Biotech Values

[Mufaso]

Barron's-Biotech Stocks Are on a Tear. They Could Keep Climbing.
https://www.barrons.com/articles/biotech-stocks-rally-outlook-c4cd1b52

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It’s comeback time in biotech.

Stocks in the sector accelerated a four-month run on Tuesday as the closely watched SPDR S&P Biotech exchange-traded fund jumped 5.7%. It closed above $100 a share for the first time in just over two years, though it has a long way to go to regain its pandemic-era highs.

The ETF, and the sector at large, are still battling back from a multiyear slump that started in early 2021. The fund, with the stock ticker XBI, fell more than 60% between early February of that year and late October 2023.

A reversal appears to have set in last fall. As of the close on Tuesday, the XBI was up a bit more than 60% since the close on Oct. 27, while the S&P 500 SPX had climbed 23%. That closing level, $102.89, compares with prices above $160 during the pandemic, but was the highest since late January 2022.

Months ago, the incipient biotech rally seemed largely based on expectations that 2024 would bring lower interest rates, and it came alongside surges in other small-cap indexes. But in recent weeks, much of the strength appears to have been sector-specific. Investors are once again turning toward biotech, intrigued by promising medical-trial data, and anticipation that big pharmaceutical companies will snap up smaller players they think could improve their pipelines of new drugs.

“Peak pandemic notwithstanding, we are in the midst of the most pronounced Biotech rally in over five years,” Mizuho healthcare equity strategist Jared Holz wrote in a Tuesday email to investors. “As long as market breadth allows for improved returns across small-cap equities, Biotech may move even higher especially if the M&A backdrop remains robust.”

The Tuesday jump came after the biotech Viking Therapeutics VKTX announced data that suggests that its experimental weight loss drug VK2735 could emerge as a serious challenger to the new obesity medicines from Eli Lilly LLY and Novo Nordisk NVO. Viking shares leapt 121% on the day.

In an email to investors early Wednesday, Deutsche Bank healthcare sector specialist Juliette Lafille suggested that Viking’s outperformance had set off a short squeeze across biotech, noting that a number of highly shorted biotechs had double-digit increases on Tuesday.