IBB - Stealth Bull Market Unfolding

The iShares Nasdaq Biotechnology ETF (IBB) which serves as a proxy for the biotechnology cohort has finally broken out to a 52-week of $122 against its 52-week low of $100 in May. This 20%-plus appreciation over the summer has largely gone unnoticed while some individual companies have soared even higher over this same period. The biotechnology cohort has been decimated over the past 2-plus years over the drug pricing debate while serving as a political punching bag. To be fair, the entire pharmaceutical supply chain became a victim of harsh political rhetoric as share prices fell across all companies involved in this space in any capacity. The biotechnology cohort has been largely ignored in this massive bull market and appears relatively cheap in comparison to other sectors. As the confluence of abating political threats, drug pricing certainty, merger and acquisition activity and continuity of the current health care backdrop, this cohort has witnessed a stealth bull market. This uptrend is likely to have legs as valuations remain compelling and many names have become value stocks.

Furthermore, as the raging bull market continues into frothy territory, downside risks continue to mount. Bank of America is predicting an end to the current bull market run and in less certain times pharma companies will benefit. Individual names within the sector have demonstrated incredible strength as of recent such as Regeneron (REGN), Bristol Meyers (BMY), Allergan (AGN), Celgene (CELG), Johnson & Johnson (JNJ) and Amgen (AMGN).

Challenging 2016, Recovering 2017 and IBB’s Resurgence in 2018

After a banner year in 2015 for the biotech ETF, the cohort sold off in a dramatic fashion falling from $138 to $89 or a 37% decline. The healthcare sector had been faced with an uncertain and volatile political backdrop. As President Trump and other political pundits vowed to bring down drug prices and increase scrutiny over the sector, IBB found its footing and set a floor near the $89 level. The ~$90 level was tested a handful of times in 2016, and it was evident that many of these political threats were being priced-in after its sharp and sustained sell-off. This sharp decline and subsequent floor coincided with heated political rhetoric aimed at the collective cohort of healthcare and more specifically biotech companies. I strongly felt that these events were extraneous and would eventually subside without any significant impact on the underlying stocks within IBB. I felt this politically induced sell-off presented a great buying opportunity considering the ~40% decline and extraneous pressures. I had written about such opportunities throughout 2016 during the market sell-off and the Brexit, respectively (Figure 1). I felt that these were great entry points for any long-term investor that desired exposure to the biotechnology sector. Ostensibly, many of these stocks were trading at multiyear low P/E ratios and as a cohort (gauged via the IBB proxy) looked to be less sensitive to tweets/threats as IBB continued to test the ~$90 barrier throughout 2016. 2017 saw a nice recovery and posted a ~20% gain, and 2018 is shaping up to posting another double-digit annual return thus far the index is up ~14% YTD. Biotechnology remains one of the few sectors that money has yet to rotate into now that retail has caught fire.
Continue reading "IBB - Stealth Bull Market Unfolding"

Inexpensive Stocks: Pharmaceutical Supply Chain Cohort

The entire pharmaceutical supply chain cohort, specifically, McKesson (MCK), Cardinal Health (CAH), CVS Health (CVS) and Walgreens Boots Alliance (WBA) are all near multi-year lows despite still posting growth albeit slow with healthy balance sheets and growing dividends. This cohort has been faced with several headwinds that have negatively impacted the growth, and the changing marketplace conditions have plagued these stocks. The political backdrop has been a major headwind for the entire pharmaceutical supply chain including drug manufacturers, pharmaceutical wholesalers, and pharmacies/pharmacy benefit managers. Compounding the political climate, the drug pricing debate continues to rage on throughout political and social media circles weighing on the overarching sector. This backdrop erodes the pricing power of drugs that ultimately move from drug manufacturers to patients with insurers and other middlemen playing roles in the supply chain web.

In an effort to address these headwinds and restore growth, companies within this cohort have made bold moves such as CVS acquiring Aetna (AET) to form a colossus bumper-to-bumper healthcare company. Cardinal Health shelled out $6.1 billion to acquire Medtronic's Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency business. McKesson has made a string of acquisitions over the past two years deploying $1.2 billion for Biologics, $2.1 billion for Rexall and $525 million for Vantage Oncology in 2016. This was followed by a $1.1 billion acquisition of CoverMyMeds, undisclosed acquisition costs for RxCrossroads and Well.ca in 2017. Thus far in 2018, McKesson acquired Medical Specialty Distributors. Continue reading "Inexpensive Stocks: Pharmaceutical Supply Chain Cohort"

Immunotherapy ETF Heats Up

Noah Kiedrowski - INO.com Contributor - Biotech - Immunotherapy


Immunotherapy Heats Up

The Immunotherapy space has ushered in a new class of therapies to combat a variety of diseases, most notably cancer. Immunotherapy has been emerging from the backdrop of oncology research for years most notably from smaller companies such as Dendreon, Kite Pharma and Juno Therapeutics as leaders in the space. Dendreon was first-to-market with its activated cellular therapy, Provenge® in 2010 followed by a 7-year gap until Novartis’ Kymriah® was approved in August of 2017 which was shortly followed up by the approval of Kite Pharma’s Yescata® in November of 2017.

