IBB - Biotech Catches Fire... Finally

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

Biotechnology has been a difficult space to deploy capital over the previous ~18-24 months. This cohort plummeted over and over again from both sides of the political isle as the 2016 presidential race unfolded. Between Hillary Clinton, Bernie Sanders and Donald Trump taking aim at drug pricing via speeches, Twitter, and other social media platforms, largely attributed to the entire cohort selling off. The sustained sell-off lead to the entire cohort to sell off from all-time highs of $400 to $240 or 40% in only six 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. Now he’s come out and stated that he’s working on a “new system where there will be competition in the drug industry.” Every time any of these remarks were tweeted, they immediately resulted in a downtrend across the entire biotech cohort. As the new proposed health care legislation enters its initial stages in Congress, 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 from $284 to $321 or 13% over the past month. As the political headwinds continue to abate, I feel the index has room to continue its upward trend. Continue reading "IBB - Biotech Catches Fire... Finally"

IBB - The Political Tug-Of-War Rages On

Noah Kiedrowski - INO.com Contributor - Biotech


Donald Trump is back at it again via Twitter and once again he has ignited the political tug-of-war between potential policy changes and Wall Street. The overall healthcare sector has become volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump held a press conference and stated that drug companies are “getting away with murder” when speaking to the drug pricing debate. Now he’s come out and stated that he’s working on a “new system where there will be competition in the drug industry.” Every time any of these remarks are tweeted, they immediately result in a downtrend across the entire biotech cohort, this time was no exception. The iShares Biotechnology Index ETF (NASDAQ:IBB) traded down 1.7% or $5 per share once tweeted. The healthcare sector has been faced with an uncertain and volatile political backdrop. The overall healthcare umbrella has become sensitive to any tweet from President Trump as he vows to bring down drug prices. Although he’s pursuing his agenda against drug pricing, IBB has become resilient as many of these threats may have already been priced-in as seen in many healthcare-related stocks that have seen sharp and sustained sell-offs. Ostensibly, many of these stocks are trading at multiyear low P/E ratios and as a cohort (gauged via the IBB proxy) looks to be less sensitive to tweets/threats and continues to test the $300 barrier.

IBB Chart
Figure 1 – IBB price activity and resilience over the previous 6 months with pronounced volatility that coincides with political rhetoric against drug pricing

The Drug Pricing Transparency Coalition

Many large-cap pharma companies have created an unofficial drug pricing coalition to provide transparency in an effort to separate themselves from a handful of egregious price increases to contend with Trump’s aim at the drug companies. Continue reading "IBB - The Political Tug-Of-War Rages On"

IBB Looks Ripe For A Turnaround In 2017

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

Will the confluence of abating political uncertainty, proposed self-regulation on drug price increases, potential merger and acquisition activity and chronically depressed valuations bode well for IBB in 2017? The biotech cohort saw a very tumultuous 2016 to say the least as the political backdrop, drug pricing debate and presidential election took the headlines. Biotech stocks responded erratically to any news that would have a perceived impact on the cohort during this timeframe. Since Donald Trump voiced his concerns over drug pricing, the initial rally in biotech has largely eroded to pre-election levels. The iShares Biotechnology Index ETF (NASDAQ:IBB) traded in a wide range throughout 2016 with pronounced volatility throughout the presidential election cycle registering a range of ~$240 to $344 or a 104-point range (Figure 1). The upcoming 2017 year is shaping up to be an eventful one with continued uncertainty about the political climate, governmental stance on mergers and acquisitions and potential deregulation. Another hot button issue will be the potential restructuring of the Affordable Care Act and proposed favorable tax and repatriation rates. Continue reading "IBB Looks Ripe For A Turnaround In 2017"

Biotech's Upward Trend - IBB Breaks $300

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction and Backdrop

As of recent, the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) has caught an upward trend and briefly crossed the $300 per share threshold for the first time over the past 9 months. The political backdrop has been very contentious and even more so after two of the three presidential debates have wrapped up. I’ve written several pieces evaluating the massive sell-offs in the biotech sector and how extraneous events such as oil, China, interest rates and to a large extent political threats are merely noise in the larger picture. These external events provide great buying opportunities in high-quality companies or the cohort itself as represented by the sector ETF, IBB as a proxy. There’s no doubt that there’s at least a loose correlation if not a direct correlation between opportunistic political posturing by political front-runners (i.e. Hilary Clinton and Bernie Sanders) and the chronic price suppression of IBB. Each time a tweet is pushed out to social media regarding drug pricing and/or specific attacks on pharmaceutical companies, the entire cohort takes a significant hit as reflected in the price action of IBB. I contend that political posturing played a major role in the sell-off of the healthcare cohort and more specifically biotech stocks. Drug pricing was used as a centerpiece and scapegoat for political gains. Continue reading "Biotech's Upward Trend - IBB Breaks $300"

The Presidential Nominees Are Set

Noah Kiedrowski - INO.com Contributor - Biotech


The political lines have been drawn, it’s Clinton verses Trump. I written several pieces evaluating the massive sell-offs in the biotech sector. Utilizing the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) as a proxy, I proposed a loose correlation between opportunistic political posturing by political front-runners and the chronic price suppression of IBB. I content that political posturing played a significant role in the sell-off of the healthcare cohort and more specifically biotech stocks. Drug pricing was used as a centerpiece as the scapegoat for political gains. Throughout this political process, this rhetoric has negatively impacted the sector. IBB fell from $401 in July of 2015 to $240 in February of 2016 or alternatively a 40% hit. This sell-off coincided with political rhetoric aimed at the collective cohort of healthcare and biotech companies. I strongly felt that these events were seasonal and would eventually subside without any significant impact to the underlying stocks within IBB. I felt this political induced sell-off presented a great buying opportunity after the 40% decline. I put my money where my mouth was by purchasing two tranches of IBB at a strike price of $250 in February and June during the market-wide sell-off and the Brexit, respectively. I feel that this is great entry point for any long-term investor that desires exposure to the biotechnology sector.

Are Drug Prices Really The Culprit?

In terms of the overall cost to the healthcare system, drugs comprise less than 10% of the pie. Allergan CEO Brent Saunders stated in an interview with Jim Cramer on Mad Money (Figure 1): Continue reading "The Presidential Nominees Are Set"