Update-2 …3/19/25…Another rally day makes 3/4 for SMID caps. ARKG and XBI both up over 1%. 70% of our life science trading stocks are green with nice winners on our focused trades: CRMD,TEM,TWST, PACB, RNA, etc. New buy ADMA at $20 specialty biologics. All novel biomarker/genetic diagnostic plays (Minimum Residual Disease-MRD) are up nicely-ADPT, GH and NTRA. More details over the weekend.
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Update-1 …3/18/25… TWO day rally fades despite some good momentum on SMID biotechs. WE have had some amazing runs on small cap biotechs wfhich is positive because it shows the appetite and liquidity is there. But the XBI fell 2% to its recent low near $86 down 5.67% for the month. On Monday the run on stocks from our Life Science Trading list was impressive with 17 stocks making moves of 2% or greater, For example : PTGX, RNA, RXRX, GERN, TWST, TEM and TXG but there was little follow through today. Some of the gainers were: GH, PTGX and SUPN. One of our recent Mid-cap picks Becton Dickinson (BDX) was up 1.88% today to $232 and 3.2% over 5 days. The stock is recovering from a big hit on the early February earnings the stock was $250.
Our portfolio is overweight large cap biopharma stocks that has helped us in 2025: ABBV,BMY, GILD, LLY, RHHBY, VRTX. The XLV is up 6.75% YTD. If you need to add healthcare stocks have a look at BDX, PFE, and UNH. Our biggest loss over the past 12 mo.s in the sector is Regenaron (REGN).
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Small Cap Stocks Continue to Tumble under the Onslaught of Trump 2.0
- Current MAGA policies have damaged sentiment for life science research with long term implications. Uncertainty is the watchword.
- MACRO has begun to hit MEDTECH as well, with the IHI down 8.1% over past 4 weeks but up YTD. Could be supply chain issues?
- Innovation is being squeezed as policy seeks to rebalance the market by slashing major discretionary expenses for deficit reduction.
“Market corrections are healthy and we need a “detox” period to assimilate the huge gains and clear the path to rebalance the economy. Invest for the long term.” (Hmm ok we’ll see?)
A crucial week is coming up for SMID Cap Life Science stocks under fire from the Trump 2.0 DOGE team which is slicing through NIH budgets and University research affecting not only small caps but maybe the IPO market as well. First let’s look at major indices within the “Health Science” sector. Last week was devastating for “momentum” stocks and SMID stocks in general as investors seek out the safety of large caps particularly those paying dividends. But as you know even MEGA Cap technology stocks were losers down about 19% YTD with the Roundhill Magnificent 7 (MAGS) at $47.67 down 13.63% YTD off a Mid-December high at the $58 level. The resilient QQQ is down only 6% YTD and still up 9.23% over 12 months now at $479.66 after nice 2%+ gains on Friday.
QQQ Performance. IJR S&P Small cap ETF
Note that despite the issues with small caps the overall performance the healthcare sector still outperforms YTD. Sectors that are trending higher in 2025 are Healthcare, If UNH continues to recover then healthcare should retain it’s defensive position even with tariff turmoil in 2025. So leaders are Healthcare, Financials and Energy as Technology and Consumer Discretionary lag. But the key small cap ETFS the Russell 2000 (IWM) and the IJR are still at January 2024 levels i.e, flat.
Here is a scoreboard of important healthcare science funds and biotech ETFs for 2024-25:
- Healthcare stocks as well as major funds and ETFs are outperforming YTD because of large cap biopharmas not currently impacted by tariffs: XLV off highs but still up 5.35% YTD but flat for 12 months. FSBIOX up 2.75% YTD and 1% over 12 months. Healthcare Providers (IHF) are up 6% YTD but down 3.25% for 4 weeks.
- MACRO policies have cut gains in US Medical Device stocks with the IHI is up only 1.5% YTD after deciiining 8.1% for the past 4 weeks. Some of the weakness was individual stock issues such as ABT, but also there are analyst comments about supply chain issues from tariffs. FSMEX is down 6.7% over 4 weeks down 2.2% YTD.
- Individual stocks notable for being leaders in life science and basic research were hit hard: Agilent Technologies (A) down 9.8% YTD and 10% over 4 weeks, ILMN down 14.6% over one month and 36% YTD,
- One of the few bright spots has been innovation with diagnostic biomarkers for cancer and MRD (Minimum Residual Disease) such as ADPT,GH and NTRA.
These emerging policies were largely Executive actions without congressional action have been unprecedented over the past 50 years of the Congressional budgeting process.
Now look at small caps which we covered last week. Both the IWM and IJR are down YTD.The ARKG has taken big tumble since mid-February down over 17% and is now down 6% YTD. As you might expect the XBI is down 4.68% over 4 weeks and off 3.25% YTD.
Nonetheless even in difficult markets such as this there are going to be big winners in SMID biotech because of clinical news, licensing deals and M&A. A quick review of our Life Science trading list shows the following outperforming YTD: ADPT, BBIO, CRMD, EXEL, GH, PTGX, TEM. But the volatility makes trading very difficult particularly with the whipsaw of policy and uncertainty caused by tariffs and the chaos of DOGE cuts. One counterpoint-if there are fewer biotechs being funded will the current class of small caps do better because of more concentration and focus?
As of 2P EDT our Life Science trading list shows more green than red with many 2%+ movers: ABSI, ARKG, CPRX, GERN, NVAX, RNA, RXRX, SUPN, TEM, VCEL,TXG, VCEL etc. IBB and XBI are rising.