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Five Biotech Stocks to Buy at the Bottom

No sector has been beaten, maligned, and abused more than the biotech sector in recent years. However, some of them are so bad they’ve become good, which piques my interest.

Investing in biotech stocks is not for the faint of heart. The road to developing and commercializing new drugs is long and riddled with hard battles, and an anxious investor won’t be able to sleep at night.

However, the returns offer incredible gains when everything falls into place. In this sector you’re almost buying lottery tickets rather than investing in shares.

In 1919, the term "biotechnology" was coined by a Hungarian agricultural engineer named Karl Ereky to define the merging of two industries: biology and technology. Almost a century later, Ereky's vision has been realized with thousands of products and services available in the biotech market today.

Despite the advancements of this industry though, the majority of the buy-and-hold investors choose to steer clear of biotech stocks -- and for sensible reasons.

It's no secret that investing in biotechnology firms can be unnervingly risky. Since its advent, investors have been regaled with horror stories of costly stage three drug trials going bust or plummeting stock prices due to the expiration of critical patents. Needless to say, these stories have soured would-be investors on the whole biotech world.

However, inadequate information and a lack of understanding of how the biotech industry really operates along with reliance on the performance of only a handful of biotech stocks may have caused investors to miss out on attractive risk-reward relationships. Not all biotech investments lead to disastrous results.

You may be surprised to learn that shares of the biotech industry has collectively gone up by approximately 70% in the past five years. This proves just how much these biotech companies rewarded their enduring. Success in biotech investing is simply a matter of buckling down to do your homework and applying a tad of common sense.

Throughout this decade, one sector has managed to outperform the S&P 500 index (SPY) in terms of total return annually: the healthcare sector. While there's no guarantee that healthcare stocks will go on to beat the S&P 500 in the years to come, the fact remains that people will continue to need medicines as well as healthcare services regardless of the country's economic status. The increasing reliance of the healthcare industry on technology has put the biotech industry smack dab in the center of all these demands.

I’ll give you some of my favorite plays in the sector.

Vertex Pharmaceuticals (VRTX)

Big-cap pharmaceutical company Vertex Pharmaceuticals Inc currently has the monopoly on the treatment of cystic fibrosis (CF) with three approved drugs out in the market, Kalydeco, Orkambi, and Symdeko, along with several promising products in the pipeline to target other auto-immune diseases.

In June, Vertex turned its sights on the genetic therapy part of the business via an expansion of its ongoing collaboration with CRISPR Therapeutics (CSPR). Vertex also purchased gene therapy firm Exonics Therapeutics to strengthen its foothold in this revolutionary technology.

Given the spectacular success of Vertex with CF treatments, its work with gene therapy is projected to bring in another blockbuster deal to the company. To ensure its monopoly in the CF market, Vertex has been aggressively seeking additional regulatory approvals to cater to younger CF patients. If the company succeeds, its target market of 75,000 CF patients would gain an additional 44,000.

Vertex is not limiting its efforts in this field though. To seal its position as the leader in CF treatments, the company is looking at developing triple-drug therapies as the next big development in their treatment plans. It has been performing clinical trials on three varying triple-drug combinations. If approved, these therapies would be able to address approximately 90% of the total number of CF patients.

As for the remaining 10% with no operational CF treatment, Vertex aims to address this via its work on gene editing alongside CRISPR Therapeutics. Aside from CF, the two companies have commenced clinical studies on applying gene-editing therapies to treat rare blood diseases and sickle cell disease.

Overall, Vertex is a certified outperformer in the world of big-cap biotech and provides good value to its shareholders.

Johnson & Johnson(JNJ)

Johnson & Johnson (JNJ) is one of the most attractive names in the biotech space. While the lawsuits against it involving alleged toxic baby powder endanger (JNJ)’s equity, the company is still hailed as one of the most notable innovators in the healthcare ecosystem.

The company recently disclosed its progress in developing an AIDS vaccine. Although the negative headlines about the company can be a cause of concern to some, it could turn out to be a win-win situation for long-term investors who can then take advantage of the bargain basement stock price.

