at the company including seeking a two-year ban for its CEO from running a lab.

It is hard to believe that this "unicorn" once raised funding giving it a $9 billion valuation and signed a partnership agreement with Walgreens (WAG) to open labs in some of its locations not to mention garnered a significant equity investment from the retail giant. It also appears that rather than using its next-gen "Edison" machine to run myriad tests it was outsourcing this work to run on standard equipment that is used in major labs. I am just glad this news came out before the firm IPO'd. This type of implosion within a public company would not be good for sentiment on this space at all.

Speaking of implosions, Valeant Pharmaceutical's (NYSE:VRX) CEO finally made his way to Capitol Hill to comply with a subpoena this week. He was grilled for nine hours in a Senate committee, mostly around Valeant's drug pricing policies. Valeant's stock held up well given this, of course after an over 85% fall from previous highs; shareholders are taking this sort of bad news in stride at this point. I think Valeant is going to be selling off assets in coming quarters to pay down debt as its growth through acquisition phase seems kaput as the company concentrates on its own survival.

I found this to be an interesting story and one I am keeping an eye on as it could emerge as a future trend in biotech. Privately held Dalcor Pharmaceuticals has been able to raise $150 million in private capital to pursue development of dalcetrapib which Roche gave up some years ago after a high profile and costly flop in development.

Dalcetrapib was part of the CETP inhibition wave whose aim was to lower the bad cholesterol and raising the good cholesterol. Pfizer (NYSE:PFE) and Roche also had costly initiatives in this area which they abandoned. However, group of heart drug researchers laid claim to a personalized approach after doing detailed genetic analysis of...