Biotech and large cap pharmaceutical stocks rallied today overcoming fears of the Obama administration healthcare
initiatives that created a bearish pall on the industry. The mood is reminiscent of Hilary care in the early nineties (see my article in Genetic Engineering News 1/1/09 on the Waxman agenda). The selloff since mid-February has been brutal with even diversified large cap healthcare stocks such as Abbott (ABT) and JNJ off 15-20%. European large cap drug stocks such as Glaxo and Novartis are at levels not seen since the early 90’s. Yesterday the XBI touched mid-2006 lows and the broader based IBB hit the lows of 2004. Both ETF’s are up over 4% today. Even Merck and Pfizer near 1995 lows are up 8% today.

The recent consolidation wave continued today with Gilead’s(GILD) acquisition of CV Therapeutics (CVTX) for $1.4B topping the rejected offer of Astellas of Japan at $1B. The rally has spilled over to MedTech with many stocks up 2-4% or more such as BDX,BSX,GPRO, IMA and MDT.
My mid-cap index of 33 biotech stocks is up 6%.My 2009 Biopharmaceutical portfolio is up 4% today although it is off 7% YTD.

Keep in mind that the financing window is still closed for smaller cap biotechs so cash positions of ~2 yrs. is critical.

While the bear market may have many months to go in these uncertain times and the “safety” label taken off healthcare stocks this is a good entry point for long term buys for mid-sized companies with revenue momentum and large cap stocks with dividends and pristine balance sheets.

%d bloggers like this: