Buying Dips in 2 Healthcare Names

Despite increasing uncertainty both around the global economy and what appears to be a deteriorating jobs market, markets continue to advance to all-time highs. 

Last week, the NASDAQ led the advance, posting nearly a 4% gain on the week. This is not surprising given almost all the earnings growth within the S&P 500 is coming from the Magnificent Seven right now. On a brighter note, a cut to the federal funds rate at the FOMC meeting in mid-September is all but a certainty now. There is also some hope for peace in Ukraine being achieved after three-and-a-half years of bloody conflict.

I had a plethora of the small- and mid-cap biotech/biopharma companies within my portfolio report second quarter results last week. The majority beat expectations, raised guidance and had their stocks sprint forward. More on some of those names in my Wednesday column. 

On Monday, I want to talk about two names that reported solid results, but whose stocks moved down last week. I took this as another buying opportunity and increased my exposure via covered call orders on the dips.

Let’s start with ADMA Biologics ADMA. The stock quickly fell 20% in early trading on Thursday morning (an investor should love algorithmic trading programs), before quickly cutting those losses in half by the close of trading. The trigger for the decline was second quarter results that came out just after the bell on Wednesday. The company only "met" top- and bottom-line expectations.

However, there is more to ADMA’s performance in the second quarter than just the headlines. While headline revenue growth came in a tad under 14%, the prior period a year ago contained a one-time non-recurring $12.6 million boost. Equating for that, sales were up 29% from 2Q2024. Adjusted net income was up 85%. In addition, the FDA recently approved a manufacturing process improvement that should enhance yields for its two plasma derived products by 20%. This should enable ADMA Biologics to continue to increase margins and cash flow at more than a solid clip in the quarters ahead.

Then we have Dynavax Technologies DVAX. The stock has done little over the previous few years even as sales and profits have grown at a nice clip at this vaccine concern. The equity has been a wonderful "rinse, wash and repeat" covered call trade for my portfolio in recent years, however.

I added some shares to my stake in this small cap after the shares dipped some 6% following Q2 numbers. Dynavax delivered a nice bottom-line beat and revenues rose just over 29% from the same period a year ago to just over $95 million for the quarter. That was nearly $9 million over the consensus. Management also tightened its FY2025 sales guidance.

Leadership also noted its flagship product, a "best-of-breed" hepatitis B vaccine known as Heplisav-B, continues to take market share. It now has 45% of the market, up from 42% a year ago. Management noted it expects Heplisav-B to garner at least 60% of a market that should be valued at north of $900 million in the U.S. by 2030. Dynavax completed a $200 million stock buyback authorization in the second quarter. Given the company’s roughly $400 million in net cash on the balance sheet, I expect another significant authorization to be announced soon. Given that, the shares are too cheap with an approximate $1.2 billion market cap.

At the time of publication, Jensen was long ADMA and DVAX.