(JNJ) has reinforced its stronghold in the fields of neuroscience, oncology, and immunology with these three areas generating over 72% of the company’s drug sales in the first quarter. In fact, (JNJ) recently received an FDA approval on its myeloma drug Dexamethasone. Its collaborative work on cancer treatment with Celgene’s (CELG) Revlimid and its own Darzalex received the FDA’s green light as well.

Apart from developing new treatments and medications, (JNJ) is also moving forward in the development of its robotic sector. Earlier this year, the company purchased robotic surgery firm Auris Health for $3.4 billion in an effort to dethrone the current sector leader Intuitive Surgical (ISRG).

With all that is in its drug and services pipeline along with its earlier successes, (JNJ) raised its 2019 outlook despite its legal woes. The biopharma giant now anticipates a sales growth of 2.5% to 3.5%. Meanwhile, its adjusted earnings per share now stands somewhere in the range of $8.53 and $8.63 per share.

Celgene (CELG)

Celgene (CELG) is one biotech stock that you can get on the cheap. It offers shares trading at only 7.4 times expected earnings.

With its shares trading well below the total book value courtesy of the pending acquisition by Bristol-Myers Squibb (BMY), investors would be hard-pressed not to take advantage of the opportunity to add a company leading in the development of treatments for cancer, blood disorders, and immunological conditions.

Aside from the looming acquisition, another reason for Celgene’s dirt-cheap stock involves the decision to sell blockbuster immunology drug Otezla to allow Bristol-Myers Squibb to appease the Federal Trade Commission’s concerns over the deal. Nonetheless, Celgene’s remaining drugs still perform well in the market.

Its blood cancer drugs, Revlimid and Pomalyst, are the leading go-to drug for multiple myeloma. Revlimid has been approved to treat two additional rare blood diseases, myelodysplastic syndromes and mantle cell lymphoma. Another winner in Celgene’s lineup is its solid tumor drug Abraxane, which has been approved for advanced breast cancer treatment along with non-small-cell lung cancer and advanced pancreatic cancer.

Celgene’s pipeline is loaded with promising winners as well, with myelofibrosis drug Fedratinib and multiple sclerosis treatment Ozanimod up for FDA approval this year. Three additional blood disease drugs including Luspatercept are also in the works along with a cell therapy called Liso-cel, which engineers the body’s immune cells to target particular types of cancer. Celgene’s work with Bluebird Bio is expected to bring another cell therapy procedure called bb2121, which is anticipated to bolster the biopharma firm’s dominance on the multiple myeloma market.

Amgen (AMGN)

With its ability to flex its financial muscles at will, Amgen (AMGN) has accumulated nearly $30 billion in cash and investments. In the past four years, it has recorded an average annual net profit of roughly $6 billion.

The company has achieved tremendous success in developing groundbreaking technology and edging out its competition courtesy of its innovative treatments like the post-chemo therapy called Neulasta. Its cholesterol drug Repatha and arthritis medication Enbrel are both impressive performers in the market as well.

Despite its aggressive drive to acquire small biopharma firms, Amgen is actually a pretty safe investment. Throughout the years, the company has made a conscious effort to diversify its portfolio to steer clear of dependence on a single product.

In fact, no single drug provides more than one-fourth of Amgen’s total income. Among its products, only two drugs generate over a tenth of its revenue. This pattern of revenue diversity doesn’t stop here either as Amgen’s pipeline has nine Phase 3 trials and an additional five Phase 2 trials.

Illumina (ILMN)

One of the incredible developments in healthcare involves the unlocking of the secrets of the human genome – and Illumina (ILMN) has been widely recognized as the leader in this field. In fact, this company has performed more than 90% of all gene sequencing procedures ever recorded.

Branded as the “gold standard” for gene sequencing, Illumina’s highly accurate technology has turned the company into one of the leaders in the biotech space. Illumina is projected to dominate the industry for a very long time.

More importantly, Illumina has managed to make these treatments affordable. Using Illumina’s technology, the cost of human genome therapy has been remarkably cut from a staggering $100 million back in 2002 to an affordable $1,000 today.

