Update-3 10/1 10:35aMerck Oral COVID Drug disrupts markets.MRK up 9% vaccine stocks down. IBB down 3.2% to $156 handle.

Update-3 (continued at 10/1 close) Merck oral COVID drug leads rally with all major Indices up, Dow Up 1.43%, S&P 500 up 1.15%, NAZ up 0.82%. A sense of optimism about combatting the pandemic may be percolating trough the mMRK was volatile but up 8.37% to $81.40 arket because we have a range of vaccines and drugs. The “re-opening ” trade took hold again today with gains in financials and industrials. The MOmentum has been broken on vaccine stocks so it’s a hard call where they go next: BNTX down 6.67% to 4254.79 , MRNA down 11.47% to 4341.09, NVX down 12.41% to $181.60. Booster shots may no longer be factored into vaccine demand equation but vaccination is still the safe healthcare policy.

It may take a few weeks for biotech stocks to digest the Merck news because many  stocks were down: IBB 1.7%  QDEL 4.83% REGN  5.68% VIR 21%. On the positive side we were expecting M&A and we got one with Merck’s  big $11.5B buyout of Acceleron. Also keep in mind that Merck revenues from the news may not ramp until 2022-23.


Long MRK.

Update -2 …End of 3rd Qtr. Biotech ETFS

IBB  $161.68 YTD 6.73%

XLV $127.30…YTD 12.2%

XBI $125.71…YTD -10%



Update-1 9/27 At Close…Re-rotation to value with financials and energy making gains but healthcare (XLV) down 1.42%. Small caps made good gains today with IWM and IWD but not IWF and speculative ARKG.  The IBB and XBI barely hold at current levels. Our mid-cap picks are in the green : CRSP CYRX VCYT. We added Pacific Biosciences (PACB) to our speculative buy list at $26.11.

Not a good-looking chart btw.


Biotech Playbook Revisited

  • Healthcare portfolio performance and diversification can be achieved with 3 ETFs and one Life Science Fund.
  • Small/Mid-cap opportunities are good for traders in Q4 because of M&A and product news.
  • Technicals need to turn around with improving momentum.

Over the past 12 months our healthcare and biotech playbook required very little hard nosed risk and stock picks. Since we developed our model portfolio in October 2020 we stayed the course in healthcare while holding a core group of large cap biopharma stocks that provided growth plus dividends. Our two core ETFs the IBB up 14% YTD and the XLV  up 16.34% YTD provided good performance which required little knowledge of the science and product news. Throughout 2021 we diversified our Healthcare Portfolio with medtech and life science tools/diagnostics: the iShares US Medical Devices (IHI) up 21% YTD and the T.Rowe Price Health Sciences Fund (PRHSX) up 15.1% YTD.    Now as we navigate a choppier period and recent weaker technicals you may want to take on more risk with small/mid caps that add beta to your portfolio.

Recent breakthroughs with mRNA vaccines over the past two years have shown the enormous potential for transformative therapies. DNA sequencing took off five years ago and new applications are still being developed. For the longer term molecular technology platforms such as RNAi, CAR-T and CRISPR can offer therapies that cure diseases at the gene level. Molecular medicines have advanced to the stage where exciting breakthroughs may occur more often and unexpectedly.

We recently picked Small/Mid cap stocks for more active traders and tracked them since May 2021. We expect life science stocks will continue to do well in Q4 because of M&A and breakthrough clinical news that tends to pick up in Q4. We added the IBB as a new trade despite its weak technicals at the SMA 50 line at a price of $170. We still have no positions in either the ARKG or the XBI as the momentum has been weak for small cap speculative biotech stocks that have no revenue. We sold a previous pick Editas Medicine (EDIT) at a 100% profit but may get back in.

Small/Mid-cap Focus Stocks (started 5/21)

chart updated 9/30

Company Ticker P P Revs MCap P/B Recom Perfor
5/21 9/30 $M $B 6m %
Cryoport CYRX 51 66.51 169 3.07 4.94.74 1.5 9.42
CRISPR Therap CRSP 124 111.93 901.8 8.37 3.39 2.1 1
Veracyte VCYT 36 46.45 157.5 3.17 3.39 2 16.4
More spec
Pac Bioscience PACB 26.11 25.55 105.8 5.47 19.65 2.4 -10.76
Quidel QDEL 125 141.15 1,840 6.14 4.17 2.5 16.5

Notes: all have a good cash position, all are in the money from early May purchase price, all are volatile.

But the issue going into Q4 is “Can smaller/mid-cap life science stocks rally?” The overall performance of the market has been in Large Cap Growth.Even the S&P 500 is up 18.6% so why add speculative small caps in biotech? You need to be a great stock picker to beat an ETF.

Compare these two small cap ETFS:

iShares Russell Growth (IWF) up 19% YTD

ARK Genomic Revolution (ARKG) down 15.7% YTD


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