Healthcare Subsector Review Part 2: Risky Seasonality Ahead but Plenty of Opportunities in Biotech…Update-3 Biotech movers….

Aug 4, 2025 | 2024-25 Life Science Portfolios, 2025 Rayno Biopharmaceuticals Portfolio, Biopharmaceuticals

 

Update -3 8/8/25. 2p EDT: ..Selected Biotech trades from our LIST continue to move despite lack of momentum in the bellwether XBI at $85.52.

 

Update-2 8/6/25,,,2:23 EDT.….Two strong biotechs from our trading list: CYRX up 28% on e beat, upgrade and RNA up 20% on talk of Novartis buyout. XBI is down 1.5% to $85 level. VRTX recovering up 3.25% to $386 and is a strong hold.

8/6/25…3p EDT More biotech movers from our trading list: RYTM up 1.6% to $90 level on business update; SUPN up 15% on earnings and merger with SAGE.

Update-1 8/5/25…Vertex Pharmaceuticals (VRTX) took a 20+ % hit to $375 level despite strong earnings after their experimental  pain drug VX-933 failed to meet goals in a Phase 2 clinical trial.The drug aimed to treat acute post-surgical pain. Guidance was re-iterated for 205 with Revenues of $1.85-$12B with strong execution of JOURNAVAX and two other products.

Pfizer gained over 5% on beat and raised outlook,despite potential tariff hit.

Healthcare Subsector Review Part 2-Opportunties in Biotech Stocks

  • Healthcare stocks remain performance laggards YTD along with the energy sector. In  the most recent quarter the top sectors are Technology, Industrials and Communication Services.
  • Weakness in stock performance from most MEDtech and Health Science stocks was attributed to uncertainty from tariffs as well as weaker demand for healthcare services.
  • Our favorite sector for investors and traders should be speculative small cap biopharma because of M&A and licensing potential and relatively less risk from the MACRO.

We had a few cracks in the market last week with the first 2% sell-off since May. I hedged with index puts and shorts because I remember late August through mid -October to be challenged with unusual volatility and this year it could be worse not only because of MACRO and geopolitical issues but valuations are a bit stretched. We could say the market momentum comes primarily from AI themes.

A Sell-Off Despite Good Earnings because a lot of Uncertainty Lies Ahead

On our last review of the healthcare sector was ranked near at the bottom of market performance as the market was driven by the Trump Administration Policies and AI. The Technology and Communication Sectors led the market as investment in AI chips and computers soared by leading MAG 7 and Tech players like Alphabet, Broadcom, Nvidia, META, Microsoft and Oracle. However the MAGS is only 2.79% YTD at $56.73  but of course is way off the “Liberation Day”bottom of $39.93 .The XLK is up 10.56% YTD but lost 1.86% over the past week and off the peak value of $269 reached only last week before the sell-off.

In contrast the healthcare sector was buffeted by turmoil at United Health, and cuts to life science research,  tariff policies, drug pricing uncertainty and even lower medical utilization factors going back to COVID days. The Healthcare SPDR ETF (XLV) is down 4% YTD to the $132 level and 13.23% one year larger because of United Health. The XLV was  rebalanced 2025 to include more so called “health science” stocks like biopharma and tools so if you have any knowledge of the sector it is better to buy individual stocks. The IHF iShares Healthcare Providers ETF hit a 12 month low last week at $40.81. The recent high in the group of $59 was reached in early September 2024.

 

Large Cap Biopharmaceuticals -Value Plus  Growth But with Price Controls Lurking

  • Individual stock picks are better than funds or ETFs: ABBV, AMGN, GILD, VRTX,
  • Dividends buffer losses, averaging  3% with BMY 5.6%, PFE at 7.25%!
  • Favorite picks: ABBV, GILD,  LLY, VRTX. Look at  MRK and REGN?. A spec BUY is Biogen (BIIB).

Long: ABBV, BMY, GILD,  LLY, PFE, VRTX.