Despite its potential, Illumina released lower-than-expected revenue guidance for this year. However, its track record indicates that the company has the tendency to underpromise but overdeliver.

Its revolutionary gene sequencing equipment NovaSeq has made remarkable progress since its availability in 2017 and has yet to reach its peak. Illumina has been on the lookout for high-growth markets currently in their infancy in an effort to become a pioneering force in other fields.

A good example of this is Illumina’s move on noninvasive prenatal testing (NIPT), which has recently gained popularity among patients. The company released an updated and more powerful version of its fetal genome detector system VeriSeq this year. This technology offers the quickest processing time compared to its rivals.

Illumina is also looking to utilize gene sequencing to bolster cancer research efforts and screening through its TruSight Oncology 500, which is a molecular test used to detect lung cancer. Since its release in 2018, the company has been seeking ways to expand TruSight’s application to include blood tests capable of detecting the very early stages of several types of cancer.

Another significant growth driver for Illumina is population genomics, with the United States, France, Singapore, England, and other countries already utilizing the company’s technology. Consumer genomics also shows a promising fiscal advancement for Illumina. To date, the company has been catering to major providers including Ancestry and 23andMe. Illumina even created its own genealogical spinoff called Helix.

April 2, 2019

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April 2, 2019
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What’s Really Behind the Bristol Myers/Celgene Merger?

Diary, Newsletter

The start of 2019 saw Bristol-Myers Squibb (BMY) reveal a plan that rattled a number of its investors: the 132-year-old biotech giant plans to buy Celgene (CELG) for $74 billion or approximately $102.43 per share.

While these kinds of moves happen often, Bristol’s decision has some of its major shareholders up in arms. So far, Bristol top holder Wellington with 8% of shares, Dodge & Cox with 2.61%, and Starboard Value with 0.06% have publicly expressed their opposition to the merger.

Aside from labeling this deal as “ill-advised,” Starboard suggested that Bristol should either consider selling itself or simply put an end to this plan.

Here’s a short background on the matter.

For Bristol, this deal seemed to have stemmed from the dwindling performance of its mega-blockbuster immuno-oncology drug Opdivo compared to its greatest competitor, Merck & Co’s (MRK) Keytruda.

Unfortunately for Bristol, Opdivo failed to obtain a monotherapy in first-line lung cancer result while Keytruda succeeded on this front. The whole process resulted in costly losses to Bristol and massive sales for Merck in the tune of $7.2 billion, outpacing Opdivo’s $6.7 billion in 2018 – a first for both drugs since the two had been neck to neck since their launches.

The threat of competing cancer drugs – generic and otherwise – against Opdivo didn’t help either. In effect, Bristol has been facing pressure from investors to recoup the costs either via expansion or a profitable merger. By comparison, Bristol’s annual revenue is at $22.6 billion while Merck is at $42.3 billion and fellow competitor Pfizer (PFE) is at $53.4 billion.

On the other side of the merger, Celgene (CELG) has been struggling with the looming loss of its patent protection for their major drug Revlimid, a multiple myeloma medication which accounts for 65% of the company’s $14.2 billion annual revenue. By 2022, generic alternatives are anticipated to eat away the shares of Revlimid. This puts roughly $10 billion in annual sales at risk for Celgene.

In comparison, Celgene’s competitors seem miles ahead based on their reported annual revenues alone, with Eli Lilly (LLY) at $24.6 billion and Novartis (NOVN) at $51 billion.

Celgene’s response to this impending “doom” is to come up with a promising stable of treatments and medications to offset their future losses. This is where Bristol comes in.

While it’s still up in the air if the merger would actually benefit Bristol massively, Celgene seems to be on a win-win situation here. With the money from Bristol, Celgene can relax a bit about the competitors chomping at the bit to decimate Revlimid’s status in the market. On top of that, they’ll be able to insulate themselves (and portfolios) from potential failures in their pipeline.

What about Bristol?

Well, you can look at the merger as Bristol paying for Celgene’s ideas. With a pipeline brimming at the seams, Bristol would be able to have choice picks on what could be their next blockbuster drug especially in light of the weakening performance of Opdivo in the market.

