Update-2 FTC breakthrough setting stage for a rally this week??
(Reuters) -The U.S. Federal Trade Commission (FTC) has suspended its challenge of Amgen’s $27.8 billion purchase of Horizon Therapeutics, allowing the FTC to consider whether the agency should settle the case, a filing late on Friday showed.
Also later in the week we may get news on which companies and drug products will be subject to price negotiation by Medicare.
Here are the ten drugs affected in the short term. No impact on stocks in the short term.
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Update-1 …Rocky Week but Powell finesses without major market disruptions. Rates likely to stay higher for longer and weigh on market, 2-year ticks up to 5.05% 10-year up to 4.239%. Friday’s trading helps averages. infotech comes back up 2.57% helped by Nvidia earnings, NASDAQ-100 up 1.68%, Healthcare flattish down 0.14%.
- IBB up 1.73% to 4127.58, XBI up 1.50% to $78.69, IHI up 0.37% to $51.74.
- Large Cap biopharmas hold: LLY up 1.32%, PFE down 0.76% to $36.38, MRK up o.92% to $110.21,REGN up 2.21%,VRTX up 1.52%.
- NEW pick BDX up 2.31% to $280.
- SMID caps still sluggish.
- Looking for better tape action in MedTech esp ABT, ISRG, MDT, SYK, TMO.
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8/27 What to look for in coming weeks of weak seasonality:
- Technicals esp S&P500 holding 4300.
- Small caps SMID perking up for traders-IWM,XBI.
- COVID stock activity: BNTX,MRNA.
- TSY yields holding near current rates.
Large Cap Biopharma-Big Winner is Lilly
- Best performing Large Cap Biopharma stocks 2023 YTD: LLY up 49%, VRTX up 19.41%, REGN up 12.6%.
- Worst performing large cap biopharma stocks 2023: PFE down 28.45%, BMY down 13.75%, GILD down 11.61 %.
- Winners over 5 years: LLY up 417.70%, REGN up 117%, VRTX up 95.83, AZN up 79.59%, MRK up 65.71%, ABBV up 51.95%.
Biotech stocks are in a bear market considering the IBB hit $177.37 in 2021, but is down 7.84% over FIVE years. The XBI fared worse down 17.51% over FIVE years and remains the best indicator for sector strength especially for momentum traders. SMID stocks underperformed over the past five years but there were good trading opportunities. Despite these numbers Large Cap Biopharma Performance shows you can beat the market through stock picking with companies having blockbuster products with long term potential such as EYLEA (Regeneron), HUMIRA with Abbvie, KEYTRUDA (Merck), and recently MOUNGARO with LLY.
By comparison the UNH was up 90% over 5 years and the XLV trailed most large caps up only 46.59%. So if you picked the best large caps and added UNH you outperformed the healthcare sector. Here is our last healthcare Playbook. Note MedTech continues to underperform.
Large caps have an advantage in this market because they are well capitalized and have resources to do licensing or M&A more easily. However in the case of Bristol Myers the acquisition arguably did not benefit the Company, AstraZeneca’s purchase of Alexion did offer long term strategic and financial benefit. The most recent large deal was Merck’s $10.2 acquisition of Prometheus.
Large caps have done better with innovative products over a five year period as well through licensing and R&D. But patent expirations loom. Think Lipitor, Humira and Eliquis. The COVID pandemic created many huge products and reinvigorated vaccine sales but are in a trough now. The next big category of products could be monoclonal antibodies for Alzheimer’s Disease but more products for autoimmune diseases and atopic dermatitis. Oncology breakthroughs are always possible. Note Eylea high dose was approved by the FDA on Aug 18.
Note the column “Analyst Recommendation” which is provided by our data source FinViz.The companies most liked by analysts are AZN, LLY and MRK. But you should read at the detail of the reports for your diligence.
One should study product pipelines in Phase 3 and monitor catalysts but easier said than done. The best management teams are likely to outperform and make the best deals. One big laggard and our contrarian pick is PFIZER (PFE)with a FWD PE of 11.6 and Cash per share of about $8. Most analysts rate the shares as Neutral and their acquisition of Seagen (SGEN) is being contested by the FTC. The Seagen deal with Pfizer should be decided in September. PFE missed the top line revenue numbers in last reporting Aug 1.But PFE is looking aggressively at other deals like the one recently with Caribou (CRBU).
MACRO looks pretty negative with high rates for longer term and economic issues with property in China.
