I'm Buying the Dip in These Biotech Stocks
These small-cap names are attractive over the long run and the options around their equities have decent liquidity.
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Considering the S&P 500 was coming off its worst weekly performance since March 2023, it's not that surprising that stocks have rebounded a bit so far this week. Especially given solid first-quarter numbers from the likes of General Motors GM and Novartis NVS. The yield on the 10-Year Treasury has also fallen slightly on the week.
I am still quite cautious on the market as I continue to believe it doesn’t fully reflect the higher-for-longer narrative and those impacts on equities. That said, I did some bargain shopping late last week and early this week — within the biotech sector and almost entirely via covered call orders.
Here are two names I added exposure to in recent trading sessions. Both companies I like over the long run and the options around their equities have decent liquidity as well.
One name I continue to do some bottom fishing around is gene-editing concern Intellia Therapeutics NTLA. Investors have become somewhat frustrated with the pace of development from CRISPR gene-editing technology. This is understandable and common in the space. StemCell and CAR-T therapies also took much longer to develop when they first emerged on the horizon.
Intellia Therapeutics, however, continues to move forward advancing its pipeline. The company is in the process of kicking off a pivotal trial to treat one subset of transthyretin (ATTR) amyloidosis.
NTLA-2001 has the potential to have a one-time dose with curative potential instead of the ongoing therapies that currently exist. Another study targeting a different subset of this rare disease also hopes to kick off by the end of the year. Intellia is partnered with Regeneron Pharmaceuticals REGN in this effort.
The company is also working on advancing NTLA-2002, which is a wholly owned therapy. This effort could hit the market much sooner than NTLA-2001, possibly filing a marketing application by 2026.
NTLA-2002 is targeting the rare genetic disorder Type I or Type II Hereditary Angioedema [HAE]. The Phase 1 portion of a Phase 1/2 study showed exceptional results albeit across a small population of subjects. Intellia is looking to kick off a pivotal study for this rare disease by the end of this year.
Intelllia ended 2023 with some $1 billion in cash and marketable securities on its balance sheet, which should fund all development well into 2026. The stock is down 30% in 2024 as biotech has gone out of fashion over the past couple of months.
ADMA Biologics ADMA is a more traditional value play. The stock dipped briefly below six bucks a share last week where I added some shares to my core position in this specialty manufacturer of plasma-derived biologics.
ADMA has a couple of FDA-approved products on the market and has now completely built out its gathering network with the opening of its tenth plasma collection facility. Free cash flow and earnings should expand significantly in coming years and the company should deliver 30% revenue growth in 2024 after management boosted guidance after posting fourth-quarter results in February.
I try to add to ADMA every time the market provides a 10% "hiccup" and lower entry point.
At the time of publication, Jensen was long ADMA and NTLA.
