The Bruised And Battered Biotech Sector - Buying Opportunity Arises

Noah Kiedrowski - Contributor - Biotech


The culmination of extraneous events such as sustained lower oil prices, an ostensibly imminent rate hike and weakness in China have indiscriminately plummeted the biotech sector as of late. Now a second and more specific wave of sector related stories such as price gouging by Turing Pharmaceuticals and the subsequent comments by Hillary Clinton have exacerbated this sector decline. These former events are seemingly unrelated to the biotechnology sector, yet this group has been taken along for the downhill ride with the broader indices in lock-step. The latter events have been detrimental to all biotechnology stocks as this is a direct threat to pricing power and our capitalism based structure.

The unprecedented secular growth streak in biotech has been more than tested as of late with biotechnology officially in bear territory. These latest events, some unrelated and others directly related to the biotech sector, may provide a unique opportunity to add to a current position or initiate a position over time as this correction continues to unfold. Based on annual and cumulative performance throughout both bear and bull markets, The iShares Nasdaq Biotechnology (ticker symbol: IBB) may provide the opportunity investors have been waiting for in the face of our current market conditions. IBB is down 25% from its 52-week high, shares have plunged from $400 to $295 per share during the recent market weakness, presenting a potential buying opportunity.

Price gouging and Hilary Clinton

Recently, Turing Pharmaceuticals and its CEO Martin Shkreli garnered criticism after the company boosted the price of Daraprim from $13.50 to $750 per pill, resulting in a greater than 5,400% increase after acquiring the drug in August. This price gouging of a decades’ old drug drew fire from the general public on social media and, in particular, the presidential candidate and Democratic front-runner Hillary Clinton (Figure 1).

Tweet by presidential candidate and Democratic front-runner Hillary Clinton
Figure 1 – Tweet by presidential candidate and Democratic front-runner, Hillary Clinton, referring to the drug price gouging

This price gouging incident has elicited widespread backlash, and in my opinion rightfully so, however this criticism has been unfairly painted across the entire sector. It’s noteworthy to point out that Democratic lawmakers have requested pricing policies and further information on pricing of drugs by Canadian drug maker Valeant Pharmaceuticals. Despite the public backlash and public statements by lawmakers, I believe this is a temporary headwind rooted in the public relations arena. Continue reading "The Bruised And Battered Biotech Sector - Buying Opportunity Arises"

A Niche ETF In The Potentially Promising Future Of Immunotherapy Is On The Horizon

Noah Kiedrowski - Contributor - Biotech


Immunotherapy has emerged as an exciting therapeutic area that has experienced massive growth over the past few years in terms of research and development expenditures and sheer number of clinical trials throughout the biotechnology sector. Immunotherapy ushers in a new class of potentially promising therapies by leveraging the immune system to recognize and eradicate debilitating diseases, specifically cancer and chronic viral infections. This immunotherapy approach may inevitably result in a paradigm shift from traditional medical intervention. Immunotherapy possesses holistic attributes by harnessing the body’s immune system to content with disease. In addition to the holistic aspects, 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 powerful technology to content 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 few years, which has given rise to a growing number small-cap biotechnology companies with potential investment opportunities via an immunotherapy ETF.

Immunotherapy – The terse science

Immunotherapies engage and recruit the immune system to combat disease by inducing an antibody generation response against a specific antigen (foreign entity) typically present on the cell surface of a virus or cancer cell. This is very similar to a traditional vaccine approach seen for a whole host of diseases throughout history. Continue reading "A Niche ETF In The Potentially Promising Future Of Immunotherapy Is On The Horizon"

The Biotechnology Sector Continues To Defy Markets With Secular Growth

Noah Kiedrowski - Contributor - Biotech


The biotechnology cohort has transformed into a secular growth sector witnessed by spectacular performance in the face of bull and bear markets as well as economic troubles domestically and abroad. The biotechnology sector has been on an unprecedented performance streak in both annual and cumulative performance over the past 10 years and accentuated during the latest 5-year timeframe. The biotechnology sector can be highly volatile, however I posit that this cohort has established itself as a secular growth sector and thus doesn't fit the mantra of high-risk high-reward based on annual and cumulative performance throughout any market condition. I content that long-term data support this secular viewpoint without the perceived inherent high-risk. Short sellers contend that the sector is overvalued and frothy while its multi-year run has resulted in a bubble imminent of bursting. Some commentators have recommended shorting the sector or relinquishing portfolio positions with exposure to the biotechnology sector altogether. In brief, I'll be using The iShares Nasdaq Biotechnology (IBB) as a proxy to substantiate this thesis. In brief, IBB holds 150 biotechnology firms listed on the Nasdaq with a minimum market capitalization of $200 million thus spanning small, mid and large-cap companies. Greater than ~30% of assets are devoted to small and mid-cap growth names while ~65% is devoted to large-cap growth names. These companies are involved in early clinical development at the forefront of innovation and research to drive the development and potential commercialization of drugs targeting a variety of diseases and unmet medical needs domestically and abroad.

High-Level Overview

• The Biotechnology cohort has solidified itself as a secular growth sector over the past decade while defying market downtrends in the face of economic woes domestically and abroad

• Using IBB as a proxy for the Biotechnology cohort, this sector doesn't fit the mantra of high-risk high-reward based on annual performance throughout bull and bear markets

• Long-term data on this cohort supports very high returns without the perceived high risk

• During the market crash of 2008, IBB outperformed the S&P 500, Nasdaq and Dow Jones by 24.8%, 27.8% and 19.7%, respectively

• Over the past 5 years through 2015 thus far, IBB has posted an average annual return of 33%

• Over the past 10 years IBB has cumulative returns of over 425%, unparalleled by an any major index

The biotech secular growth

The returns for IBB have been very impressive to say the least in both annual and cumulative performance, unparalleled by any major index. Over the past 10 and 5 year timeframes, IBB has posted cumulative returns of over 425% and 390%, respectively. Continue reading "The Biotechnology Sector Continues To Defy Markets With Secular Growth"