- Update-1 11/25/19... Rally right on track driven by NVS/MDCO deal, new product surge and cheap money from FED.
- As we said many time on this site XBI is the bellwether up 4.25% today (UP 13% in one month) as biotech stocks broke out last week. IBB up 2.46%.
- We hold many winners today: ALNY, AMRN, DRNA, FBIOX, GILD, SGMO VCYT XBI etc.
- The Medicine Company deal announced with Novartis purchase for $9.78B.RNAi drugs are in a very hot sector: ALNY, ARWR , DRNA, etc.
- Gene therapy stocks are hot: BLUE,CRSP, EDIT, NTLA etc.
- Mid-caps surged: ARNA, ASND, BPMC, ICPT, MRTX, SGEN, etc.
- Laggard large cap Alexion (ALXN) up 2.95% to $114.30; laggard GILD up 3%.
- CCXI from $8 to $35 on 5a receptor data for ANCA vasculitis! Microcaps on the move
======
Sentiment Shift Boosts Biotech Stocks in late 2019: IBB up 18.37% , XBI up 20.97%.
Rotation into Healthcare Stocks is in the Sixth Week and XLV is up 15.33% YTD.
Large Cap Biopharmas Lead the Way with Good Earnings and Guidance
2019 was a volatile year for healthcare stocks until early October when a reversal began as Q3 earnings allayed investor fears.The overall healthcare sector was flat as of mid-April wracked by political posturing with promises of lower drug prices and “Medicare for All”. As the hard rhetoric faded and sales growth plus value became a more realistic scenario for 2020 the healthcare markets recovered. Large cap drug stocks now can offer investors below market PEs in 15 range with attractive dividends.
Despite the good performance of biotech ETFs gains investors did better with the S&P 500(SPY) up 25.88% YTD and the NASDAQ-100 (QQQ) was up 31.4% YTD.
A sentiment shift in biotech was helped by FDA approvals and breakthrough technologies such as CAR-T and gene editing. Moreover a supportive FED indicated a low interest rate scenario for months to come favoring a boost in M&A.
A snapshot of ETFs and Funds in healthcare and life science stocks shows the breadth of the rally with MedTech a leader (IHI).
| Name | Symbol | Sector | Price | % Perf | |
| ETF or Fund | 11/22/19 | YTD | |||
| First Trust Arca Bio | FBT | Biotech large | 141.86 | 14.35 | |
| iShares NASDAQ Bio | IBB | Biotech large | 115.41 | 18.37 | |
| iShares U.S Healthcare | IHF | Providers large | 193.69 | 20 | |
| iShares U.S, Med Dev | IHI | Med Tech, large | 254.63 | 30.93 | |
| SPDR S&P biotech | XBI | Biotech equal wt | 88.14 | 20.97 | |
| Healthcare Select SPDR | XLV | Large cap divers | 98.26 | 15.33 | |
| Fidelity Select Bio | FBIOX | Divers Bio | 21.43 | 25.17 | |
| T.RoweP Health Sci | PRHSX | Divers Bio | 82.33 | 22.86 | |
| Fidelity Select Med Tech | FSMEX | Med tech large | 58.39 | 23.5 | |
Our focus has been to update the broad themes with deals and earnings news that tends to pick up in the fourth quarter.
Our large cap biopharma picks –ABBV,BMY,CELG,RHHBY-have done well as you can see from the is chart (last updated 11/1/19). Two of the large cap laggards have shown big gains in November : BIIB up 11% and REGN up 20%.
| COMPANY | Ticker | Price | 2017 | Price | Price | MCap |
% Perform
|
||||
| 1/15/18 | Rev$B | 12/18 | 11/1/19 | 2019 | 2019 | FWD | Analyst | % | |||
| $B | YTD | P/S | PE | Recom | Div | ||||||
| Abbvie | ABBV | 100.340 | 27.27 | 92.19 | 81.75 | 121 | -10.85 | 3.71 | 8.55 | 2.1 | 5.24 |
| Alexion | ALXN | 122.710 | 3.47 | 97.36 | 109.38 | 24.42 | 7.5 | 5.16 | 9.77 | 1.8 | |
| Amgen | AMGN | 185.040 | 23 | 194.67 | 217.95 | 130.55 | 11.13 | 5.58 | 13.8 | 2.3 | 2.66 |
| Biogen | BIIB | 335.950 | 11.84 | 300.92 | 299.2 | 53.9 | -1.58 | 3.79 | 9.09 | 2.7 | |
| Bristol Myers | BMY | 62.810 | 19.92 | 51.98 | 57.16 | 93.84 | 9.42 | 3.93 | 9.03 | 2 | 2.87 |
| Celgene | CELG | 106.000 | 12.5 | 64.09 | 108.53 | 76.7 | 62.11 | 4.69 | 8.7 | 2.9 | |
| Gilead Sci | GILD | 79.020 | 27.48 | 62.55 | 64.66 | 82.12 | 0.43 | 3.68 | 9.3 | 2.1 | 3.9 |
| Merck | MRK | 58.660 | 39.8 | 76.41 | 84.94 | 221.88 | 14.64 | 4.83 | 15.26 | 1.8 | 2.59 |
| Regeneron | REGN | 366.960 | 5.52 | 373.5 | 310.48 | 33.07 | -17.76 | 4.57 | 12.37 | 2.5 | |
| Vertex | VRTX | 158.000 | 2.3 | 165.71 | 200.94 | 50.25 | 19.14 | 13.88 | 30.48 | 2 | |
| XBI | 71.75 | 83.66 | 16.6 | ||||||||
| IBB | 96.43 | 109.85 | 13.92 | ||||||||
| FBT | 124.2 | 132.92 | 7.02 | ||||||||
| FBIOX | 17.74 | 20.26 | 14.21 | ||||||||
| XLV | 86.46 | 94.87 | 9.66 | ||||||||
| XPH | 39.47 | 7.78 | |||||||||
The sentiment shift is bullish near term assuming we do not get major flack from macro events such as geopolitical turmoil and China trade setbacks. The wild card for healthcare stocks on the downside could be political like repeal of the ACA or legislation on drug pricing.Moreover healthcare costs are rising and unsustainable long term.
With low interest rates CEOs see more opportunities for M&A than R&D or CAPEX investment.
Drivers through January are: M&A, major clinical (ASH) and banker (JPM) conferences , FDA product approvals and clinical trial updates.Stock portfolios should remain overweight a diversified healthcare portfolio including biotech stocks.