Biotech Is Coming Back, Can The Run Last? -

Biotech Is Coming Back, Can The Run Last?

Dec 11, 2023Jeremy ParkinsonFinance0

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Biotech is Coming Back Despite Government Forces

M&A and Licensing Deals Are Driving Biotech Stocks Higher.

Small Cap Momentum Continues with wild day-to day volatility.

Innovation Theme Catching On With blockbuster obesity/diabetes drugs and vaccines.

Biotech stocks are coming back against a backdrop of negative policy actions from the Biden Administration to lower drug prices. First, there was the Inflation Reduction Act which targeted 10 prescription drugs for which Medicare can negotiate drug prices directly with manufacturers. Now you have challenges to the historic Bayh-Dole Act where Biden asserts power to seize drug patents in cases where prices are deemed too high. Despite this onslaught from government biotech stocks have rallied over the past six weeks from the early November bottom with one brief sell-off. The IBB is up about 20% from a November 1 low of $13 to $125 level today but still down about 5% YTD. The equal weight smaller cap XBI is up about 20% off its October lows but individual small cap stocks have much greater volatility. The XBI is still down about 4% YTD and momentum has slowed since the stock hit $80.The rally can be attributed to lower interest rates and seasonal factors from the end of Q4 through January. But recently some major biopharmaceutical deals have supported the rally. The Abbvie acquisition of Immunogen and Cerevel amplified this trend whereby Abbvie strengthened its portfolio in immuno/oncology and neuroscience. Still awaiting FTC clearance is Pfizer’s acquisition of Seagen for its Antibody Drug Conjugate technology (ADC).
In the meantime our top large cap picks are holding up nicely: ABBV MRK REGN VRTX but LLY was off 2.7% today after a study showed that weight gains could come back after you stopped taking the drug.Biogen (BIIB) was up 2.5% today on recent upgrades for their Alzheimer’s drug prospects for 2024.We will be tracking our MOMENTUM SMID picks below this week. We did notice an emerging rally in genomics stocks like Twist Bioscience (TWST) and 10X Genomics (TXG) and bought positions early last week. We also bought a small position in Illumina a great Company with a lot of issues from their GRAIL deal.Cognition Therapeutics (CGTX) is up 19% as a Neuroscience play with potential biomarkers.Comments:

Day-to day volatility is huge.

Device, diagnostics and MedTech companies are lagging particularly those with revenue. HOLX, QDEL.

The XBI still tracks momentum of speculative SMID biotechs. ARKG as well.

Major small cap ETFs are providing some support: IWM, IJR.

4-6 week momentum trends remain strong.

M&A impact on biotech is picking up.

SMID Cap Life Science Trades

P 1/20/23 % Perf 2/4/23 12/10/23 Perf Company Ticker $ P % week P 4 wks YTD % REC Acumen Therap ABOS 5.29 2.77 35.78 48.7 1.5 Caribou Biosci CRBU NEW 4.18 20.55 5.81 28.26 -7.48 1.8 CRSPR Therap CRSP 49.61 -25 55.27 4.72 64.54 17.98 58.77 2.3 Cryoport CYRX 21.75 -42.34 25.24 9.41 15.23 48.3 -12.22 2.3 Evolent Health EVH 30.83 13.74 31.96 2.21 28.1 0.72 – 1.7 Geron GERN 3.19 9.24 3.22 3.59 2.07 11.88 -14.46 1.5 Hologic HOLX 79.66 22.41 84.68 2.28 68.37 0.15 -8.61 2.4 Immatics IMTX NEW 9.3 9.25 -3.24 6.2 1.5 Pacific Biosci PACB 11.29 55.68 11.58 -1.7 8.59 28.4 5 2.2 Quidel/Ortho QDEL 88.13 -11.56 89.7 3.93 66.02 9.5 -22.94 2 Supernus SUPN 40.3 12.3 41.61 2.29 26.91 14.41 -24.56 2 Twist Biosci TWST NEW 12/2 18 26.98 55.06 13.31 2.2 10x Genomics TXG NEW 12/2 47.84 48.84 28.76 34.03 2.3 Vericel VCEL 31 33.86 -4 28.55 1.5 Veracyte VCYT 24.89 39.43 26.67 2.46 25.62 10.67 2.1 SPDR Biotech XBI 86.99 14.75 90.39 1.12 79.32 14.24 -4.43 n/a wildcard ArkGenomics ARKG NEW 35.28 28.6 14.16 1.31 12/10/23 5 yr iShares CoreS&P IJR 100.35 9.41 6.03 34.73 iShares Russell IWM 186.8 9.97 7.13 29.7 iShares BIO IBB 123.88 4.56 -5.64 19.53 NASDAQ-100 QQQ 392.17 5.16 47.28 143 HealthcareSPDR XLV 132 3.04 -2.78 45.84 T.RowePrice PRHSX 88.02 3.67 -2 16.29 iShares MED Dev IHI 50.65 9.14 (3.650 48.35

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