Even in the risky biotech sector, investors are looking for slightly less risk.
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It would be difficult to overstate the poor performance of biotech stocks this year.
Even as investors rushed into defensive healthcare stocks, the
SPDR S&P Biotech listed fund
(ticker: XBI) fell 37% in 2022 at close of trading on Friday.
According to a report released Sunday by Jefferies analyst Michael Yee, more than 120 biotechnologies are traded for less than the cash held by the companies. That represents a quarter of publicly traded small- and mid-cap biotechnology, Yee wrote, a larger percentage of the industry than that traded at or below liquidity during the financial crisis in 2090 and 2009.
Some biotech stocks, however, remained bullish over the year. Of the 382 biotech stocks included in the SPDR S&P Biotech ETF or the
iShares biotechnology ETF
(IBB), 18 were still in positive territory at the end of last week.
Of these, a handful are very small companies, with market values below $ 600 million, while some are up by less than 3% from the previous year. The pharmaceutical company
AbbVie (ABBV), which is not generally considered a biotech title, is also on the list.
The favor shown to the other 10 so far this year provides some insight into what investors are looking for in biotech. Even in that inherently risky market, investors seek a little less risk. All stocks in the group have products that are generating revenue, placing them in a relatively select group in the industry.
Some of the winners since the beginning of the year are large companies, including
Amgen (AMGN), the largest biotechnology in terms of market capitalization, e
Vertex Pharmaceuticals (VRTX).
Amgen it was up 5.1%, while Vertex had gained 16%.
Vertex has received good news on drug development, particularly positive data on two Phase 2 studies of a new non-opioid pain reliever called VX-548. Mostly, however, it appears that investors are looking to big biotech as defensive tools, as well as large-cap companies in the healthcare sector.
For smaller biotechs that have seen their share prices soar this year, the common thread is that companies are generally trading companies with revenue. While many of the companies in the small- and mid-cap biotech market are developing drugs but have none on the market, investors are not rewarding those companies this year.
Instead, it’s like biotechnology
Pharmaceutical ions (IONS), which gains from the spinal muscular atrophy drug Spinraza, among other products. Spinraza is marketed by
Biogen (BIB). Ionis shares are up 19% this year.
Alkermes (ALKS), which sells numerous drugs, including Lybalvi psychiatric treatment, grew 19% this year. And
Exelixis (EXEL), which sells anticancer drugs, grew by 18%.
Biotechnologies with market values of less than $ 2 billion whose stock prices have risen this year also have products on the market. One is
Pharmaceutical Mirum (MIRM), up 58.4% this year, which received approval for its drug Livmarli in a rare genetic disorder called Alagille syndrome late last year. Mirum is a dear analyst: in a note published May 5, Evercore ISI analyst Josh Schimmer called her one of her “best choices”.
“If you are looking for a solid, low-key management team that has done a great job managing expectations while at the same time performing exceptionally well through development, regulatory and now commercial steps, check out MIRM,” he wrote. Schimmer.
Other small biotechnologies growing this year include
Albireo Pharma (ALBO), up 34%;
Pharmaceutical catalysts (CPRX), with a gain of 6.6%;
Bioscience of the meridians (VIVO), up 29%; And
Ironwood Pharmaceuticals (IRWD), up 3.2%. They all have products on the market.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
.