Update 2..-11/3…Powell curbs enthusiasm for stocks with harsh rhetoric. Get whipsawed? We get it, rates are going up

  • Recent trades: bought HOLX, sold MRNA, bought more IHI.
  • Biotech movers: BMY up 1.39%, LLY up 1.96%, ROIV up 6.655, VCYT up 24.25%.
  • Veracyte grows revenue 25% to $75.6M.
  • IBB holds $128.,XBI holds above $80 handle.

Update-1 11/1/22…Awaiting the FED tomorrow…..busy bullish day in biotech and MedTech.

  • Lilly (LLY) Down 2.63% to $352.58 on earnings. Q3 revenue up 7% with currency adjusted. String launch for Mounjaro obesity drug with revenues of $97.3M US. Q3 EPS increases 32% to $1.61, with guidance $6.50-$6.65. Fwd PE,37.82, P/S 11.41, forecast cut.
  • EVH down 9% before earnings tomorrow.
  • XBI up 0.82%, many nice movers today: ICPT,MDGL, MRNA, NBIX, PACB, REGN,VCYT even QDEL recovering. IBB up 0.9% to $129.75.
  • New ETF to watch SPDR S&P Pharmaceuticals (XPH) at $42.70, down 7.48% YTD, up 6.32% 30 days. Among top holdings: AXSM, SAVA, ELAN, JNJ and CTLT,
  • MedTech netting up on JNJ $16.5 B buyout of Abiomed (ABIO) heart pump maker, accretive in 2024.\
  • IHI perking up 0.94% at $50 handle.
  • Notable Trades -sold ILMN at $221, bought HOLX last week up 9% today.

Can Biotech Stocks Continue Rally?

  • Seasonality and earnings favor life science sector.
  • Innovation and new products drive investor interest.
  • Biotech Rally can expand to SMID caps with help from general market. Buy IBB.

Despite a vicious bear market  n 2022 biotech stocks have come back in October recovering with the XBI up 3.72% to $83.76 on Friday. Recent lows were hit on October 20 at $76.20. On June 14 the XBI was $63.32. The XBI is volatile but tradeable and with its equal weighting in biotech would track a rally in small and mid caps. .The XBI is a good indicator of momentum in the sector.

The larger cap weighted IBB also rallied last week to the $130 level up from lows at the $109 level on June 13. So we have higher lows after the September sell-off. The IBB holds many of the large cap stocks we favored in 2022: GILD, VRTX, REGN even our new buys like Illumina (ILMN). So if you are bullish on biotech for Q4  you should own both IBB and XBI.

Here are some of our Top Large Cap Biopharma Picks and how they performed with earnings last week:

Abbvie (ABBV) flat up 0.37% to $147.61. Botox, Juvederm slowdown?Q4 Revs of $14.8 B an incr of 3.3%, EPS of 2.21 an incr of 24.2%    PE of 20.88, Fwd PE of 12.51. Div of 3.82%

Bristol-Myers Squibb (BMY) up 6.4%  to $76.83. Q 4 revenues up 8% when adjusted for currency. EPS of $0.75. FDA approval of plaque psoriasis drug Sotyku. PE of 25, Fwd PE of 9.66. Div of 2.81%.

Gilead Sciences (GILD) popped over 12% to $79 level on earnings Friday. This move broke through the upward channel to highs for the year. Product sales were up 11% YoY to $6.1B.Oncology sales increased 79% YoY  to $578M.Two upgrades bring the recommendations up overall.The PE is 29 with a Fwd PE of 11.95. Div. is 3.68%.

Merck (MRK) sales rose 14%to $15B  and raised guidance. Keytruda sales soared. Q3 GAAP EPS from operations was $1,28.

We will follow SMID picks from June to to track news and performance. Most picks are laggards due to small cap avoidance. Winners since July 2022 are: CCXI (acquired), EVH, and XBI All show good momentum when IWM and XBI rally .We will update SMID focus stocks  after Q3 earnings.

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