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Position Your Portfolio for A Biotech Breakout in Q4
It’s hard to focus on biotech stocks right now because there are many distractions. The Fed and the rate cuts, AI and semiconductor stocks and geopolitical turmoil seemingly worse than ever. But we have had strong innovation that contributed to bullish sentiment like the obesity stocks driven by breakthrough molecules based on the GLP-1 family. Eli Lilly and Novo Nordisk products have led the stock surge. And if you have followed the sector over the past two years you know that large caps like Abbvie, Merck, Regeneron and Vertex have provided 20% annualized returns to your portfolio over the past 3 years. Now to continue these kind of impressive gains we may have to take more risk or trade more often because of the volatility implicit with SMID life science stocks. Or you can just buy a few mutual funds and let the fund manager cover what should continue to be an attractive sector through 2025. We have recommended several funds that should cover the biotech sector such as FBIOX, JFNAX, and PRHSX. And by adding MedTech funds such as FSMEX you cover most stocks in the biotech and MedTech sector.Our SMID stock picking strategy is more difficult if you are generalist without experience and not wanting to spend a lot of time reading analyst reports. Moreover tracking clinical trials in the individual product pipelines of companies that do not have predictable growth P&Ls requires a lot of knowledge. So we developed a list of promising stocks that are widely followed to have demonstrated Momentum during bull runs or product news. These companies are unique because of their platform technologies, product pipelines or business models and have been screwed fr cash positions and analyst coverage. (We eventually hope to cover at least ten of these stocks in an algorithm to track price movements and news events.)So here are several varied examples from the list that we currently hold although there are many others that we have traded In the past. But the list of companies as you can see is quite diversified from robust clinical stage portfolios to mature companies in a turnaround mode. Another example is Pacific Bioscience (PACB) down over 81% YTD, up 22.48% MTD but still tradeable on a weekly basis . (PACB: The stock traded above $50 in the bubble pandemic driven market of 2022). We want to eventually build. a portfolio of biotech stocks for the long run.Adaptive Biotechnologies (ADPT) $4.60 up 1.31% MTD, down 5.10% YTD. Market cap $685M. Adaptive Biotechnologies Corporation, a commercial-stage company, develops an immune medicine platform for the diagnosis and treatment of various diseases. The company offers immunosequencing platform which combines a suite of proprietary chemistry, computational biology, and machine learning to generate clinical immunomics data to decode the adaptive immune system. Mixed financial results. Operating at huge losses. Strong cash position and analyst recommendation.Catalyst Pharma (CPRX).$20.79 up 0.48% MTD, up 23.68% YTD , Mark cap 2.7B.Catalyst Pharmaceuticals, Inc., a commercial-stage biopharmaceutical company, focuses on developing and commercializing therapies for people with rare debilitating, chronic neuromuscular, and neurological diseases in the United States. Revenue Q2 of $122.7M a 23.2% YoY increase, strong cash position over $300M and analyst support.Denali Therapeutics (DNLI) $30.91.up 30.7% MTD up 44% YTD, Market cap $4.43B. Denali Therapeutics Inc., a biopharmaceutical company, develops a portfolio of product candidates engineered to cross the blood-brain barrier for neurodegenerative diseases and lysosomal storage diseases in the United States. Has a broad portfolio of clinical stage product candidates for neurodegenerative diseases. Filing for first produce expected in 2024 for HunterSyndrome.Net losses about $100 M per quarter cash position is about $1.5B.Natera, Inc. (NTRA) $127.78, up 7.88% MTD, $103.78 % YTD. Market cap $15.8B. Natera, Inc., a diagnostics company, develops and commercializes molecular testing services worldwide. Its products include Panorama, a non-invasive prenatal test that screens for chromosomal abnormalities of a fetus, as well as in twin pregnancies; Horizon carrier screening test for individuals and couples determine if they are carriers of genetic variations that cause certain genetic conditions etc. Explosive revenue growth of 58% + $413M in Q2 with positive cash flow of $3.3m, losses were reduced to $43.9M from $112M previous year.$887M in cash.Quidel-Ortho (QDEL) New. $45.40, 3.75% MTD $45,40,YTD, down $8.40 YTD,MKT cap $3.05B. QuidelOrtho Corporation provides diagnostic testing solutions. The company operates through Labs, Transfusion Medicine, Point-of-Care, and Molecular Diagnostics business units. The Labs business unit provides clinical chemistry laboratory instruments and tests that measure target chemicals in bodily fluids for the evaluation of health and the clinical management of patients; immunoassay laboratory instruments and tests, which measure proteins as they act as antigens in the spread of disease, antibodies in the immune response spurred by disease, or markers of proper organ function and health; testing products to detect and monitor disease progression across a spectrum of therapeutic areas; and specialized diagnostic solutions. This Company was merged from the spinout of a JNJ company, ORTO Diagnostic Systems during the pandemic and the stock took a big hit at the time.o So the Company is in a restructuring mode right now with cost savings of $100M initiated.Q@ revenues were $634M, YTD revenues were $1.4B. So the stock may take a while to recover as a turnaround begins.Tempest AI (TEM) New. $54.43.down 7.29% MTD,up 35.23% YTD. Market cap $8.4B, Tempus AI, Inc operates as a healthcare technology company. It engages in providing next generation sequencing diagnostics, polymerase chain reaction profiling, molecular genotyping, and other anatomic and molecular pathology testing to healthcare providers, pharmaceutical companies, biotechnology companies, researchers, and other third parties. The company also offers Insights, a license library of linked clinical, molecular, and imaging de-identified data, as well as a suite of analytical services to analytic and cloud-and-compute tools to pharmaceutical and biotechnology companies; and Trials that provides clinical trial matching services to pharmaceutical companies.NOTE: For trading not a buy list and data as of 8/17/24. Sources Yahoo and FinVIZ.
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