4 Biotech Bets to Make as Healthcare Fears Become Overblown
Trading on Tuesday got off to a rocky start due to growing concerns that the conflict in Ukraine is escalating, with U.S.-supplied missiles being used to hit targets far away from the border for the first time and Russia modifying their nuclear doctrine. However, by the market close, most of the major indexes ended in the black. The NASDAQ led the rebound with just over a 1% rise while small caps showed some life with the Russell 2000 gaining .8%.
I used the early decline in equities on Tuesday to add to some of my biotech holdings via covered-call orders. As I noted in my column on Monday, the fears about the new administration when it comes to potential changes to healthcare policy and leadership at the FDA seem overdone. I started by establishing a position in the iShares Biotechnology ETF (IBB) , which had fallen just over 10% from highs earlier this month. This well-diversified biotech ETF is an easy way to make a macro bet that the sector has gotten oversold without thinking too hard about it.
I also added to my holdings in Mirum Pharmaceuticals (MIRM) . The sharp pullback in the sector swamped what was a very good third quarter that the company reported last week. Quarterly losses came in significantly under expectations as growth in Livmarli helped net product sales to rise nearly 90% on a year-over-year basis. Management also raised forward guidance. The results got Evercore ISI to initiate the shares as a new Buy and this biopharma is marching nicely towards profitability and has a solid balance sheet to boot.
I had to add some shares to Dynavax Technologies (DVAX) after vaccine plays took a recent hit due to fears of putting a long-time vaccine skeptic in charge of Health and Human Services. Those concerns seem more than overblown when it comes to Dynavax. Its "best of breed" hepatitis B vaccine Heplisav-B has been on the market for several years now. It is clearly superior to the previous standard of care with 95% efficacy and much higher compliance rates. The vaccine continues to gain market share, which clocked in a 44% in the third quarter in what is a growing market. The company also has a huge cash hoard on its balance sheet and recently announced a substantial stock buyback authorization to put some of that excess cash to work.
Finally, I added a tad to my stake in Rocket Pharmaceuticals (RCKT) after the market has taken out clinical stage biotech stocks to the woodshed and treated them like rented mules in some recent trading sessions. The company’s first gene therapy should be approved in the coming months. Rocket Pharmaceuticals also released encouraging Phase 1 trial results for its gene therapy to treat the rare affliction Danon disease, which could eventually turn out to be a paradigm shifter. The company has very strong support in the analyst firm community where the median price target on the shares is in the high $40s. The equity currently trades just above $13.00 after the recent sell-off.
At the time of publication, Jensen was long IBB, MIRM, DVAX and RCKT.