JPMorgan Healthcare Conference Notes #1: Current Portfolio Positions

Focus is Coronavirus diagnostics and vaccines.

Gene therapy is poised for next wave:

The Conference boosted many stocks as you might expect in a bull market for biotech. We reviewed rather quickly some of the presentations from the JPMorgan Healthcare Conference and will comment on specific companies and stocks in a series of posts. Overall the coverage was excellent for all companies in the sector and in some ways better than a live presentation  because of slides and ability to focus. Of course the personal interactivity was missing. We hope to go back and review specific names assuming the sessions are still posted. Overall the market reaction was upbeat but since the sector has already moved substantially in 2020  the momentum eased. And despite all the distractions this week from politics and COVID stocks are up.

The market continues to look forward to a 2022 “wind down” of the coronavirus pandemic and a return to a growing economy. Even with gridlock a stimulus is expected to be approved by Congress. COVID vaccines are the major factor for a “return to normal”. IBB at $158, XBI at $148 both near new highs.

Here are some initial comments on stocks we already own.

Abbvie (ABBV) broke $110 today and made some nice moves off Q4 bottom up to new highs since we commented and added to it in November 2020.  Here is the presentation which focused on Abbvie’s strong pipeline in immunology, hematology, neuroscience and now the Allergan acquisition into aesthetics. High dividend of 4.2% with good value on FWD PE and P/S.

Our other large cap holdings held ground with Bristol Myers (BMY) showing a nice gain to the $64 handle on pipeline potential in the autoimmune disease area. It is a core holding and pays 3%.Merck (MRK) is also a core holding and div pays 3%. MRK received approval of a BLA application for its pneumococcal conjugate vaccine.

Diagnostics market leader Abbott Labs (ABT) has lagged the skyrocketing COVID testing stocks but perked up a bit today toward new flattish highs after their presentation. The Company will be ramping up and distributing their BinaxNOW 5 minute Rapid COVID-19 test. Our top pick from last year you know well Genmark Diagnostics (GNMK) is lagging a bit after 4x gains in 2020. Preliminary financial results showed a 95% in total revenue in 2020 over 2019 primarily from the ePlex diagnostic platform. Hologic (HOLX) moved to new highs briefly and preliminary Q1 results of $1.6B. Sales of 30 M COVID-19 tests were a major impact on results and diagnostics are 30% of sales.

Pacific Biosciences (PACB) was strong again this week even after its meteoric run .Sequencing is hot. We first owned PACB under $10 but sold a lot too soon but still have a little. Preliminary Q4 results showed Q4 revenue of $27M compared to $19.1M in Q3 of 2020.

One of our picks from last year Glaukos (GKOS) had a huge move today to the $80 handle after announcing trial results on their devices, Preliminary financial results for this ophthalmologic Medtech innovator showed $73M in sales for Q4 and $225M for $2020.The product focus is Glaucoma and Corneal health.

Teledoc (TDOC) is pick from 2019 that is a core holding for long term growth. The Company is a global leader in comprehensive virtual care with a compelling economic model.  TDOC looks stronger after its recent merger and was up 10% this week to the $230 level. Member visits are estimated at 10.6M for 2020 with a CAGR of 40%. Bookings are up 35% YoY with a focus on diabetes and hypertension.YTD cash flow is 61M.

One of our better trades of 2020 is Vir Biotechnology (VIR) which vaulted up 40% from lows in the $26 range to close at $35.55 today.  Vir announced collaborations and pipeline milestones for COVID-19, FluA,HIV,HBV utilizing multiple platforms for therapies and vaccines. The Company has two Phase 3 antibody therapy products  in collaboration with GSK;  readouts are expected near term. The stock is quite volatile!

Accelerate Diagnostics (AXDX) was a great trade last year to the mid teens and we still hold some at the $8 level but see no reason to add to our position after review of the presentation. Orasure (OSUR)is a laggard and choppy stock  but has good potential for rapid COVID testing.

We will review a few vaccine companies tomorrow: AZN, BNTX and MRNA all of which have been good trades but volatility and valuations make them hard to buy and hold.

We will provide an update on gene therapy stocks.

I always get too enthusiastic on biotech stocks at this time of the year and I am already fully invested.

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