Now, immunotherapy is at the forefront in oncology as a leading therapeutic which has been shown to cure cancer in previously untreatable patients. Immunotherapy ushers in a new class of promising therapies by harnessing the body’s immune system to recognize and eradicate debilitating diseases, specifically cancer. Immunotherapy has been shown to have a favorable side effect profile and best-in-class efficacy across many different disease states. These therapies may provide a powerful technology to contend with a host of diseases, and in a future state, may potentially serve as a preventative technology similar to a traditional vaccine. Immunotherapy has evolved into many different classifications with differing modalities over the past several years, which has given rise to a growing number mid and small-cap biotechnology companies. In late 2015, The Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR) and provides investors with an opportunity to invest in this unique cohort.

Immunotherapy – The Science

Generally speaking, cancer is immuno-tolerant, meaning these cancerous cells evade the surveillance mechanisms of the immune system and thus persist, proliferate and manifest disease within the host. The immune system cannot distinguish cancerous cells from normal host cells thus giving rise to malignancy and metastasis. Continue reading "Immunotherapy ETF Heats Up"

IBB - Challenging 2016, Recovering 2017 and Resurgence in 2018

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

The Biotechnology cohort has finally broken out and reached a 52-week high while making up much of the lost ground during the pummeling from both sides of the political aisle during the 2016 presidential race. Tweets and excerpts from the campaign trail from Hillary Clinton, Bernie Sanders, and Donald Trump put the biotech cohort through the wringer via taking aim at drug pricing. The sustained sell-off lead to the entire cohort to sell off from all-time highs of $132 to $83 or 37% in only six months as measured via the iShares Biotechnology Index ETF (IBB). From February of 2016 through June of 2017 IBB traded in a tight range from $83 to $98 while Donald Trump continually fired shots against the healthcare sector. Any healthcare related stocks became volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump stated that drug companies are “getting away with murder” when speaking to the drug pricing issue. The previously proposed healthcare legislation never materialized thus a level of certainty has entered the picture, and the drug pricing threats are not perceived to be as bad as initially feared. Recently the index has had a resurgence moving to a 52-week high of $118 with a much clearer runway ahead as the political headwinds continue to abate. As the confluence of abating political threats, drug pricing certainty, merger, and acquisition activity ramps and continuity of the current health care backdrop, I feel the index has room to continue its upward trend and retrace its 2015 level of $130.

AbbVie Earnings Setting the Tone

AbbVie (ABBV) reported Q4 numbers that beat expectations and updated guidance above consensus estimates for 2018, and as a result, the stock moved up 14%. This earnings announcement stroked the entire biotech cohort and had pumped more life into the group that has seen a steady rise leading up to this statement. Other large-cap companies that have plenty of upside based on its multi-year highs include Celgene (CELG) which is off 35%, Regeneron (REGN) which is off 31% and Gilead (GILD) which is off 29% based on current prices. Even specialty pharma Allergan (AGN) is off a staggering 43% as well. All of these names may be due for a resurgence if quarterly results beat and guidance is raised similarly as AbbVie. Continue reading "IBB - Challenging 2016, Recovering 2017 and Resurgence in 2018"

IBB - A Clearer Runway Ahead

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

The Biotechnology cohort has finally made up much of the lost ground during the pummeling from both sides of the political aisle during the 2016 presidential race. Tweets and excerpts during the campaign trail from Hillary Clinton, Bernie Sanders and Donald Trump put the biotech cohort through the wringer via aiming for drug pricing. The sustained sell-off lead to the entire cohort to sell off from all-time highs of $400 to $240 or 40% in only 6 months as measured via the iShares Biotechnology Index ETF (NASDAQ:IBB). From February of 2016 through June of 2017 IBB traded in a tight range from $250 to $300 while Donald Trump continually fired shots against the healthcare sector. Any healthcare related stocks became volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump stated that drug companies are “getting away with murder” when speaking to the drug pricing issue. As the proposed healthcare legislation appears to be dead as of now, a level of certainty has entered the picture, and the drug pricing threats are not perceived to be as bad as initially feared. Recently the index has had a resurgence moving to a 52-week high of $335 with a much clearer runway ahead as the political headwinds continue to abate. As the confluence of abating political threats, drug pricing certainty, and continuity of the current healthcare backdrop, I feel the index has room to continue its upward trend and retrace its 2015 level of $400. Continue reading "IBB - A Clearer Runway Ahead"