Update-2 3/24..12;15p   ..Biopharma and healthcare stocks rally. Update over weekend.


Update-1 3/22…Away from FEDspeak”. We believe that sm aller cap life science stocks with good business models can outperform amidst the MACRO turmoil. While we favor large cap biopharma for core positions we have added to our portfolio the following stocks over the past week.We will update our small cap portfolio picks over the weekend. The XBI is trying to hold the July ’22 bottom at $75.

  • Hologic (HOLX) $79.78: solid technical uptrend with good fundamentals P/FCF of 11.35, PS 4.48.
  • Quidel/Ortho (QDEL $87.07:  leading player in infectious disease diagnostics with FWD PE of 14.68, P/FCF of 7.83. Strong management team.
  • ImmunoPrecise Antibodies (IPA) $3.11: microcap with double play potential for this platform technology Company for CRO services revenue and therapeutic antibody discovery potential.


Biotech Stocks Performance in a Turbulent Week

  • Biotech stocks held up better than expected but cash is king so smaller caps are vulnerable.
  • Healthcare stocks have been in a downtrend since the mid-December peak, XLV down 7.35% YTD.
  • Tech behemoths took the lead last week because of balance sheet strength and rotation,QQQ is up 14.68% YTD.

The collapse of Silicon Valley Bank may create short term financing issues for Small and Mid cap biotech sector but many stocks recovered by the end of the week. The volatility is not yet over because the market sentiment has been damaged by the regional banking crisis and we are now on a recession watch, a concern for earnings later in 2023. Many of these smaller innovative biotech and healthcare companies should be more defensively positioned in the economy. Assuming smaller caps don’t need to raise capital in the near term they would be less impacted by a regional banking crisis and a slowing economy. But we need to get through another FED week and the regional banking liquidity crunch.

NASDAQ Stocks Lead the Way Out of Uncertainty-Industrials and Energy Lags

It was a volatile week as a result of near zero % interest rates last year climbing to the 5% level. Fed funds futures pricing this week fell from a probability of the benchmark range from 5.25% -6% to between 2.75%–3.25%. The bellwether and volatile inflation bellwether two year treasury yield(US2Y) dropped from 4.24% to a current 3.804%. We can’t cover all the ramifications of the banking crisis with small cap biotech stocks except to report trends on a week by week basis. Clearly the rapid rise in interest rates created havoc that was not anticipated by bankers and the FED. Cash is king with the large caps in the NASDAQ-100 (QQQ) up over 14% YTD. Gold was up 5.79% and silver up 9.7%. Even the consumer discretionary sector was up 2.35%. But smaller cap stocks sagged with the Russell-2000 (IWM) down 2.63% and the S&P Small Cap 600 (IJR) down 3.28%. No doubt many biotech stocks are in these indices so we have to rely on stock picking or the more concentrated IBB and XBI to see how life science stocks are affected by this banking crisis.

Our top large cap biopharma picks held firm for the week: ABBV, BMY, REGN, but MRK took a hit presumably on a disappointing lung cancer study as well as valuation.  VRTX is off its peak of $321 in January to $295 but remains a strong hold. With healthcare currently lagging and tech stocks  leading we may be .in for more rotation. Pfizer a value play deployed $43 B of its cash to bolster its cancer portfolio with Seagen. up 15%

Biotech performed better than expected in a tough week so we expect the sector is not correlated to the regional banking problems. The uptrend from October remains intact. But we are off the 2023 February highs and need to hold here with the XBI at $75.

Here is brief summary of the SMID Portfolio Performance during the week 3/13-3/17:

  1. The bellwether equal weighted XBI was down only 1%for the week but down 7.83% YTD. We sold the downward momentum at $80 YTD; but we expect  to get back in because it’s a good trading vehicle.
  2. Leaders % for the week: Veracyte (VYCT) 6.35, CRSPR Therapeutics (CRSP) 5.83, Quidel/Ortho (QDEL) 2.13.
  3. Laggards % YTD are: VCYT 5.48,  SUPN 2.07,  QDEL 0.75.
  4. Invitae (NVTA) was designated as a “wild card” more of a curiosity because of its spectacular fall from high of $50 in DEC 2021 to its current price of $1.31. This medical genetic testing Company is trading under its cash value of $2.09 but has no enterprise value?
  5. The % Performance last column refers to our return from trades in 2022.

As we mentioned in an earlier post traders would have done much better than  investors if one sold in early February.

***We will be adding additional small cap picks in the coming weeks.

SMID Portfolio: long all of these stocks except XBI.

P 1/20/23 % Perf 2/4/23 3/18/23
Company Ticker $ P % week % Perf P % week YTD % % Perf
CRSPR Therap CRSP 49.61 -25 55.27 4.72 -15 45.74 5.83 6.32 -12.51
Cryoport CYRX 21.75 -42.34 25.24 9.41 -33 21.61 -18.24 12.52 -33.97
Evolent Health EVH 30.83 13.74 31.96 2.21 17.91 30.81 -0.55 9.72 13.67
Geron GERN 3.19 9.24 3.22 3.59 10.27 2.53 -1.56 4.55 -13.36
Hologic HOLX 79.66 22.41 84.68 2.28 30.14 77.07 -0.79 3.02 18.43
Pacific Biosci PACB 11.29 55.68 11.58 -1.7 59.67 8.3 0 1.47 6.5
Quidel/Ortho QDEL 88.13 -11.56 89.7 3.93 -9.98 85.03 2.13 -0.75 -11.21 added
Supernus SUPN 40.3 12.3 41.61 2.29 15.95 34.93 -0.11 -2.07 -2.67
Veracyte VCYT 24.89 39.43 26.67 2.46 49.41 22.43 6.35 -5.48 14.78
SPDR Biotech XBI 86.99 14.75 90.39 1.12 19.24 76.5 1.1 -7.83 4 sold 80
Invitae NVTA 2.555 2.62 3.15 0.67 1.31 -7.09 -29.57 -16.38
iShares CoreS&P IJR 93 -3.3 -1.73
iShares Russell IWM 171.23 -2.81 -1.8
iShares BIO IBB 124.5 2.07 5.17
NASDAQ-100 QQQ 305.36 5.83 14.68
Healthcare SPDR XLV 125.86 1.38 -7.35



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