Update-2  10/7/21…Nice broad rally day with temporary relief from the political spat on the debt ceiling.

  • All of our mid-cap focus stocks were up: CRSP CYRX PACB QDEL and VCYT. We need to get confirmation of bottom on small/mid caps in life science stocks with XBI now at $123.91.
  • Quidel (QDEL) was up over 6% AH to $145 with a pre-release on financials. Revenues will be up 6-7% from2020 quarterly levels to $505-510M.
  • Those of you who are underweight healthcare should look at the XLV near $127.58.


Update-1…10/5/21 Nice rally day but TECH shares and FAANG outpaces BIOTECH.

  • ARKG up 1.21%, IBB flat at $155.79, XBI up 0.3% to $123.60 treading near term bottom.
  • XLK up 1.43% to $150.17, QQQ up 1.35% to $357.38.
  • Biotech strength among mid-cap focus stocks: CYRX, PACB, VCYT.
  • Large cap strength: ABBV, LLY, UNH otherwise weak.MRK down 1.81% .
  • Gene therapy 2%+ winners: CLLS, EDIT, NTLA.
  • Vaccine movers Novavax,Inc. (NVX) down 4.64% to $170.
  • TSY yield rises on ISM number 61.9%.


Pivotal Month for Biotech in a Sea of Uncertainty

  • Merck oral COVID-19 pill disrupted the market for coronavirus stocks.
  • Biotech stocks are in a downtrend and we expect a pivotal month ahead.
  • Small/Mid Cap stocks will drive Q4 performance.

Biotech stocks were in free fall last week in one of the worst weeks since its peak in early February. Only when Merck (MRK) announced strong data from its experimental COVID-19 antiviral therapy did buyers come into the sector. But the news created more volatility for Coronavirus stocks as the potential for an oral pill disrupted vaccine and diagnostics stocks which had been leaders until early August. BioNtech (BNTX) lost 6.67% to $254.79 and Moderna (MRNA) lost 11.37% to $341.09.  COVID vaccines are still critical to arresting the pandemic but the mRNA vaccine are widely held momentum  stocks with huge gains YTD so portfolio rebalancing and volatility is to be expected with any breakthrough product news. Just look at Regeneron (REGN) down 5.68% to $570.79 and VIR (VIR) down 21.07% to $34.35, both companies working on treatments for COVID-19. Monoclonal antibody therapies are expensive compared to an oral pill depending on efficacy data. Until we get more clinical data and an updated forecast for these COVID treatments biotech stocks will be volatile.

The Merck news curbed the selling of biotech stocks which are in a funk leaving the XBI up 0.37% on the day and the IBB off its lows down only 1.7% to $158.93. Until the markets digests the news and upcoming earnings it is best to follow the technicals. But the sentiment should be improved if investors take the view that the biopharma industry is developing a range of diagnostics, therapies and vaccines to combat the pandemic. Look for the IBB to bottom in the $155-160 range and move up through Q4.

Small Caps Need to Regain an Upward Trajectory

The iShares Russell 1000 (IWF) also sold off in October and broke support at the $285 level. The SPDR S&P Biotech (XBI) is down over 10% YTD and trying to stabilize at the mid-range of its low channel at the $130 level. But to make these moves we will need M&A and positive clinical data news. Earnings reports and guidance from major drug companies are coming in the weeks ahead can also be pivotal.

Here are current active positions of our small/mid cap focus stocks. We initiated our calls in mid-May. All of these trades were profitable but obviously volatile.

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
Pacific BIioscience 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

Need Help from Macro with COVID Cases Down

There is plenty of uncertainty on the economic front starting with the budget resolution and the infrastructure bill. Add to that any legislation on drug pricing through Medicare.

COVID cases created by the delta variant  in the US has eased over the past month helped consumer spending. Daily COVID cases have fallen 35% since Sep 1 to 111.2k. Dr Scott Gottleib reported on CNBC that up to 90% of Americans will have some form of immunity after the delta wave passes.

However a confluence of macro issues such as the supply chain crunch, a China slowdown, inflation rising all contribute to a lack of clarity for the market direction and a forecasted slowdown in global growth.

Life Science Bellwether Stocks Today 9/4/21 as of 11am EDT

NASDAQ down 2.11%.

ARKG down 3.77% to $72, IBB down 2% to $156, MRK up 2% to $83, MRNA down 5.8% to $321, QQQ down 2.4% to $351, XBI down 2% to $123.



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