Not only that, another Bristol mega-blockbuster drug Eliquis, an atrial fibrillation medication, is expected to see a decline in sales starting 2022 due to its pending patent expiration.

So far, Bristol shares have experienced a drop by -25.29% or -$17.25, putting it at $50.97 per share in comparison with its previously recorded high of $68.22 last week. The past 52 weeks have also seen Bristol trade as low as $44.3. Meanwhile, its current earnings-per-share (EPS) is estimated to sit at around $1.04 per share.

These estimates make a number of investors bullish with regard to the near-term reports of Bristol a modest prediction of an 11.3% increase in its average price target. This is estimated to lead to a potential market cap rise to $93.04 billion.

How realistic is this promising future of overflowing pipeline for Bristol?

Details of the merger reveal that Celgene will get a contingent value right (CVR) worth a one-time $9-per-share bonus if the company’s three most promising treatments snag FDA approval on set dates: multiple sclerosis drug Ozanimod and Liso-cel by December 31, 2020, as well as bb2121 by March 31, 2021.

Is it achievable?

It looks like it since all three drugs already have available data and are set for late-stage trials necessary for regulatory approvals.

Is this a slam dunk deal then?

This depends greatly on how Celgene works out the kinks of their drugs. So far, Ozanimod was rejected by the FDA in 2018 due to doubts on the company’s capacity to execute the trials effectively. Will Bristol’s backing guarantee approval in the next round? Possibly, especially since the FDA’s rejection was reportedly due to a lack of potential funding by Celgene to support their trials.

Whether or not this deal pushes through heavily depends on the other major shareholders of Bristol. So far, the opposition raised by the three investors hasn’t really resulted in the company wavering on this plan.

However, April 12 is a long way to go when it comes to finalizing this takeover and both sides are still working on persuading their fellow shareholders to stand by their arguments.

What about Celgene? How does this takeover sound to their investors?

Celgene’s investors should be celebrating since this merger has a lot of promising upsides for them and quite frankly, offers a highly lucrative escape plan. Bristol’s buying price of $102.43 per stock is a 54% premium in comparison to the average price of per Celgene share. The CVR incentive offered by Bristol definitely adds the icing to the cake for Celgene investors as well.

Overall, the deal seems to be a reasonable move for both Celgene and Bristol. While the merger definitely has its fair share of risks, Bristol’s key takeaway here is the plethora of opportunities to grow their SKUs. Even with the threat of Celgene’s Revlimid losing patent protection in the years to come, this takeover still offers good strategic positioning shots and promising pipeline expansion for Bristol.

After all, both companies are not necessarily goldmines for investors and are poised to crash sometime soon given their recent performance trends. Perhaps joining forces would give them a fighting chance to ward off more hostile takeovers or worse, a bankruptcy.

February 28, 2019

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February 28, 2019
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June 22, 2018

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June 22, 2018
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June 21, 2018

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Here Comes the Next Revolution

Diary, Free Research, Newsletter, Research

Technology and biotechnology are the two seminal investment themes of this century.

And while many tech companies have seen share prices rise 100-fold or more since the millennium, biotech and its parent big pharma have barely moved the needle.

That is about to change.

You can thank the convergence of big data, supercomputing, and the sequencing of the human genome, which overnight, have revolutionized how new drugs are created and brought to market.

So far, only a handful of scientists and industry insiders are in on the new game. Now it's your turn to get in on the ground floor.

The first shot was fired in December 2017 when CVS (CVS) bought Aetna (AET) for an eye-popping $69 billion, puzzling analysts. A flurry of similar health care deals followed, with Berkshire Hathaway (BRK.A), Amazon (AMZN) with its Verily start-up, and J.P. Morgan (JPM) joining the fray.

March followed up with a Cigna (CI) bid for Express Scripts, a pharmacy benefits manager. Apple (AAPL) has suddenly launched a bunch of health care-based apps designed to accumulate its own health data pool.

What's it all about? Or better yet, is there a trade here?

No, it's not a naked bid for market share, or an attempt to front run the next change in health care legislation. It's much deeper than that.

