Update-3 ….2/14/25…Happy Valentine’s Day!... RISK ON for MOMENTUM Trades in SMID Life Science List.-Big MOVERS: ABSI, ARKG, BBIO, CRSP, DNLI,,GH, MNMD,PACB, RXRX,TEM, VCYT. We missed TEM up 29% in 5 days.
Jumped into REGN too soon down 4.57% In 5 days.
Update-2 …2/12/25….The market is down a tad at the opening but digesting the higher inflation of 0.4% vs expected 0.3%. Healthcare stocks opened strong continuing the trend over the last few days wit large caps up: ABBV, LLY, GILD, UNH. SMID caps remain in a risk-off mode until we get support from high volume ETFs like ARKG and XBI that are trying to regain momentum. EXEL was up over 6% from financial results that showed strong revenues and earnings. Biogen (BIIB) was down over 5% to a 52 week low despite a beat because of weak guidance and increased competition for its multiple sclerosis products.
2/11/25…Gilead Sciences (GILD) financial results shows strong product sales growth of 8% for 2024 and 13% QoQ in HIV and Oncology. Increases Q1 dividend by 2.6%.Stock soars to $100 AH.
Update-1 2/10/25- Vertex Earnings on 2024 revenues of $11.02 B with an increase of 12% with upbeat 2025 guidance to $11.75-$12B for 2025. Four programs in clinical development.
Gilead Sciences tomorrow.
Building a Healthcare Portfolio in the AGE of Disruption
- Momentum is gone from SMID biotech stocks but there is always a trade in the healthcare sector if you follow the market. e.g.M&A
- Core portfolio remains the large cap biopharmas: ABBV, GILD, LLY, VRTX as well as MedTech.
- Featured Trade for the week: Becton- Dickinson (BDX).
Biotech stocks are slipping fast-see the “red screen day” on Friday when few SMID stocks could catch bids. The XBI was down 1.54% for the week ,like off a cliff on Friday from a Wednesday high of $94.82. Talk about “curbing your enthusiasm” just as we were enjoying the momentum. We can blame it on the TRUMP Turmoil according to Barrons. But there was data in like the consumer sentiment which hit a 7 month low and a a whiff of inflation ,and a mixed jobs report. But our large cap picks held up with Eli Lilly (LLY) coming to the rescue with strong earnings and a ‘pill” in the pipeline to maintain te growth trajectory for the GLP-1 class of drugs for the blockbuster GLP- 1 class of drugs to treat diabetes ad obesity. Vertex Pharmaceuticals (VRTX) was bolstered by their non-opiate, non-addictive pain medication up 1.65% for the week and 16.54% YTD. Another top pick Abbvie (ABBV) was up 3.64% for the week off its $94 high and 7.26% YTD. Gliead Sciences (GILD) hit the $100 mark before falling 1.9% and Roche ADR( RHHBY) is up 14% YTD. We took a look at one of our old favs now a loser down one 24% over one year like Regeneron (REGN) looking much better so nibbled a bit. Alas not the case for Pfizer (PFE) trying to put a spin on their earnings and their pipeline but the stock fell back to the $25 + range where it has been since falling from the $30s in October, but the stock buys patience with a 6.6% dividend. So we plan to keep large cap biopharmas in our core portfolio collecting dividends while we trade the high risk small and mid caps (SMID) of biotech which had been doing well until Friday.
After the current Administration took power a mere two weeks ago there has been a lot of talk and an avalanche of media about deregulation and disruption which has not really hit healthcare yet. OK we had our brief healthcare correction from the UNH executive killing flushing out some of the issues of our “broken healthcare system”. But there have no direct attacks on HHS from the DOGE Boyz yet. lIssues have arisen like pintail of less support for R&D funding for NIH and of course existing legislation controlling drug prices. But how can ithings get worse? Well for one China is focusing on biotech R&D just as turmoil comes to NIH.
We began an algorithm project about six months ago for trading SMID stocks from a Life Science Portfolio we developed that was screened for a number of key factors such as analyst coverage, technicals, balance sheet and product portfolio. But the key parameter was MOMENTUM. Without earnings and financial metrics the SMID stocks can only climb or sink on sentiment from milestone news and M&A. So in the meantime we play it safe until we see big moves in the ARGX or XBI. But in biotech there is always a trade from a deal a or a valuation imbalance. Take Crenetics (CRNX) as an example. The stock got crushed after the JPM presentation. so we missed the short-sale based on technicals and loss of momentum
Here are some of our Top SMID Biotech Winners from the List over the past year:Adaptive Biotechnology (ADPT, CorMedix (CRMD), Catalyst Pharma (CPRX), Supernus (SUPN,) and Viacyte (VCYT).. Here are two new SMID trades to consider that we purchased recently :Protagonist Therapeutics (PTGX) up 0.54% YTD at $38.70, and Vigil Neuroscience (VIGL) at $2.65 up 56.47% YTD.
- MedTech appears to ave avoided the MACRO and tariff flak and have weathered their earnings reports recently-we are long ABT, ISRG, SYK, With the US Medical Device (IHI) flat for the week but up 9% YTD. We also believe that the Fidelty Select Medical Tecnology Fund FSMEX is good long term play in healthcare with positions in MedTech and life science companies such as above stocks as well as ThermoFisher and Danaher.
- Our long term trade for Medtech is Becton-Dicknson Co. (BDX) which we have owned for at least 10 years but have not done well trading iBDX over the past year as it is down 4% over 12 months and in fact down 4.58% over 5 years except for a few raliies and dividends of 1.75%. But now I think management has got the message and after the recent earinigs release that they would split the Company into two businesses, a Bioscience Division and Diagnostic Solutions Company. As many you know post -Covid the In Vitro Diagnostic IVD sector has been slumping so the Company believes there is better long term potential for shareholders in biosciences. The stocks has a FWD PE of 14.95, a P/C a low 3.25, So watch for the bioscience spinout and play the new stock.
As of 11a EST the market is GREEN and has ignored 0.74%.all the tit for tat tariff talk preferring to view it as a negotiating tool. The NAZDAQ s up 1.19% and the S&P 500 is up 0.74% The yield on the 10 Year Treasury is 4.47%. But a lot of uncertainty lies ahead.