Analyst PRICE PRICE 52 wk
Top Biopharmas TICKER PICK TECH Fwd/PE Summ 2022 11/23 7/12/25 8/2/25 YTD % 1 mo.% div % RSI high
Abbvie ABBV H/B U 13.69 1.87 161.64 138.59 192.45 195.22 9.86 2.75 3.33 59.4 219
Amgen AMGN H U 13.84 2.21 275 303 292.27 296.88 13.9 2.19 3.25 49.98 347
Astra Zeneca AZN H/B U 14.34 1.37 68 63.17 71.13 73.95 12.78 5.82 2.18 56.41 87.62
Bristol Myers Sq BMY H D 7.36 2.58 71.05 50.61 46.86 44.23 -21.8 -6.9 5.6 37.26 63.33
Gilead Sci GILD H/B U 13.19 1.8 85.39 75.92 109.64 113.18 22.53 1.3 2.87 53.95 120
Eli Lilly LLY H/B F 25.38 1.53 447.71 597.71 793.01 762.33 -1.25 -1.75 0.82 45.65 972.53
Merck MRK H/B F/U 8.21 1.93 110.95 101.39 83.36 79.29 -3.08 3.78 3.96 43.35 134.63
Pfizer PFE H/B D 7.61 2.44 51.24 29.48 25.65 23.49 -11.46 -6.19 7.25 37.18 31.54
Regeneron REGN H/B F 14.03 1.71 725 798 567.74 558.87 -21.54 4.48 0.51 54.16 1211
Vertex VRTX H/B U 22.21 2.03 289 373.65 468.85 462.13 14.76 2.2 0 49.57 519
Van Eck ETF PPH H D 84.52 -2.04 -4.04 1.93 99.51
iShares IBB B F 133 0.21 4.24 0.3 150.57

Health Sciences, MEDtech and Tools

A leading stock in the group Intuitive Surgical (ISRG) had strong 20 % growth in earnings and revenue with procedure growth of 15.5%. But guidance  was cautious citing concerns about tariffs. The stock has dropped below the 50 day moving average. Another top stock the group AbbottLabs (ABT) showed some weakness post earnings because of weaker demand for diagnostic procedures related to COVID 19. But excluding COVID-19 testing growth should remain in 6-7% range.We have cut back on our largest positions in MEDtech: BDX, ISRG and SYK. Update .8/4/25..at close on Stryker (SYK).Tariff impact lower , demand higher.

Our core FUNDs have been pummeled with FSMEX down 6.59% YTD and 8% over one year; and PRHSX down 4.06% YTD and 21.3% one year.Our best stock the group was BSX up. Recently we made a good call to buy ThermoFisher (TMO) and the stock  up 9.86% to $463. but still down 11% YTD. We also hold individual stocks in BDX, ISRG and SYK but the performance has been disappointing after earnings. We sold the US Medial Device ETF (IHI) up 2% YTD.down 4.5% MTD. In light of mixed performance for the group we prefer to pick individual stocks and hold: ABT, BSX, and TMO. Much better opportunities come up with small caps like CorMedix (CRMD) up 50% YTD..

We have covered a new category of Next Generation high sensitivity diagnostics for tracking oncology therapy called MRDs (measurable residual disease). The coverage  includes : ADPT, GH, and NTRA.  We wiil add Personalis (PSNL) to the group at $5.39 which focuses on MRDs in solid tumors. PSNL is down 6% YTD and has a Market cap of $476M, and a Price to Cash of 2.56.Analyst coverage is favorable 1.25 strong buy. The market potential for Cancer Genomics is huge ($ BB) and at an early stage.

FOCUS on SMID Cap Biotechs for INNOVATION

One of the reasons we have shifted our focus to SMID Cap Biotechs is over the past twelve months is because many of these life science companies have the technology, funding and pipelines to propel growth. Indeed there is greater risk but if you identify a stock with good potential your odds of a big 100% + win are greater. For example we have identified small cap biotech companies who already utilize AI tools for drug discovery, example Recursion Pharmaceuticals (RXRX.) And of course SMID caps are the likely sector for M&A and licensing deals. We see a number of other companies on our trading list touting the potential of AI: ABSI, CAI, TEM, and RNA.

We have made good gains in the following Small Cap biotech stocks and will provide updates  on new trades in the coming weeks as the 2nd QTR closes out: ADPT,  EYPT, COGT, CRMD, GH, MNMD< RNA, SLDB, MRUS, RYTM, RXRX, SUPN, and WVE.  Also for these small cap stocks are the ARKG and the XBI are bellwether ETFs,  The XBI is abetter inductor of MOMENTUM but if both are rallying up 2% or more this should be a BUY signal for small caps.

 

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