In short, it's all about you, or your data to be more precise.

We have all seen those clever TV ads about IBM's (IBM) Watson mainframe computer knowing what you want before you do. In reality we are now on the third generation of Watson, known as Summit, now the world's fastest super computer.

Summit can process a mind-numbing 4 quadrillion calculations per second. This is computing muscle power that once was associated with a Star Trek episode.

Financed by the Department of Defense to test virtual nuclear explosions and predict the weather, Summit has a few other tricks up its sleeve. It can, for example, store every human genome and medical record of all 330 million people in the United States, process that data instantly, and spit out miracle drugs almost at whim.

You know all those lab tests, X-rays, MRI scans, and other tests you've been accumulating over the years? They add up to some 30% of the world daily data creation, or some 4 petabytes (or 4,000 gigabytes) a day. That's a lot of zeroes and ones.

Up until a couple of years ago, this data just sat there. It was like having a copy of the Manhattan telephone book (if it still exists) but not knowing anyone there. Thanks to Summit we now not only have a few friends in Manhattan, we know everyone's most intimate details.

I have been telling readers for years that if you can last only 10 more years you might be able to live forever, as all major human diseases will be cured during this time. Summit finally gives us the tools to achieve this.

Imagine the investment implications!

The U.S. currently spends more than $3 trillion on health care, or about 15% of GDP, and costs are expected to rise another 6% this year. To modernize this market, you will need to create from scratch four more Apples or six more Facebooks (FB) in terms of market capitalization. You can imagine what getting in early is potentially worth.

Crucial to all of this was Craig Venter's decoding of his own DNA in 2000 for the first time, which cost about $1 billion. Today, you and I can get 23andMe, Ancestry.com or Family Tree DNA to do it for $100, with most of the work done in China.

Of course, key to all of this is getting the medical data for every U.S. citizen on line as fast as possible. The Obama administration began this effort seven years ago. Remember those gigantic overstuffed records rooms at your doctor's office? You don't see them anymore.

But we have a long way to go, and 20% of the U.S. population who don't HAVE any medical records, including all of the uninsured, will be a challenge.

To give you some idea of the potential and convince that I have not gone totally MAD let me tell you about Amgen's (AMGN) sudden interest in Iceland. Yes, Iceland.

There, a struggling, young start-up named deCode sequenced the DNA of the entire population of the country, about 160,000 individuals. It tried to monetize its findings but it was early and lost money hand over fist. So, the company sold out to Amgen in 2012 for $415 million.

Until then targeting molecules for development was based on a hope and a prayer, and only a hugely uneconomic 5% of drugs made it to market. Using artificial intelligence (yes, those NVIDIA graphics processors again) to pretest against the deCode DNA data based it was able to increase that hit rate to 75%.

It's not a stretch to assume that a 15-fold increase in success rates leads to a 15-fold improvement in profitability, or thereabouts.

Word leaked out setting off a gold rush for equivalent data pools that led to the takeover boom described above. And what happens when the pool of data explodes from 160,000 individuals to 330 million? It boggles the mind.

As a result, the health care industry is now benefiting from a "golden age" of oncology. Average life expectancy for chemotherapies is increasing by months at a time for specific cancers.

All of this is happening at a particularly fortuitous time for drug, health care, and biotech companies, which are only just now coming out of a long funk.

Traders seemed to have picked up on this new trend in May, which is why I slapped on a long position in the iShares Nasdaq Biotechnology ETF (IBB) (click here for a full description).

Like many companies in the sector it is coming off of a very solid one-year double bottom and is going ballistic today.

The area is ripe for rotation. Other names you might look at include Biogen (BIIB), Celgene (CELG), and Regeneron (REGN).

If you have grown weary of buying big cap technology stocks at new all-time highs, try adding a few biotech and pharmaceutical stocks to spice this up. The results may surprise you.

As for living forever, that will be the subject of a future research piece. The far future.

Biotech and Health Care Stocks to Buy at the Bottom

Diary, Newsletter, Research

One has to be truly impressed with the selloff in biotech and health care stocks over the past year.

