4 Biotech Bets to Make as Healthcare Fears Become Overblown
The trading environment on Tuesday faced significant headwinds as concerns over the escalating conflict in Ukraine took center stage. The unsettling news included U.S.-supplied missiles being used against targets further away from the border and Russia’s altering of its nuclear doctrine. Despite this rocky start, by the day’s end, the major indexes managed to close in positive territory, with the NASDAQ leading the way with a rise of just over 1%. Meanwhile, small-cap stocks showed resilience, as evidenced by the Russell 2000 advancing by 0.8%.
Seizing on the early decline in equities, I opted to bolster my biotech portfolio using covered-call orders. I explained in my Monday column that the unease surrounding the new administration’s impact on healthcare policy and leadership at the FDA appears exaggerated. Here are four biotech stocks that present compelling investment opportunities based on recent market movements.
iShares Biotechnology ETF (IBB)
To kick off my investment approach, I established a position in the iShares Biotechnology ETF (IBB), which had experienced a decline of over 10% from its highs earlier this month. This ETF offers a well-diversified avenue to invest in the biotech sector, serving as an effective macro bet that the sector has been oversold. Investors seeking a less complicated entry point into the market might find this ETF an attractive choice.
Mirum Pharmaceuticals (MIRM)
Next, I added shares in Mirum Pharmaceuticals (MIRM). The recent downturn in the sector overshadowed the excellent third-quarter results that the company reported last week. Mirum’s quarterly losses fell significantly below expectations as the growth of Livmarli drove net product sales nearly 90% higher year-over-year. Additionally, the company raised its forward guidance, prompting Evercore ISI to initiate coverage with a “Buy” rating. With a strong balance sheet and ongoing progress toward profitability, Mirum looks poised to capitalize on its recent momentum.
Dynavax Technologies (DVAX)
I felt it necessary to increase my stake in Dynavax Technologies (DVAX) after vaccine stocks took a hit due to fears surrounding the appointment of a long-time vaccine skeptic to the position of Health and Human Services Secretary. However, these concerns seem overblown for Dynavax. Its premium hepatitis B vaccine, Heplisav-B, has demonstrated a remarkable 95% efficacy rate and significantly higher compliance rates, clearly superior to the previous standard of care. The vaccine continues to capture market share, which hit 44% in the third quarter within a growing market. With a robust cash reserve and a substantial stock buyback authorization, Dynavax appears well-positioned for future growth.
Rocket Pharmaceuticals (RCKT)
Lastly, I added to my position in Rocket Pharmaceuticals (RCKT). The recent sell-off has had a particularly harsh impact on clinical-stage biotech companies, and Rocket has not been spared. However, the company is on the brink of approval for its first gene therapy, with promising Phase 1 trial results for a treatment aimed at the rare Danon disease—potentially a game-changer in the field. Significantly, the median price target from analysts hovers in the high $40s, while its shares currently trade above $13.00 following the recent downturn, presenting a lucrative buying opportunity for investors.
Conclusion
The recent market corrections present unique opportunities in the biotechnology sector. With oversold conditions and fundamental strengths in companies like iShares Biotechnology ETF, Mirum Pharmaceuticals, Dynavax Technologies, and Rocket Pharmaceuticals, investors may find these stocks as attractive options amid the healthcare fears that seem disproportionate. As market dynamics continue to evolve, these biotech bets may prove to be resilient choices for savvy investors looking to capitalize on the growth potential in this sector.