5/7/21 10:30a EDT Nice Move in Regeneron (REGN). I finally made a good option trade . I wanted to own REGN which looks undervalued (PE about 12, P/S 6.30) among large cap biopharma. Q1 Results were good but concerns remain on Sanofi R&D relationship.The key to the trade was to buy two options with different strike prices and dates. I did this after making a good single option trade in BNTX but missed on expiration date. Analysts recommendations for REGN remains at the 2 level. Still options trading are not an easy way to make a profit. The XBI however remains weak at a triple 2021 bottom at the $128 level. Small cap biotechs are fraught with trading risk.
NASDAQ Sell-Off of 1.88% Hits Biotech as Value and Re-Opening Plays Dominate Gains
Small Cap Biotechs Plummet: XBI down 3.84% to $129.81 below mid-point of 52 week range, but a recent triple bottom. IBB down 2.84% to $150.27. As we urged earlier in the year better to have a balanced portfolio in healthcare as we published including the XLV and UNH. rather than overweighting with IBB and XBI.
- Large caps holding upp because of dividends: ABBV, BMY, LLY, PFE. Look for a rally in Regeneron (REGN) after earnings on May 6.
- Vaccine stocks had a huge momentum run BNTX , CVAC, MTNA, NVAX but that ended today.
- Gene Therapy stocks hit hard in recent sell-off: CRSP, EDIT, QURE, SRPT.
- Most mid-caps down 3-6% : BHVN, FATE, INCY, LGND, MRTX, RETA, RGEN, XNCR.
Bellwether ARKG offers little help;
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Biopharma Stocks Stall After Earnings.
- But the IBB holds up YTD and outperforms most biopharma stocks.
- Legislative backdrop and COVID pandemic were blamed on mixed results.
- Most analysts maintained outlooks so look for downgrades and technicals.
It is hard to forecast with the choppy tape but assuming the COVID vaccinations are on track in the U.S. financial results should improve for most large cap biopharmas. Assuming no legislative action on pricing most of these stocks are a hold because of their defensive nature and dividends.Notice how the IBB has outperformed. We hold and trade ABBV, AZN BMY, GILD , MRK, PFE ,REGN and RHHBY. If you hold the IBB and XLV your portfolio is covered for healthcare.
IBB at $154 with 52 week high of $174.
Here is a quick summary in order of relative performance. Look for uptrend in coming weeks on laggards.
Biopharma Leaders
Abbvie (ABBV).One of our top picks up over 4% YTD and 33% 12 months, a beat and a raise, betting on Botox in second half. Total revenue up 1% with Q1 Rev $12.9B,Diversified portfolio in immunology , oncology and neurology. Legislative overhang on Humira pricing.
Bristol MyersSquibb (BMY) miss on Q1 as cancer drugs lag. Total Revs lag at $11.1B but guidance retained.Product pipeline improvements in immuno-oncology. Cut to Neutral at Morgan Stanley. Waiting on the Celgene boost?
Pfizer (PFE), Earnings May 4.
Biopharma Laggards
Amgen (AMGN) revenues decreased 4% YoY to $5.9B.EPS down to $2.83. Full year guidance was re-affirmed.Price erosion in core business.
Astra Zeneca (AZN) stock bounced today on Q1 Revenues beat of $7.32B up 15% YoY. Merger with Alexion Q1 Revs $1.636B, on track.Are COVID Vaccine issues solved?
Biogen beat estimates but sales were down YoY. Guidance on earnings were raised and sales were reiterated. The big upside bet will be for their Alzheimer’s drug with an FDA decision on June 7.
Gilead (GILD). Good results from Veklury -remdesivir COVID drug otherwise same old story. Q1Revs $6.4B incr 165 with EPS up $1.37, $2.6B cash flow with 4.45 div., hope for pipeline improvement.
Merck (MRK) Q1 Revs of $12.2B and EPS hit by pandemic.Growth outlook to resume at 8-12%.Keytruda strong at $3.9B.Organon spin-off coming.
Vertex (VRTX) Product Revenues increased 14% to $1.72B and GAAP EPS increased 23% to $888M. A beat. The stock has been bottoming since 10/20 but several analysts have buys.
Regeneron (REGN). earnings May 6.
And be sure to watch out for Drug Pricing Reform!
We will publish or Large Cap Biopharma Metrics data after all earnings are in.