Since May, there were signs that life was returning to this beleaguered sector. Then Mylan decided to raise the prices of it's EpiPen by 400% and it was back to the penalty box.

Let?s gouge poor small children who may die horrible deaths if they can?t afford our product. That sounds like a great marketing and PR strategy. NOT!

Once the top performing sectors of 2015, they went from heroes to goats so fast, it made your head spin.

What I called ?The ATM Effect? kicked in big time.

That?s when frightened investors run for the sidelines and sell their best stocks to raise cash. After all, no one wants to sell other stocks for a loss and admit defeat, at least in front of their clients.

It?s not that the companies themselves were without blood on their hands. Valuations were getting, to use the polite term, ?stretched? after a torrid five-year run.

Gilead Sciences (GILD) soaring from $18 to $125?

Celgene (CELG) rocketing from $20 to $142?

It has been a performance for the ages.

If a financial advisor wasn?t in health care, chances are that he is driving for Uber in a bad neighborhood by now.

Then there was The Tweet That Ate Wall Street.

Presidential candidate Hillary Clinton made clear in a broadcast on September 21, 2015 that the health care industry would be target number one in her new administration.

Her move was triggered by an overnight 5000% price hike for a specialty HIV drug by a minor player in the industry.

Among the reforms she would implement are:

1) Give the government power to negotiate drug purchases with the industry collectively.
2) Allow Medicare to import drugs from abroad to encourage price competition (which I already do with my annual trips to Switzerland).
3) Ban drug companies from using government grants to pay for sales and advertising.
4) Set an out of pocket limit for drugs bought through Obamacare at $250 a month, thus ending customers? blank checks.
5) Set a 20% of revenue minimum which companies must spend on research and development.

She certainly got our attention.

Competition in the drug industry? Yikes! Not what the shareholders had in mind.

Raise your hand if you think Americans aren?t paying enough for their prescription drugs.

Yes, I thought so.

Drug company CEOs aren?t helping their case by flying to press conferences to complain about the proposals in brand new $65 million Cessna G-5?s.

And that Mylan CEO, Heather Bresch? She took home $18 million last year, and she?s just a kid.

Here?s the key issue for health care and biotech for investors. It all about politics.

Even if Hillary does get elected, the government is likely to remain gridlocked for another 4-8 years. The Democrats will almost certainly retake the Senate in 2016, thanks to a highly favorable calendar, and keep it for at least two years.

But the heavily gerrymandered House is another story.

With the current districting map, the Democrats would have to win 57% of the national vote for them to regain a majority in both houses.

That is a feat even Barack Obama could not pull off in 2008, when a perfect storm in favor of his party blew in.

A Hillary appointed liberal Supreme Court could bring an end to gerrymandering, but that is a multiyear process. Texas hasn?t had a legal districting map since 2000.

Even with Democratic control of congress, Hillary won?t get everything she wants.

Remember, Obamacare passed by one vote only after a year of cantankerous infighting, and then, only when a member changed parties (Pennsylvanian Arlen Spector).

That means few, if any, Clinton proposals will ever make it into law. If they do, they will be severely watered down and subject to the usual horse-trading and quid pro quos.

Beyond what she can accomplish through executive order, her election may be largely symbolic.

Therefore, the biotech and health care stocks are a screaming ?BUY? at these levels, provided you ignore Mylan (MYL), now the poster boy for corporate greed.

It?s a political call I can only make after spending years in the White House and a half century following presidential elections.

It?s easy to understand why these stocks were so popular, and are found brimming to overflowing in client portfolios and personal 401ks and IRAs.

We are just entering a Golden Age for biotech and health care.

Profit growth for many firms is exceeding 20% a year. Hyper accelerating biotechnology is rapidly bringing to market dozens of billion dollar earning drugs that were, until recently, considered in the realm of science fiction.

And we have only just gotten started. Cures for cancer, heart disease, arthritis, diabetes, AIDS, and dementia? You can take your pick.

Most biotech and health care stocks have given up all of their 2015 gains. Here is a chance to hoover up the fastest growing companies in the US at 2014 prices.

