Biotechnology And Healthcare, A Bit Of A Lull

Dna, Genetic Material, Helix, Proteins, Biology

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  • Strong momentum of Tech and Chip stocks may be too good of a distraction for biotech investors.
  • New therapeutic themes for 2024 are neuroscience and psychedelics.
  • Core positions in neuroscience are ABBV, LLY, and SUPN.

The S&P 500 rose to new highs (5234.18) over the past week as the Fed held interest rates at current levels with expectations of 3 rate cuts at the June Meeting. All sectors rose except real estate, down 1% but led by Communications, Technology and Industrial stocks. The rally is broadening which is a good sign. Healthcare was flat with the XLV stalled at $145.44 but up 6.64% YTD. The IBB was down 0.24% and is flat YTD up only 0.24% at 136.24. And despite a slight uptick the XBI quickly faded and was down 1.12% to 93.56, but is for now holding the SMA 50 line.

With large cap technology companies under fire from governments like the “Digital Marketing  Act ” in Europe investors may shift their focus to more defensive areas like healthcare.

We have explored small cap trades in a list of momentum stocks picks with the idea that a few big winners would emerge with longer term prospects. We have several winners but the volatility causes us to trade too often for short term gains. SMID caps on our momentum list that we hold look encouraging YTD are CRMD, CYRX, EXEL, GERN, SUPN, and VCEL. And no major themes have emerged for biotechnology other than blockbuster drugs for weight loss and diabetes from Eli Lilly with Mounjaro and Ozempic from NovoNordisk. So we want to discover new market areas that are poised for scientific breakthroughs in 2024. The neuroscience area has been targeted because of the huge market potential and costs of treating neurodegenerative diseases like Alzheimers’s (AD), Migraines, Parkinson’s, and Depression. And investors are still hopeful as you can see from two of the major stocks focused in this area: Biogen (BIIB) and Eli Lilly (LLY); we have written about Abbvie’s (ABBV) major investments through the pending $8.7B acquisition of Cerevel Therapeutics (CERE) with a clinical pipeline for treatment of psychiatric disorders and Parkinson’s Disease. Abbvie has raised about $13B with a bond issue to fund R&D and recent acquisitions.

Frontiers in Biotechnology: Neuroscience and Psychedelics

In the coming months ahead we will try to focus on clinical news and stocks in the Neuroscience area because of emerging clinical and regulatory news.One of our core holdings  is Supernus (SUPN) which is up 19.28% YTD and 23..55% over the past month. Buyers boosted the stock upon the 2023 earnings when total revenues increased 26% to $607.5M. The company has a cash position of $271.5M as of 12/31/23. Another one of our MedTECH picks with broad AI imaging applications for Alzheimer’s Disease, oncology and neuroscience is GE Healthcare (GEHC) up 16% YTD; GE Healthcare has the most cleared AI/ML FDA-cleared devices with 10 compared to Siemens with 9.

But don’t expect a rapid roll-out of “next-generation” Alzheimer drugs from Biogen and Lilly as the regulatory process in the US and Europe may be cautious as there has been various issues such as brain swelling from Amyloid targeted drugs

According to various market research reports the psychedelic drug market will open up with draft guidance on clinical trials last year from the FDA. The market is expected to grow from around $5B in 2023to $12B by 2029. But only two States have a legal framework to provide psilocybin services and Federal Law has no path for legalization. We own tiny number of shares in MindMed (MNMD) with price around $10 and a market cap of $700M. The Company recently received a breakthrough therapy designation and positive data from a Phase 2b study for Generalized Anxiety Disorder. Other studies will soon be underway with MDMA and psilocybin.The Company recently raised about $175 M in a private placement.

More By This Author:

Healthcare And Biotech Update With Market At 2024 Highs
It's A Bull Market But Harder To Pick Small Cap Biotech Winners Because Of Volatility
Healthcare Stocks Are Looking Better But What About Biotech?

Disclosure: Long ABBV and LLY.

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