4 Biotech Bets to Make as Healthcare Fears Become Overblown

Trading on Tuesday began with a tumultuous backdrop, as escalating geopolitical tensions surrounding Ukraine created waves of uncertainty in the market. This apprehension was amplified by reports of U.S.-supplied missiles striking targets further inland in Ukraine for the first time, coupled with Russia’s modifications to its nuclear policy. However, by the end of trading on the same day, most major stock indexes had managed to recover, with the NASDAQ leading the way with a gain of just over 1%, and the Russell 2000 showcasing resilience with a .8% increase.

In light of these events, I used the initial downturn in equities as an opportunity to bolster my biotech investments through covered-call orders. As I discussed in my previous column, concerns regarding the new administration’s potential shifts in healthcare policy and leadership at the FDA seem exaggerated. This sentiment presents an opportune moment to consider some noteworthy biotech stocks.

1. iShares Biotechnology ETF (IBB)

To capitalize on the increased volatility, I initiated a position in the iShares Biotechnology ETF (IBB), which had recently seen a decline of over 10% from its peak earlier this month. This ETF offers a diversified approach to investing in the biotech sector, allowing investors to make a macro bet on the industry without the need for in-depth stock selection. Given the recent sell-off, the ETF presents a valuable opportunity for those looking to re-enter the biotech market.

2. Mirum Pharmaceuticals (MIRM)

I also increased my holdings in Mirum Pharmaceuticals (MIRM), a compounding company whose strong third-quarter performance was overshadowed by the recent sector-wide slump. Mirum’s quarterly losses were significantly lower than anticipated, primarily due to a remarkable 90% year-over-year growth in net product sales attributed to its leading drug, Livmarli. The company’s management has also raised forward guidance, showcasing confidence in future performance. Evercore ISI’s initiation of coverage with a “Buy” rating further solidifies the company’s positive trajectory towards profitability.

3. Dynavax Technologies (DVAX)

Another stock I capitalized on was Dynavax Technologies (DVAX), particularly amid a concerning environment for vaccine developers. Recent fears regarding the appointment of a vaccine skeptic to oversee Health and Human Services have flattened vaccine-related stocks. However, these concerns surrounding Dynavax appear to be overblown. The company’s Heplisav-B, a groundbreaking hepatitis B vaccine known for its superior efficacy of 95% and improved compliance rates, continues to gain market share — clocking in at a notable 44% growth in the third quarter. Furthermore, Dynavax possesses a substantial cash reserve and a newly-announced stock buyback program, which should provide ample liquidity and support for ongoing growth.

4. Rocket Pharmaceuticals (RCKT)

Rounding out my recent acquisitions is Rocket Pharmaceuticals (RCKT). The company has faced severe sell-offs recently but has not wavered in its mission to pioneer gene therapies. Rocket is on the brink of obtaining approval for its first gene therapy, and recent Phase 1 trial results for its treatment of Danon disease showed promising efficacy. The stock currently trades just above $13.00, which presents a compelling entry point, especially given the median price target set by analysts is in the high $40s, indicative of significant potential upside.

Conclusion

The current dynamics of the biotech sector, both macroeconomic and company-specific, suggest a pivotal moment for investors. While the market’s reaction to external pressures like geopolitical conflicts is understandable, many of the fears surrounding healthcare policies seem disproportionate. The four biotech stocks highlighted — IBB, MIRM, DVAX, and RCKT — are poised to offer significant potential in the coming months as market conditions stabilize and investor sentiment normalizes. For those looking to allocate funds in a sector resilient to broader market uncertainties, these companies provide solid prospects fueled by innovative advancements and robust growth trajectories.