As the political cycle unfolded throughout 2015, the entire healthcare cohort posted shape declines, this was particularly true for the biotechnology sector. Using the iShares Biotechnology Index ETF (ticker IBB) as a proxy for the biotechnology sector, this cohort fell from $401 in July to $284 in September or alternatively a 29% decline. This shape decline coincided with heated political rhetoric aimed at the collective cohort of healthcare and more specifically biotech related companies. This cynical sentiment by political frontrunners was largely rooted in the pricing of drugs. As candidate threats via legislative action geared towards reining in the costs of drugs unfolded, these actions negatively reverberated through healthcare and biotech stocks alike. The political posturing surrounding potential plans to reign in drug costs are now largely priced into many stocks within the healthcare umbrella. I contend that after the recent sell-off the biotech cohort looks attractive at these levels. Once the political cycle is complete in 2016, these stocks will likely benefit from the mere absence of political headwinds. Additionally, as the candidate pools thin out many remaining candidates gradually move towards the middle to appease a broader audience. Taken together along with the difficulty of enacting any legislative action to regulate the industry this may represent a buying opportunity that’s been presented by extraneous political events. Continue reading "Will Political Headwinds For Biotech Subside In 2016?"
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).
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"
The culmination of sustained lower oil prices, fear of an imminent rate hike and weakness in China have indiscriminately plummeted all indices over the past week. These exogenous forces are ostensibly unrelated to the biotechnology cohort yet this group has been taken along for the downhill ride with the broader indices in lock-step. 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 however lately this streak has been tested. The biotechnology sector can be highly volatile, however I posit that this cohort has not only established itself as a secular growth sector but these latest events are unrelated to the biotech sector and thus this recent correction may provide a unique opportunity to add to a current position or initiate a position over time as this correction unfolds. Based on annual and cumulative performance throughout both bear and bull markets, IBB (iShares Nasdaq Biotechnology) may provide the opportunity investors have been waiting for in the face of our current market conditions. IBB is down 15% from its 52-week high, shares have plunged from $400 to $340 per share during the recent market weakness, presenting a potential buying opportunity. Continue reading "Extraneous Events Providing Unique Buying Opportunity In The Biotechnology Cohort"
The biotechnology sector has witnessed unprecedented growth that has left all major indices far behind in both annual and cumulative performance over the past decade and more notably 5 years. Using the iShares NASDAQ Biotechnology Index (IBB) and SPDR S&P Biotech (XBI) as proxies, these ETFs have posted annual returns of greater than 30% over the past 5 years while more than quadrupling returns on a cumulative basis over the past decade. It is noteworthy to point out that both IBB and XBI have risen to all-time highs recently while IBB broke the $400 per share barrier as well.
A novel way to play the biotechnology cohort has entered into the ETF universe via BioShares™ Biotechnology Products (BBP) ETF. BBP offers a pure biotech play with no holdings in the generic, specialty pharma, life science tools, medical device, diagnostic or other healthcare companies. Thus this ETF focuses solely on the biotechnology cohort with at least one FDA approved product in its portfolio. Continue reading "A Newly Issued Pure Biotech ETF Worth Considering"