Update-4 7/10/26 11:45a Watch out for Friday afternoons. A sell-off is developing in SMID biotechs with the XBI down 4.35% to the $157 level and a red screen day in my model.
7/10/26 After the close: some whale decided to unload a bunch of XBI at the top after being up about 30% YTD. Nice trade! We were going to post an update of our SMID biotech portfolio stocks today but decided to hold off until the dust settles and we can get a better analysis of the damage. The XBI closed down 3.2% to the $159 level off the lows. The IBB was also down 2.68% to $192 reflecting sellers of biotech stocks and the volatility of a sector that has been doing well somewhat under the radar of bullish market action of AI and Technology. stocks.The market overall was higher with small caps weaker and the Russell 2000 (IWM) down 0.42%.
Update-3..7/8/26….Its about geopolitics today.With the likelihood of a “smoldering” kind of War with Iran and the Region. SO we can expect no immediate PEACE deal and a comeback in the energy sector. Investors are likely to a hold back on new positions until we get through the earnings cycle.
VERTEX (VRTX) was down 3% today to the $506 level ending MOmentum which carried the stock up from $440. NO downgrades yet but consider the CRENETICS deal a reboot for more diversification.
Update-2..7/7/26...Rolling roller coaster as today they sell chips buy energy and defensive including biopharma: GILD, LLY, JNJ all nice movers . PTCT up 4.4% at $89.20.
Update-1 …M&A is good for biotech but this $10B deal had VRTX down after hours. VRTX is one of our top large cap picks. More on Crenetics ( CRNX) later and the question is ‘Is this a new direction for VERTEX and why?
Innovation Drives Gains in SMID Biotech Stocks
- Our SMID Biotech Model continues to churn out winners- innovation resides in small cap stocks.
- ASCO data has confirmed Value of Precision Oncology, genomics and use of MRDs for tracking therapies.
- Drivers are clinical data, partnerships and M&A.
Our last major update for the SMID Biotech group of stocks was June 1 when we focused on genomics as it relates to Precision Oncology for cancer diagnostics and targeted therapy. This was at the beginning of ASCO as many of these companies would present their data. Since June 1 the performance of many of these stocks has been phenomenal, and really the momentum has picked up over the past week when have to ask yourself how long can this rally last ? Well nobody knows because many of the SMID biotech stocks have limited product revenues and no earnings. So when we developed our Focus List of SMID we had to consider factors like: cash position, product pipeline, analyst reports, technology, disease area and technicals. And for this group of stocks on our Trading list probably only represents 30% of the well followed SMID group in the available universe.
Here is the performance of biotech sector for the past month and YTD (as of 6/27):
- Major ETFs : (ARKG) up 32.36% 1m, 42.46% YTD; : (IBB) up 10.6%, up 11%, (XBI) up 16.52%, 27.4%.
- (FBIOX) up 12.51%, up 13.4%: Large cap favorites: ABBV up 18.83%, 10.98%: MRK up 7.47%,22.33% ; LLY up 13.47%, 12.42%; VRTX up 8.38%, up 12.71%;
- The overriding theme for ASCO has been Precision Oncology and cancer diagnostics and the performance is a bit overwhelming: Adaptec (ADPT) 31.7% YTD, Guardant Health (GH) up 50.5% YTD, Illumina (ILMN) up 38% YTD, Natera (NTRA), up 18.87% YTD, Personalis (PSNL) up 72% YTD.
And here is a snapshot of some of our new picks:
Arcus Biosciences (RCUS) P $31.08, Market cap $3.19B,YTD 30.42%, RSI 79, Analyst Rec.is a buy at 1.33, recent reports by Truist and Goldman.
Arcus Biosciences, Inc. is a clinical stage biopharmaceutical company focused on developing differentiated molecules and combination therapies for people with cancer and inflammatory and autoimmune diseases. The highest priority of the Company is to establish casdatifan(cas -small molecule) as a foundational standard of care in kidney cancer so that patients have the opportunity to benefit from casdatifan-based regimens across lines of treatment. Arcus’s development strategy is designed to generate evidence to secure casdatifan as a backbone therapy in ccRCC so that every patient has the opportunity to benefit from casdatifan across each line of therapy over the course of their care. In addition to CAS in the Arcus Pipeline there is a CD73 small molecule inhibitor for pancreatic cancer in Phase 3. The Company has partnerships with Astra Zeneca and Taiho.Cash position is $875M.
PTCT Therapeutics (PTCT) P $84.3, Market Cap $7B, 11% YTD, RSI is 71, Analyst Rec. is a buy at 1.79 with recent upgrades by Citi, Jeffries and Cowen.
We “discovered” PTC a few months ago and it is truly a unique Company focused on the discovery, development, and global commercialization of clinically differentiated medicines for those with serious rare diseases.PTC research efforts are based on two scientific platforms—splicing and inflammation/ferroptosis — where PTC has unique expertise to discover and advance to the clinic innovative therapies. The Company has several products for rare diseases in two therapeutic areas: neurology and metabolic disease where there are few treatment options. Several products are on the market globally and Roche is a major partner. The Executive Team is outstanding and broadly experienced. Revenues for Q1 were $273M including the global launch of Sephience, a PKU treatment. Cash position was strong at $1.895B.
Here are our strong holds among the SMID Biotech stocks that we have substantial gains: ADPT, AMRX, AXSM, COGT, GH, PSNL, XNCR. Our best performing biotech fund is Fidelity Select Biotech (FBIOX) at $29.05, up 20% YTD and 55% over one year. XBI is at $159.30 up 30.67% YTD at 11:30am EDT.
Eventually a rally with this much momentum runs out of gas without an M&A surge or clinical news from an individual Company. What is different is this time is that it is benefiting from a big pile of trading cash exiting the technology and AI markets. Moreover until recently the SMID caps of biotech has languished. But looking at seasonality the rally can go on through July if NASDAQ and speculative sectors continue to run like the Russell 2000 (IWM). And the volatilty makes it tempting to sell on a day of weakness like today. SMID stocks show weakness today probably due to end of month profit taking.
It could be that Q2 earnings will provide clues because the driving strength of the overall market has been earnings and a rotation of sectors.