LONG: ABBV, GILD, LLY, REGN, MRK, PFE, VRTX.
| Company | Ticker | Price | Price | Price | Price | MktCap | % Perf | |||||||
| 1/15/18 | 3/31/23 | 11/1/19 | 8/18/2023 | 2023 | 1 yr | FWD | Analyst | % | 52 week H | YTD % | ||||
| $B | P/S | PE | Recom | Div | ||||||||||
| Abbvie | ABBV | 100.000 | 159.37 | 81.75 | 150.14 | 265 | 6.26 | 4.71 | 13.56 | 2.4 | 3.94 | 168.11 | -7.1 | |
| Alexion*(ALXN) | ALXN | 123.000 | 182.5 | 109.38 | – | 40.33 | n/a | 4.56 | 9.38 | 2.2 | *acquired by AZN | AZN | ||
| Amgen | AMGN | 185.000 | 241.75 | 221 | 261.82 | 139.9 | -0.31 | 5.26 | 13.92 | 2.6 | 3.25 | 296.67 | -0.31 | |
| AstraZeneca* | AZN | 35.000 | 69.41 | 40.34 | 68.46 | 212.45 | 2.95 | 4.81 | 15.85 | 1.7 | 2.12 | 76.56 | 0.97 | |
| Biogen | BIIB | 336.000 | 278.31 | 299.2 | 261.15 | 37.8 | 20.71 | 3.73 | 15.35 | 2 | – | 319.76 | -5.69 | |
| Bristol Myers* | BMY | 63.000 | 69.31 | 57.16 | 62.06 | 130.38 | -16.3 | 2.87 | 7.9 | 2.4 | 3.67 | 81.44 | -13.75 | |
| Celgene* (BMY) | CELG | 106.000 | n/a | 108.53 | – | 77 | n/a | 4.69 | 8.7 | n/a |
*acquired by BMY
|
BMY | ||
| Gilead Sci | GILD | 79.000 | 82.97 | 61.69 | 75.88 | 94.65 | 16.42 | 3.45 | 10.47 | 2.8 | 3.95 | 89.75 | -11.61 | |
| GlaxoSmithK* | GSK | 38.000 | 35.58 | 45 | 34.47 | 70.58 | 0.64 | 1.9 | 8.75 | 2.8 | 4.06 | 39.74 | -1.91 | Haleon spinout |
| Eli Lilly | LLY | 85.000 | 343.42 | 113 | 546.43 | 518.71 | 72.53 | 17.34 | 43.33 | 1.9 | 0.83 | 552.87 | 49.36 | |
| Merck | MRK | 59.000 | 106.39 | 78 | 109.2 | 277 | 19.47 | 4.67 | 12.9 | 2 | 2.67 | 119.69 | -1.58 | |
| Pfizer | PFE | 40.8 | 36.66 | 206.96 | -24.54 | 2.63 | 11.14 | 2.4 | 4.47 | 54.93 | -28.45 | new pick | ||
| Regeneron | REGN | 367.000 | 821.67 | 310.48 | 812.4 | 89.13 | 12.63 | 6.84 | 18.02 | 2.2 | – | 837.55 | 12.6 | |
| Vertex | VRTX | 158.000 | 315.07 | 196 | 344.82 | 88.81 | 17.17 | 9.3 | 21.26 | 2.1 | – | 367 | 19.41 | |
| 3/31 | 11/19 | 8/18 | %YTD | 1 yr | 12 mo hi | |||||||||
| XBI | 76.21 | 93 | 77.53 | -6.59 | -12.76 | 92.6 | ||||||||
| IBB | 129.16 | 119.65 | 125.41 | -4.48 | -2.73 | 138.74 | ||||||||
| FBIOX | 15.63 | 20.26 | 16.02 | -1.6 | -3.49 | 17.44 | ||||||||
| PRHSX | 87.75 | 79 | 88.06 | -1.96 | -5.25 | 94.9 | ||||||||
| XLV | 129.46 | 121.11 | 133.53 | -1.71 | -0.73 | 141.77 | ||||||||
| XPH | 41.01 | 39.47 | 42.86 | 4.66 | -0.83 | 44.67 | ||||||||
| UNH | 472.59 | 252 | 498.44 | -5.99 | -8.58 | 558 | ||||||||
| QQQ | 320.93 | 201.23 | 358.13 | 34.49 | 8.76 | 387.98 | ||||||||