Update-2 3/2  Better tape action today. Big winners: CRSP, CYRX, NTLA, NVTA, QDEL, PACB,SUPN. Review on Weekend. Cowen conference next week March 8 should help life science sector.

Update-1 2/28 Risk Off when FED rules with rates rising. Equities fighting higher yields.Trading range S&P 500 3750-4100.We favor large cap biopharma but looking for good trades in small caps as tracked by XBI. Biotechs looking weak as IBB falters to $127. No sells yet in portfolio below with good tape action. Drug pricing legislation looming as backdrop. Pfizer /Seagen deal talk sparks interest in sector. Need help from healthcare sector as defensive play with XLV at $127.


SMID Life Science Update: Momentum Run is Over

  • The January Effect for small caps ended in early February.
  • Market malaise building from FEDspeak and inflation data.
  • Biotechs took a big hit last week: IBB and XBI.

The ebullience for stocks in 2023 appears to be over as fresh economic data shows a strong economy with persistent inflation.  The PCE or personal consumption expenditures index rose 5.4% in January from a year earlier. US consumer spending rose 1.8% in January from the prior month as American are spending more in a surprisingly hot economy. High inflation in a robust economy means FED is less likely to ease rate increases. The reaction  to the data on Friday was swift and most indices took a big hit in a choppy market that was digesting big January gains. Very few sectors did well over the past week except energy which was up 0.17% and Nat Gas roaring ahead off the bottom  7.74 %. But the XLE broke the upward channel in early February at the $86 level. The XLV was less volatile  down only 1.77% for the week as you might expect.

Small caps in general were down about the same as growth stocks and the general market. Going forward we need to see how small caps perform as rates are rising. the IJR was down 2.6% last week and the IWM was down 2.64%.But the ETFs that track our small and mid-cap focus stocks were hit harder like the bellwether equal weight XBI was down 3.89%. Surprisingly the less volatile IBB was down 4.31%.

Here are some of the notable results from this SMID portfolio:

  1. The worse performers were the mid-cap biotechs driven by milestones like the gene therapy group. CRSP was down about 5% for the week and over 8% since we made the trade. But we added NTLA to add a comparable gene therapy play.
  2. Momentum driven stocks like PACB took another hit from January and 2022  highs around $12. The stock was $34 in the 2021 bull market for biotech. Similar  for VCYT down 6.49% for the week.
  3. Three of our HOLD picks EVH, HOLX and QDEL were supported by good earnings but only EVH was up for the week.
  4. One of our worse trades Cryoport (CYRX) was up 5.21% after releasing earnings and record revenue of $237M up 27% YoY. The Company has $523M in cash. Consider adding CYRX to your portfolio.
  5. Our best trades since we began publishing this portfolio are: VCYT, EVH and HOLX.
  6. Invitae a former high flier is still struggling to find a deal or any traction at all.

We said about two weeks ago that traders should take profits and this proved prescient. Now with overall downward pressure from MACRO you may need to sell losers or wait for the next rally. We traded most of the these positions in Q4 2022 near the bottom. We remain overweight large cap biopharma: ABBV, MRK,REGN,VRTX.

Long all of these stocks. Added to QDEL.

P 1/20/23 % Perf 2/4/23 2/25/23
Company Ticker $ P % week % Perf P % week % Perf
CRSPR Therap CRSP 49.61 -25 55.27 4.72 -15 48.02 -4.99 -8.15 see NTLA
Cryoport CYRX 21.75 -42.34 25.24 9.41 -33 22.41 5.21 -40.59
Evolent Health EVH 30.83 13.74 31.96 2.21 17.91 34.91 5.21 28.8 Hold
Geron GERN 3.19 9.24 3.22 3.59 10.27 2.7 -0.74 -7.54
Hologic HOLX 79.66 22.41 84.68 2.28 30.14 80.1 -3.05 23.09 Hold
Pacific Biosci PACB 11.29 55.68 11.58 -1.7 59.67 8.77 -18.8 20.93
Quidel/Ortho QDEL 88.13 -11.56 89.7 3.93 -9.98 87.51 -3.5 8.62 *added
Supernus SUPN 40.3 12.3 41.61 2.29 15.95 38 -1.68 -5.89
Veracyte VCYT 24.89 39.43 26.67 2.46 49.41 23.78 -6.49 33.22
SPDR Biotech XBI 86.99 14.75 90.39 1.12 19.24 81.47 -3.89 7.47
Invitae NVTA 2.555 2.62 3.15 0.67 1/95 -11.36 -16.38
iShares CoreS&P 600 IJR 102.19 -2.6
iShares Russell IWM 187.51 -2.64
iShares BIO IBB 126.41 -4.31

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