Small-Cap Biotech Is Where It’s At
After wildly seesawing at the end of last year, biotech and pharma stocks have partially recovered much of the ground lost after October’s sell-off.
The Nasdaq Biotechnology Index (NBI) has stabilized over course of this almost-over first quarter. Although the past two trading sessions have been tough.
That’s due to the fact that the NBI is heavy in large-cap biotech and pharma companies, meaning that if one tumbles, it can really hit the index.
How We Dodged a Bullet
That was the case last week, when big biotech Biogen (NASDAQ: BIIB) got punched in the face by the failure of a Phase 3 Alzheimer’s drug. Somewhere in the neighborhood of $20 billion in market value was wiped out of Biogen — a third of its market cap.
Biogen did seem to have potential based on its Alzheimer’s therapy, aducanumab.
Alzheimer’s is a huge, largely untapped pharmaceutical market. Even a partial success means the potential for a massive payday.
But after one of Biogen’s competitors working on a similar Alzheimer’s treatment failed, it raised the odds of Biogen suffering a similar fate.
Our fears were well-founded, too… Tech Profits followers dodged that bullet!
Up Next for Biotechs?
In the meantime, while the large-cap-heavy NBI has had a rough couple of sessions thanks to Biogen, we could see small-cap biotechs make all-time highs this year.
One good gauge for tracking small biotechs in general is the ETF that follows the S&P Biotechnology Select Industry Index, under the ticker XBI.
It’s my belief that changes at the FDA are increasingly stacking the deck in favor of innovative small biotechs while kicking the legs out from under the some of the bigger companies.
The drug regulator is approving record numbers of new generic drugs, bringing market pressures to bear on Big Pharmas’ ability to jack up prices on old, out-of-patent drugs.
But at the same time, the FDA has bent over backward to work with companies developing new, innovative and sorely needed therapies. We haven’t just seen record generic approvals over the past couple of years — we’ve seen record approvals for novel drugs, too.
That means 2019 is setting up to be a banner year for smaller biotech companies, which outperform not just Big Pharmas, but the market in general.
Furthermore, many of the best of these smaller names could be bought out just based on the potential of their pipelines and technology.
I’m currently working on your next hot move, and I’ll be telling you all about it soon.
To a bright future,
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily