Update-2 …7/11/25…Momentum eases on tariiff threat with Canada. President Trump said tariffs on Canadian goods will go up to 35% next month. The market was at new highs on Thursday and this apparently gave Trump more leeway to launch stronger messages to our North American “trade partners”. IT and chip stocks soared again but healthcare stocks hardly defensive anymore (XLV) down 1.5%,took a hit with biopharmas down across the screen. Among the 2% +losers were : BMY,GILD, NVS and VRTX. Others were own in the 1% range. MEDTECH also took a hit as the IHI U.S. Medical Device ETF was down 1.71% with ABT down 1.18%, ISRG down 2.66% and SYK down 1.35%. But MDT and TMO were up. Over the next 2-3 weeks of earnings reports, we should get a harsher view of the tariiff impact not only for goods like medical equipment but services as well.
The worse sectors QTD are Energy and Healthcare the best are Technology, Industrials and Comm Services.
We remain bullish on small cap biotech dependent on momentum created by deals and clinical milestones. Today the ARKG was down 3.29% to $25.26 and the XBI down 1.54% at $87.
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Update-1 7/9/25 11:30a EDT. Momentum rally in biotechs triggered by Merck acquisition of Verona for $10B, focused on cardio-pulmonary and first in class COPD maintenance treatment. Green screen potential today with other big movers we follow on our Trading List: BBIO, COGT, EYPT,RNA, RYTM etc. Added to XNCR at $8.50 trading at 1.34X cash with positive analyst coverage? XBI and ARKG both up over 2%.
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Small Cap (SMID) Biotechs Are Still A Huge Trading and Investment Opportunity.
- Uncertainty from tariffs and the TRUMP Administration policies toward NIH and basic life research has dampened investors appetite for biotech.
- Our momentum model prescreens stocks for a trading list.
- Our SMID cap biotech trading list has produced huge returns despite a weak biotech sector.
Sometime it’s better to write an article on a “risk-off” down day because it makes you more objective. But in 2025 it’s rare to get a big up day in the biotech sector so we temper our enthusiasm while maintaining that SMID cap biotechs can be good for trading and longer term investing.
Small cap biotechs have huge potential and the timing is right to develop a portfolio. If you have been following our articles you’ll understand our momentum model for trading this difficult sector of market. It is difficult even for the most experienced trader because most of the companies In the SMID cap range have minimal revenues and are not profitable. And you get little help from small and mid-cap general funds like the IJR or various Russell Familyl of FUNDS like the IWM.which can’t get traction and was down about 1.5% today. So how do we get started with a position when life science stocks are eclipsed by Technology stocks in AI, CLOUD computing , Internet Security and new large cap favorites trending in the market like the Industrials and Aerospace/Defense.
Over the past three months the leading sectors of the market have been: Technology, Comm Services and Industrials while Healthcare has lagged, flat since the early April takeoff and still down 2.61% YTD. Large cap biotechs have kept pace with the markets as we have recently covered yet most of the sector has lagged with the IBB down 3.77% YTD.
Small Cap Biotech Investing-Step ONE -You have to be Interested in the SCIENCE
So we start by looking at major trends such as we did recently with Precision Oncology from the ASCO Meeting. From there one can review a basket of trades from our prescreened trading list. Our list of potential trades was developed by prescreening readily available public information such as : Cash position, Pipeline of Products, Platform technology, Analyst coverage and Technicals as tracked by momentum or RSI. Eventually an algorithm does the prescreen.
Here are several areas of the SMID Cap biotech market that have been profitable in 2024-25 despite a lackluster market as defined by large mutual funds like FBIOX down 5% over one year, or JNGLX down 13.73% over one year. We assess market momentum by looking at widely traded ETFs like ARKG, XBI, IBB and PPH. Currently I would rank the sector as Neutral just off the short term lows and highs over the past two years in a lackluster market. But the lifescience market is diverse so that a Company that has technology or an even a clinical stage product with strong data can be a profitable trade. And the innovative technologies have created over the past 3 years such as monoclonal and bispecific antibodies, genomics and now even AI can really excite investors .
What we try to do with our Theme ” Timely Market Intelligence”, is to follow basic trends like M&A, Licensing, breakthrough product/clinical news and financial underpinnings to provide investors with stock picks and windows of opportunity. Here is an overview of important bullish calls lately keeping in mind that you should start with a basic portfolio of 2-3 large cap biopharma stocks and either a fund or ETF as a core holding.
MOLECULAR DIAGNOSTICS: Precision Oncology with MRDs
Innovation has impacted cancer diagnosis and therapy and data was presented at ASCO are three advanced molecular diagnostic companies utilizing DNA analysis and AI : Adaptive Biotechnologies (ADPT) up 96.83% YTD for MRD assessment I Lymphoid cancers. Guardant Health (GH)up 66% YTD presenting ctDNA data (“liquid biopsy”) for colon cancer, and Natera (NTRA) don 2.19% YTD, with their SIgnatera cell free DNA assays across 10 different cancer types. We spotted this MRD trend in 2024 and these stocks have been huge winners for us particularly ADPT and GH.
GREAT TRADES and Focus Stocks
On occasion we get tips from unlikely sources and one good example is CorMedix (CRMD) up 177% in 1 yr. We knew very little about kidney disease except that it was a big market and expensive to treat. CorMedix has unique antimicrobial catheter product that mitigates infection in the process for preventing kidney failure. A similar and easier trade was Vigil Neuroscience (VIGL) .Recently I read a report from an analyst at WEDBUSH, because I was primed for trades In neurodegenerative disease. VIGN was a 3X return within 2 mos as the Company was acquired by Sanofi.
We have been bullish on Eyepoint Pharmaceuticals (EYPT), a clinical stage Company focused on eye diseases including WET age related macular degeneration. The Company has a Market cap of $653M and a Price/ cash position of 2.3 and an RSI of 59. Also we recently recommended Cogent Biosciences (COGT) which is up 28% today and 43% over I month. Cogent develops precision therapies for genetically defined diseases; The Company has a market cap of a little over one Billion and has a PRICE/ Cash of 4.33 and an RSI through the roof over1 M.
Another recent focused trade is Rhythm Pharmaceuticals (RYTM), focused on rare neuroendocrine diseases, up 18.6% YTD, 57% one year, Market Cap $4.22B,RSI 59.
Caution when a stock meets a milestone a clinical stage Company may chose to issue new stock to raise funds R&D.
FOCUS Stocks for Summer Rally from our Trading LIST
We last published our trading LIST in MAY and updated it through our articles. We frequently delete stocks from the LIST \ without notice and do not inform readers of sells or downgrades. And the list may not define the stock as a BUY.
- The following stocks are still recommended but we have either sold and took profits or found better trades: BBIO, CRNX,DNLI, EXEL, NTRA, PTGX,, TEM, TWST, VCEL.
- We hold the following stocks as losses: PACB, QDEL,RNA, ILMN, SDGR.VCYT.
- Our best performers over one year; ADPT,CRMD, GH, VIGL
- We hold several other stocks: MRUS, SLDB,SUPN etc.
Summary our model works but we lack the funding and resources to implement for maximum gains. Moreover it represents a small allocation to our healthcare portfolio which includes MEDTECH and Large CAP BIOPHARMA.