Update-1 2/25 Broad Rally Includes Materials XLB, Financials XLF and Healthcare XLV. Dow leads up 2.44%.Investors seek safety of large caps with dividends.
- XLV up 3% to $130.93. IBB up 1% XBI up 0.43%, QQQ up 1.3%.
- Large cap leaders: UNH and PFE up over 4%, AMGN AZN GSK LLY MRK up over 3%, ABBV BMY up over 2%.
- Mid caps mixed: AGIO CRSP PCRX winners; BHVN down 8%.
Large Cap Biopharma-Well Positioned For Choppy Markets
- Large cap biopharma can provide value plus growth in choppy markets.
- Valuation parameters are more attractive than the S&P 500.
- Look for milestone clinical updates or M&A.
If the past week is any indicator large cap biopharma stocks are a good place to hide from the turbulence of 2022 markets. Our recent picks have done well over the past six months: Abbvie (ABBV) up 24.88%, Bristol-Myers Squibb (BMY) flat, and Vertex Pharmaceuticals (VRTX) up 19.79% all beating the IBB down 22.51%.. As investors seek value and dividend stocks as a respite from high flier tech stocks large cap biopharma are strong holds. And some of the biopharma laggards provide nice dividends: Amgen (AMGN) 3.4%,Bristol Myers (BMY) 3.2%, Gilead Sciences (GILD) 4.58%, and Glaxo SK (GSK) 4.96%. Roche Holding AG (RHHBY) has also been one of strong holdings over time but can lag due to currency nonetheless up 55.73% over 5 years and 6.89% over one year with a 2.61% yield. Roche has strong R&D with innovation in oncology and clinical diagnostics.
Lily as been a very strong stock over one year up 16.37% but lagging down 10.13% over one month. Lilly has recent good news for its Covid 19 Antibody Treatment. A bit more controversial is Lily’s partnering with a Chinese Company Innovent for development of a lung cancer drug when the FDA requires a new trial.Lilly is also developing new Alzheimer drugs based on monoclonals and has a broad research pipeline. LLY is a bit more expensive than other big pharmas with a Price/sales ratio of 8.1 and a Forward PE of 24.5. Lilly is more aggressive on R&D investment and is a company to be watched for innovation and new products.
we also have traded Pfizer (PFE) and its partner BioNtech(BNTX) because of its innovative mRNA vaccine. The Company recently beat on revenues and earnings but the stock is up 47.49% over one year and guidance Is cautious on vaccine revenues going forward, However revenues for its oral COVID-19 antiviral pill Paxlovid should be strong.
A big week is coming up with continuing geopolitical risks from Russia and Ukraine conflict, FED minutes published on Wednesday, more tech earnings and more inflation data.
It looks like new drug pricing legislation is off the table for now.
Long ABBV, BMY, GILD, PFE, RHHBY, MRK, REGN .
Select Large Cap Biopharmaceutical Metrics
*acquired by AZN
*acquired by BMY