I've Got My Finger on the Trigger for These Two Biopharma Stocks

Last week saw the Nasdaq advance an additional 4% as the S&P 500 and Russell 2000 climbed roughly 2%. It was the same bifurcated backdrop that has driven the gains in the market over the past several weeks. Despite continued hopes for some sort of agreement soon around ending the war on Iran, the Strait of Hormuz remains effectively closed. The damage from much higher energy and commodity prices continues to accumulate across the global economy.

Yet, AI-related technology names like DataDog, Inc. (DDOG) and Advanced Micro Devices, Inc. (AMD) continue to post robust first-quarter numbers and guidance, powering rallies in their stocks. SpaceXAI inked a massive deal with Anthropic last week to provide the latter access to SpaceXAI’s huge Colossus 1 data center.

Outside this niche of the market, first-quarter results have generally been above expectations -- but the numbers included one a month affected by the closure of the Strait of Hormuz. A flood of biopharma names reported last week, too, so today I will highlight two names I own in the sector. Both beat expectations and are reasonably valued. I will add to these stakes within my portfolio via covered-call orders on any 10% decline in these equities, during the next market pullback. Providing the indexes ever fall again.

Let’s start with Collegium Pharmaceuticals (COLL) . The pain-management focused biopharma name posted first-quarter results on Thursday. The company delivered a big bottom-line beat on better-than-expected revenue growth of 9%. Collegium announced a significant acquisition in the back half of March that will strategically build out its product portfolio and offset projected sales declines in other compounds. Collegium is not a growth name, but at five-times forward earnings, it is a significant value play and free cash flow story.

Next is mid-cap oncology name Exelixis (EXEL) . Exelixis has been one of the most consistent "rinse, wash, and repeat" covered-call trades for years now. Every year there are one or two buyable dips in the shares and the liquidity in the options against the equity is solid as well. Exelixis delivered a top and bottom-line beat with its Q1 numbers that were announced on Wednesday.

Exelixis posted 10% sales growth for the quarter and its franchise drug Cabometyx continues to take market share. The company is working on Cabometyx's eventual TKI (tyrosine kinase inhibitor) upgrade in the form of Zanzalintinib, which will be known by the brand name Zanza. The first new drug application around this compound looks heading to approval at the end of this year. Exelixis has a solid balance sheet and has an approximate $12 billion market capitalization. The company is projected to see earnings growth in the high teens annually on sales growth in the low teens. Given that, the stock is not too expensive at just over 15-times forward earnings. Finally, Exelixis is buying back a prodigious amount of its own stock. It repurchased $430 million worth of shares in the first quarter and just added another $750 million to its stock buyback authorization.

At the time of publication, Jensen was long COLL, EXEL