Bullish Biotech Plays for Q3 ‘22

David Keller
4 min readJul 17, 2022

Biotech’s rally hasn’t let up, but without any clear changes in the setup for the sector, it is hard to have confidence that the longer-term bear market in those stocks is really over. A surge in biotech share prices that began in mid-June is lasting longer than might have been expected. The SPDR S&P Biotech ETF rose 17.1% in the last two weeks of June, and as of Friday’s close, it was up 15.4% in July.

Source: https://www.grandviewresearch.com/static/img/research/us-biotechnology-market.png

Since the start of the current upturn, the XBI is up 33.3%, but that isn’t close to enough to erase the year’s losses. The XBI is still down 24.6% in 2022, and 36.9% over the past 12 months, for a loss of just over 50% off its high in early February of 2021. A bear market is generally defined as a 20% drop from a recent high. Still, the gain has sent investors hurrying to put money back into the sector. In a note on Thursday, Piper Sandler analyst Christopher Rayment said a net $1.1 billion, the second-highest total this year, flowed into funds focused on healthcare and biotech in the week ended July 6.

Aside from the climbing stock prices, however, little has changed for biotech in the past few weeks. The major catalyst for the increase appears to be reports from The Wall Street Journal that Merck (MRK) is lining up a $40 billion purchase of the biotech Seagen (SGEN), a cancer-focused drugmaker. The Seagen deal could have a big impact on the sector. Investors have been “circling around stocks” with similar revenues to Seagen, including Alnylam Pharmaceuticals (ALNY), BioMarin Pharmaceutical (BMRN), and others. Alnylam shares are up 21.2% since the start of June, while BioMarin has gained 18.5%.

Pharmaceutical company Celgene expanded its portfolio in 2019 with Revlimid, Pomalyst, and Abraxane. Zeposia, a medication for ulcerative colitis and multiple sclerosis, is now under BMS’ ownership as a result of the Celgene acquisition. Abecma and Breyanzi, two cell treatments, were given regulatory approval by BMS in the United States in early 2021. Additionally, it produces Reblozyl, a drug used to treat anemia in people with myelodysplastic syndromes and blood problems.

More than 50 clinical testing programs are being carried out by BMS. The business is investigating the potential for combining Opdivo and Yervoy to treat more cancer types. In addition, various fresh cancer immunotherapies are being tested. For 13 years running, BMS has boosted its annual dividend. Over the last five years, it has increased its dividend payout by more than 38%.

Source: https://static.seekingalpha.com/uploads/2019/1/5/234751-15467046074512458.png

One of the primary causes of disability worldwide is spinal cord injury. It can cause long-term consequences that necessitate costly therapies and long-term care and can result in permanent functional impairment. As of 2016, surgery accounted for 85% of spinal cord treatments; this procedure alone has an average cost of around US$150,000. According to the degree of the damage, annual healthcare costs for people with SCIs can range from from US$300,000 to US$1,000,000 per person.

By 2028, the market for therapies for spinal cord injuries is anticipated to reach $9.61 billion. Nurexon (TSXV:NRX) is developing a groundbreaking pharmacological platform for ExoTherapy, a bio-guided exosome-based treatment for injuries to the spinal cord, brain, and other central nervous systems. Two of the top Israeli universities have granted an exclusive worldwide license to develop and market exosome-based technologies. This license is supported by preclinical research, giving the company a strong foundation of IP and scientific backing as begins to establish itself on Canada’s TSXV exchange.

The global biotech industry tops $1.2 trillion in sales each year, and after COVID has become a focal point of not just investor but public attention. This huge sector improves the quality of life for many people while creating attractive opportunities for long-term investors. The COVID-19 pandemic has attracted even more attention to pharmaceutical companies developing coronavirus drug and vaccine candidates.

--

--

David Keller

Market analyst into the intersection of technology, finance, society, politics, and macro-econ. Straddles the NY-TLV axis. Fortis Fortuna Adiuvat.