If you missed biotech and health care the first time around, you?ve just been given a second chance at the brass ring.

Here?s a list of five top quality names to get your feet wet:

Gilead Sciences (GILD) ? Has the world?s top hepatitis cure, which it sells for $80,000 per treatment. For a full report, see the next piece below.

Celgene (CELG) ? A biotech firm that specializes in cancer cures (thalidomide) and inflammatory diseases. It also produces Ritalin for the treatment of ADHD.

Allergan (AGN) ? Has the world?s third largest low cost generic drug business. In addition, it has built a major portfolio of drug therapies through more than two dozen acquisitions over the last decade.

Regeneron (REGN) ? Already has a great anti-inflammatory drug, and is about to market a blockbuster anti cholesterol drug that will substantially reduce heart disease.

HCA Holdings (HCA) ? Is the world?s largest operator of for profit health care facilities in the world.

If you want a lower risk, more diversified play in the area, you can buy the Health Care Select Sector SPDR (XLV). Please note that a basket of stocks is going to deliver a fraction of the volatility of single stocks.

Therefore, we have to be more aggressive with our positioning to make any money, picking call option strikes that are closer to the money.

Johnson and Johnson (JJ) is the largest holding in the (XLV), with a 12.8% weighting, while Gilead Sciences (GILD) is the fourth, with a 5.1% share. For a list of the largest components of this ETF, please click: https://www.spdrs.com/product/fund.seam?ticker=XLV.

The other classic play in this area is the Biotech iShares ETF (IBB) issued by BlackRock (click their link: https://www.ishares.com/us/products/239699/ishares-nasdaq-biotechnology-etf ).

Their largest holding is Biogen (BIIB), followed by Gilead Sciences (GILD), Celgene (CELG), Amgen (AMGN), and Regeneron Pharmaceutical (REGN).

I?ll be shooting out Trade Alerts on biotech and health care names as soon as I think the coast is clear.

Until then, enjoy the ride!

Say You Were A Biotech Investor, Did You?

Celgene Will Make a Comeback

Diary, Newsletter, Research

It was known as the ?Tweet that sank Wall Street.?

When presidential candidate Hillary Clinton attacked the drug industry last summer, the entire pharmaceutical and health care industries were taken out to the woodshed and beaten like the proverbial red headed stepchild (my apologies in advance to red heads).

One of the principal victims was cancer drug maker Celgene (CELG), which dropped some 24.6% from top to bottom.

Never mind that Clinton is unlikely to get what she wants, even if she wins the election.

For that, you need a congress in your pocket, a probability that is at least 5-9 years away.

That is, unless Donald Trump continues his campaign for the Republican nomination.

However, in this nervous, twitchy, gun shy trading environment, it is shoot first and ask questions latter. So Celgene shares sank, whether it was warranted or not.

Celgene is really all about one drug, Revlimid, a blood cancer treatment that accounts for 75% of its sales. Last year, the company sold $7.6 billion worth of this complex molecule.

To wean itself off of its overdependence on a single drug it has embarked on a number of aggressive initiatives.

Since the spring of 2012, it has increased the use of its Abrazane drug to treat late stage pancreatic cancer, the disease that killed Steve Jobs. It has won regulatory approval for the psoriasis drug Otezla.

It has also pursued the mergers and acquisitions road to growth, picking up some two-dozen small drug makers in recent years. The $7.2 billion purchase of Receptos was a big one, which manufactures Ozanimod, a drug used to treat ulcerative colitis and multiple sclerosis.

Celgene also picked up Juno Therapeutics for $1 billion a few months ago, a maker of innovative cellular immunotherapies.

If this ambitious strategy works, Celgene?s net earnings should continue to grow at a 25% annual rate for the next five years. That means the shares should triple by 2020.

This is why the company?s shares command a lofty multiple of 18 times 2016 earnings, the higher end of the range for this industry.

So the next time Hillary opens her mouth, use the dip in (CELG) shares to load the boat. It would also be helpful if stock investors shift their focus from value back to growth.

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Say You Were A Biotech Investor, Did You?