Update-2 4/29 12:15p Mid-day trading -Healthcare weak as Investors rebalance to other sectors.
- Gilead Sciences (GILD) up over 6% and. boosts overall market with positive remdesivir data.
- NAZ up 2.84%, IBB up 1.3%, IJR break-out?
- Technology, financials and energy show big gains; rally broadening out.
- Liquidity from FED main driver.
- Dx and Tools leaders: AXDX GNMK PACB VCYT
Update-1 4/27 at close : Diagnostics and Tools Stocks are on fire!
- My small cap holdings up: AXDX GNMK VCYT
- Core holding up ILMN
- Notable movers up: HOLX NSTG NVTA TMO VIVO
- Russell up 4.49%, IJR up 4.9% to $61.60. Smaller caps have been lagging recovery from pandemic.
A Good Week for Biopharma and Diagnostics: Innovation Is Driving Gains in Biotech
- Potential coronavirus solutions create many big winners: see our daily tracking “Volatile Coronavirus Plays” .
- Coronavirus stocks we track near 52 week highs: CEMI GNMK TDOC REGN INO.
- Microcap stocks with news are getting frothy as speculation picks up.
- Biotech ETFs are strong: IBB up 8% YTD at $126 up 19.44% 12 mos.; XBI up 2% YTD at $97, up 13% 12 mos.
As the market moves with COVID epidemiological data many stocks took at hit on questionable or incomplete news from the WHO on a Clinical study from China on remdesivir ; Gilead Sciences (GILD) stock took a hit on Thursday from the $82 level but recovered Friday to the $79 level, but it is still the big hope for a coronavirus antiviral therapy. The market remains volatile not only on company news but on dire economic news which at times makes the stock market seem disconnected from the pandemic reality.
- A big earnings week is coming up!
Nonetheless large cap biopharma stocks have been strong because of a strong balance sheet, reliable revenue and dividends. LLY VRTX and EGN are trading near 52 week highs and we favored the following over 12 mos: ABBV GILD RHHBY and both ETFs. Roche is unique in having strength in both diagnostics and therapeutics.
The diagnostics field is much more broad and volatile with many smaller players like Genmark Diagnostics (GNMK) one of our top picks along with Teledoc (TDOC). The large cap diagnostics stocks we favor are ABT and RHHBY although Illumina (ILMN) is a core holding because of their sequencing capabilities.There are many smaller cap diagnostic and biotech companies that are soaring on their diagnostics capabilities and we have been only tracking a few. Keep in mind that we are at an early stage of determining the accuracy of antibody tests and their clinical significance. The sectors is very hot and some of the companies are raising funds on a Press Release.
Most gene therapy stocks were up on Friday on their deal potential as well as regulatory milestones in 2020. If you area serious biotech trader you have to hold a gene therapy stock and they are way off 3 year speculative highs. Here are some recent movers: BLUE CRSP DRNA EDIT QURE RGNX. Here is our Gene Therapy Stock Review from June 2019.
Disclosure : long many large cap biopharmas: ABBV, BMY, GILD GSK RHHBY and mid caps: BLUE CRSP EDIT ILMN .
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As a review here are recent articles from 2020 and 2019 that were pivotal to the current upward trend in biopharma and diagnostics:
Innovation Drives Biotech Stocks
Biotech Stocks Catch Bids-Is it time to nibble on selected life science stocks?
Fear dominates the markets
Biotech and Life Science stocks showed some green on Friday and some themes emerged that are positive were it not for the fear factor and undercurrent of U.S. politics confusing the real situation. (Also keep in mind that drug pricing reform is a bi-partisan agenda.) But we are in a period of uncertainty where momentum is gone from the upside and volatility distorts the trend lines. Concerns remain about the pharmaceutical supply chain with many plants in China.
Here are some positives for the longer term.
- Look for green stocks in large cap biopharma with dividends and potential for growth and innovation . ABBV BMY RHHBY GILD.
- At some point mid-cap biopharmas will be good buying opportunities: ALNY, BMRN, INCY.
- Believe that the U.S. Healthcare system can attack the epidemic better than most countries.
- Life science stocks are more insulated from any potential economic downturn from COVID-19.
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On October 15, 2019 we urged investors to re-balance their portfolios into healthcare and biopharma:
Strong Earnings Spark Healthcare and Biotech
Macro News Retreats to Background- China Truce?
Time to Review Equity Portfolios For Healthcare Weighting and Rotation
We have written in 2019 about lagging healthcare and biotech stocks because of potential health insurance upheavals, the politics of drug pricing and tepid news on biotech drug development with fewer breakthroughs. Healthcare and biotech stocks are among the weakest sectors in 2019 after a good 2018. As we roll through earnings season a picture should emerge on top line growth guidance for larger biopharma companies and how they might counter bad sentiment. Historically drug stocks offered steady growth and reliable dividends making them good anchors and even defensive for equity portfolios.
Today Johnson and Johnson (JNJ) rose 1.62 % on better than expected EPS of $2.12 above expectations of $2.01, despite being the target of several lawsuits the most serious being with their opioid business lines and ongoing baby powder litigation. Sales of $20.7B reflected operational growth of 5.2% and adjusted EPS growth of 3.4%. Strong performance was attributed to underlying growth in pharmaceuticals and Medical Devices. Biological products were strong:for immune- mediated inflammatory diseases, (check earnings link above for pipeline updates).
United Health (UNH )also beat Wall Street earnings and revenues estimates of 3.47% and 1.2% respectively and the stock soared over 8%. UNH made a double bottom in 2019 and gapped up today. Price to sales is a very low 0.97 with a forward of 14.40. We nibbled on UNH early this month. The IHF iShares Healthcare Providers ETF soared 4% today well off recent lows.
What Next for Your Healthcare and Biotech Portfolio?
The Healthcare Select Sector SPDR Fund (XLV) was up 1.82% today but technicals are mixed:
Healthcare and biotech stocks rose broadly today and we should track the impact of company earnings over the next few weeks, Hopefully the earnings reports will be the focal point of the market and not macro news especially now that FED policy supports the market.
So how did the sector perform today:
- We have focused on large cap biopharma with dividends and most did well today today: ABBV, BMY, GILD. Some like MRK,RHHBY and MRK are already near 52 week highs.Yesterday we added Alexion (ALXN) and it is up 3.47% to $104.81 today. The IBB was up 1.83%.
- MedTech has been a major component of our healthcare portfolio and the IHI iShares Medical Devices ETF was up 1.1% today and one of the best subsectors YTD up almost 30%. We also hold one of the best MedTech funds Fidelity’s FSMEX up 14.5% over 24 mos.We also own blue chips like ABT and BAX.
- Mid cap biopharmas were strong today with big winners: AGIO, ANAB, BPMC, ICPT, NBIX,NKTR, XNCR etc. many of the mid-caps are below their mid-point over 12 month but are hard to trade.
- Gene therapy stocks rose in a green screen mode but they have been very disappointing in 2019.
We own XBI at about $75 as a play on mid and small cap biopharma stocks Today it is up 2.5%. If you trade small cap biotechs without earnings consider “day trading” your ideas before big losses mount. The Russell 2000 was up1.15% but we would like to see strength in small caps before plunging into more speculative life science stocks. We own several positions in small caps but hope to make money in AMRN and TDOC as we did trading them in Q1.