- Mid-Caps show huge gains but with high volatility.
- FBT at 142.91, IBB lagging at $110.52, XBI leading at $97.77
- IWC Micro-Cap ETF breaking out up 11% YTD.
- Healthcare (XLV) comes to life lately up over 2% YTD.
As we predicted in early May Mid-Cap biotech stocks rallied up through ASCO but the issue as in the past is what happens after the momentum is gone. Mid-caps have been the sector to watch offering significant clinical news and dealmaking so have the best opportunities for big gains (and sometimes big losses e.g. NKTR TSRO). Small caps are also strong with huge daily moves very day. All of this volatility amidst a plethora of small stocks can be challenging for the most experienced of biotech investors. Do you want to be a day trader or long term investor? If you focused on the long term for example on quality stocks in our universe you made huge gains over 3 years on Abbvie (ABBV), Foundation Medicine (FMI) and Illumina (ILMN). Over the past month many small cap biotech stocks soared but which ones are the long term winners: ADAP, DRNA, ECYT, GHDX, GLYC, KPTI, NTLA etc? (now even cannabis stocks from Canada –LEAF.TO, HMMJ.TO ). The iShares Micro-Cap Index (IWC) is up 11% YTD and a 5 year high, but most of the gains came in May and June. (Keep in mind that even “micro-caps” can have ~$2B valuations)
Here are a few significant takeaways from ASCO:
- Merck(MRK) up 13.4% over 3 mos. and particularly first line PDL-1 therapy Keytruda show outstanding clinical outcomes particularly for renal cell carcinoma (RCC) as well as data for melanoma and lung.
- http://kirakazantsev.com/portfolio_page/uso-tour/ Targeted therapy and genomic profiling continues as a dominant cancer treatment trend with data from both Foundation Medicine (FMI) and Genomic Health (GHDX) up 44% over one month.
- Loxo Oncology (LOXO)soared 51% over one month and now is up 158% over 12 mos. on experimental drug LOXO-292 with RET biomarker.
- Among the big Mid-Cap momentum winners over one month not including those mentioned above are: Agios Pharma (AGIO), Ligand Pharmaceuticals (LGND), Neurocrine Biosciences (NBIX), Sarepta (SRPT) and Seattle Genetics (SGEN).Nektar (NKTR) was down big yesterday but up 10% today.
We expect a breakout on the XBI in 2018 but post-ASCO is usually not good time for new buys. Although the drug price rhetoric has failed to curb bullish sentiment it will be an issue later in 2018.
Another ASCO related article will be posted tomorrow.
Here is our Rayno Biopharma Portfolio Summary from early 2018.
Disclosure : long ABBV, FBIOX, GILD, MRK, NTLA , trading XBI, hold other small caps