How will GILD impact the biotech sector?

Gilead Sciences released its latest earnings report after the market close, showing earnings of $2.43 per share on $7.31 billion in revenue, a huge year over year increase. Despite these encouraging results, GILD is down over 4% at pixel time.

The biotech industry has been on a tear over the last few years. IBB, a bell-weather ETF that tracks the sector, has more than doubled since the beginning of 2013. The top 10 holdings of IBB have all had amazing runs:

returns

As the heatmap below shows, the correlation structure of the sector is dominated by IBB. There is a tight sub-cluster formed by BIIB, GILD, CELG, AMGN, and REGN.

With GILD getting slammed after releasing its earnings, it will be interesting to see what effect this will exert on other stocks in the sector. Gilead has been most correlated with Celgene.

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Categories: Markets

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3 replies »

  1. Boy its been a while since I stayed on top in the biotech sector. GILD (besides ABBV) were two of my favorites. I remember sometime last year when IBB was down, pulling down the NASDAQ index single hand. Interesting correlation chart you’ve put up there. I sense a short term correction is due in IBB.

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    • Admittedly we started watching the sector after it had made its biggest moves as well. always interesting to see a rally across an entire group. hard not to argue that the fundamentals look good, america can’t stop spending money on healthcare as it ages:

      US NHE 1960-2013

      also the biotechs like GILD have the insurance co’s by the short and curlies, charging incredible sums for their drugs (5-6 figures per dose)

      could be a ST pull back. such a good run there’s bound to be a lot of people who are still up big today even with a pullback. potentially lots of opportunity either way

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