Last Updated on June 1, 2019 by Sultan Beardsley
A popular idea floating around the biotech community is that healthcare companies are insulated, or more so at least than other sectors, from a trade war with China. From a fundamental perspective, that idea makes sense. Most U.S. biopharma equities do the bulk of, if not all, their business domestically. Economic landscapes in Europe, Asia, Africa, and the Middle East more so pertain to big pharma companies like Merck (MRK), Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), Eli-Lilly (LLY), etc. The performance differentials between U.S. indexes and the healthcare sector align somewhat with this rationale.
| Performance (%) | |||
| 5-day | 1-mo | YTD | |
| NASDAQ | -1 | -6 | +15 |
| DOWJ | -0.5 | -4 | +10 |
| SP | -1 | -4 | +13 |
| XBI | +1 | -5 | +14 |
| XLV | +2 | +1 | +6 |
| IBB | +1 | -3 | +6 |
| MRK | +4 | +5 | +7 |
| NVS | +7 | +9 | +19 |
| BMY | +0.7 | +1 | -10 |
| LLY | +1 | -2.5 | +2 |
| JNJ | +0.1 | -1 | +9 |
| ADMA | +12 | -1 | +76 |
| GALT | -12 | -10 | +4 |
| ARRY | +25 | +17 | +82 |
| LABU | +3 | -15 | +28 |
| LABD | -3 | +15 | -28 |
Looking at the last 5 trading sessions healthcare stocks and ETFs outperformed the major U.S. indexes (NASDAQ, DOWJ, S&P500). As we move out to the 1-month and YTD time frames this trend weakens. The biotech ETFs (XBI, XLV, IBB) outperformed the indexes in the past month marginally, but year-to-date (YTD) the latter is up almost two-fold. The reason being I believe is investors started to invest more defensively.
During times of economic and political turbulence like we are experiencing right now with the trade drama with China, and the military fiasco with Iran, money is transferred to blue-chip type companies. Many of these fundamentally solid companies reside in the major U.S indexes and could explain why they have outperformed healthcare ETFs. There are several exceptions that we can see looking at select big pharma companies and clinical stage bios.
Novartis (NVS) and the XBI are up +19% and +14% YTD, respectfully. Two clinical stage bios in the MS portfolio ADMA biologics and Array Biopharma (ARRY) are up +76% and +82% YTD, respectfully. All of which greatly outperformed the Nasdaq and S&P 500. At the same time Bristol-Myers Squibb (BMY) is down down -10% YTD and Johnson and Johnson (NYSE: JNJ) has only gained +2%. The data tells us that money is flowing away from stagnant and riskier companies and into ones that are growing. Thus, we should remain hyper-vigilant and avoid extremely speculative plays.
Note that most of the daily trading action is driven by algorithms that buy and sell stock based on headlines and price fluctuations. With all the geopolitical drama happening we should continue to see violent moves up and down.
Clinical Stage Bios With Catalysts
- Achieve Life Sciences (ACHV) $3.79
- Phase 2 data is due the 2Q19 for its smoking cessation product Cytisine.
- Gained +14% in the last 5-days, but is down -11% in the last 1-month.
- AMAG Pharmaceuticals (AMAG) $10.24
- PDUFA (i.e. the date the FDA will decide if a drug is approved or not by) was extended to June 23rd. Vyleesi is being evaluated as a treatment of female sexual dysfunction.
- AMAG has traded sideways in the last 5-days and down -11% in the last 1-month.
- Atara Biotherapeutics, Inc. (ATRA) $23.21
- Phase 3 data due in the first half of 2019 for ATA 129.
- ATRA traded sideways last week, but is down -33% in the last month.
- Cara Therapeutics (CARA) $18.05
- Phase 3 data due 2Q19 for Korsuva which is being developed as a treatment for Chronic kidney disease (CKD) on hemodialysis (HD) with Moderate-to Severe Pruritus.
- CARA declined -5% last week.
- CymaBay Therapeutics Inc (CBAY) $12.90
- Phase 2b topline data due 2Q19 for its NASH drug Seladelpar.
- CBAY is up +3.2% in the last week.
- Dova Pharmaceuticals (DOVA) $9.93
- PDUFA for sNDA filing on June 30th.
- Traded down -7.4% last week.
- Intra-Cellular Therapies (ITCI) $13.47
- Phase 3 top-line data due 2Q19 for a bi-polar drug.
- ITCI gained 8.6% last week.
- Kezar Life Sciences (KZR) $16.89
- Phase 1b top-line data due 2Q19 for the company’s drug candidate for Lupus.
- Traded down -16% last week.
- Minerva Neurosciences (NERV) $5.37
- Phase 2b data due 2Q19 for primary insomnia.
- Down trended -28% in the last month.
- Savara Inc (SVRA) $11.29
- Phase 3 data due June 2019 for Autoimmune pulmonary alveolar proteinosis (PAP).
- Has traded sideways and up slightly (+1%) in the last month
Top Stocks To Watch
NVS, MRK, ACHV, CBAY, NERV
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