Haggerston BioHealth Market Review Week 19: Fallers, Gainers & Top Scoring Stocks

Summary

• It has been a bad few weeks for the biotech sector as COVID-19 fears, disruption to BAU, and impending US elections leave investors hesitant, and companies' development plans on hold.
• I have revamped my weekly newsletter to include top gainers and fallers, plus 5 tips based on my proprietary algorithmic scoring system.
• As promised, virtual trading for HB Subscribers will become more active starting this week, taking more account of market timing, with positions increased and decreased.
• Subscribers will be able to follow all trades in real-time via the Haggerston BioHealth embedded portfolio, of take advantage of the Google Sheets document which provides more flexibility.
• As usual, I will be sending 3-5 stock deep-dives this week to subscribers and going forward, as well as exclusive new trading ideas.

Discussion

S&P 500 performance vs ETFs IBB, XLV, XBI. Source: TradingView

As we can see above the biohealth sector has been under serious pressure in recent weeks, under-performing the S&P 500 significantly, even while the S&P itself has been on a downtrend.

A gloomy outlook on the pandemic, which shows no signs of abating in the near-term, is a significant contributor to the downtrend. Biotechs' developing COVID vaccines or treatments being heavily punished by the market as early optimism and sky high share prices dissipate, whilst others are facing serious disruption to their clinical trials, sales distribution channels and overall operations owing to the pandemic, and are having to put crucial development plans on hold due to a lack of access to physicians, hospitals and clinics.

The pattern could reverse quickly, however. Many of the worst pandemic fears - the seasonality of the virus and fears of a "second wind", for example, may be overblown, which may make it possible for companies to resume operations more normally towards the end of the year, and recover lost progress and sales, whilst the prospects of a successful vaccine or treatment gaining approval remain strong, although governments playing politics with treatment release schedules has led to an overall feeling of scepticism, I believe.

In the US, the upcoming elections are unlikely to be good news for biohealth stock prices as the threat of new laws and protocols hangs in the air, and uncertainty leads to companies acting more conservatively. As such, when selecting stocks to back, investors will need to up their due-diligence game, and study companies more intently than ever in order to find winners.

Haggerston BioHealth - a new approach

I have been busy revamping the structure of the live virtual portfolios I am maintaining in the subscriber section of Haggerston BioHealth. I have long been promising more active trading and more time-sensitive and considered trades shared with subscribers in the most timely manner and now I am ready to deliver.

Whilst its important to remember that these are virtual portfolios, I am treating them as seriously as a fully-invested portfolio as I expect to attract investment based on performance over the coming months, and will provide further detail and updates on this project for those interested.

I have revamped this weekly newsletter to include news and analysis of top gainers and fallers in the >1,200 stock universe I monitor and analyse using my stock analytics spreadsheet, which is available exclusively to Haggerston BioHealth subscribers.

Via the subscriber-only resources you can see all of my trades in real-time, and there will be many to monitor and take note of in the coming weeks as I ramp up activity.

This week I am likely to reduce holdings in some of my top-performing stocks based on the fair value price targets I have set and the ongoing sector downturn, and will send a note to all subscribers detailing all trades as well as updating the document in real-time. I look forward to discussing these trades and other opportunities in the chat room.

Meanwhile, I hope all of my followers find the below analysis useful. I will be making a fuller version (with more stock tips, deep dives and due diligence) available exclusively to subscribers, whilst circulating a "lite" version weekly newsletter to my followers and prospective subscribers.

Let's begin with an overview of the HB Live and HB Pure Biotech portfolios, then look at weekly gainers and fallers across my BioHealth research universe of >1,200 stocks, and finally, look at the best-scoring companies this week, based on my unique 25-point algorithmic scoring system.

Making money in the biotech sector has been trickier than ever in the past month, but the opportunities are there - hence this is a great time to be ramping up the analysis and due diligence, and delivering better-than-ever stock recommendations based on fundamental analysis and market timing. Subscribers can expect to receive a full list of my trades later this week as I make final decisions.

HB Portfolio Live Performance

HB Live portfolio asset distribution. Source: subscriber only resources. (HB Live portfolio full detail: 44 stocks + performance analysis, deep dive research notes and 5-year integrated financial statements with financial modelling and forecasts; is available exclusively to subscribers of Haggerston BioHealth.)

Turmoil in the biotech markets has seen the HB Live portfolio decline from >8% as at COB Friday 7th August to just ~3% less than a month later. Prior to that, the portfolio had touched +12% and was out-performing the S&P 500 as well as key benchmark ETFs.

The portfolio has held up well against performance of the benchmark ETFs iShares Trust Nasdaq Biotechnology ETF (IBB) (currently -3.6%) and SPDR S&P Biotech ETF (XBI) (+1.1%) but has fallen far behind the S&P 500 (+12.1%) since its May 1st launch.

The disastrous 75% drop in the share price of Akebia Therapeutics (AKBA), whose lead candidate Vadadustat hit safety concerns in its phase 3 trials (discussed below) dragged the overall portfolio performance down, although the declining sector performance also saw Autolus (AUTL) decline by 16%, Abiomed (ABMD) by 10.3%, and Biospecifics (BSTC) by 9%, whilst Alpha Pro Tech, the PPE equipment and mask supplier whose stock soared to $25 in late July, has been in freefall, despite the company reporting larger orders ($46.8m) for protective masks and, based on my analysis, its shares being worth >$40.

HB Live portfolio KPIs as at COB 2020.09.04 are available exclusively to subscribers.

On the positive side, Corcept therapeutics gained 57% thanks to a likely court decision to prevent generics from competing against its best-selling cortisol modulating drug Korlym, whilst the likes of Novocure (NVCR) +32%, TG Therapeutics (TGTX) +30% and Joint Corp (JYNT) +27% continue to trade at a substantial premium to purchase prices, as shared with subscribers at the time.

HB Pure Biotech Performance

HB Pure Biotech portfolio performance as at COB 2020.09.04 available exclusively to Haggerston Biohealth subscribers.

My decision to back vaccine-developing stocks on the periphery of Operation Warp Speed ("OWS") was somewhat premature, given that the stock prices of Vaxart (VXRT), Inovio (INO), and Novavax (NVAX) keep falling, but I remain confident that my thesis - that there is a long way to go and many twists and turns ahead in the "race" to develop a SARS-Cov 2 vaccine, and that all 3 stocks remain in contention to deliver a best-in-class vaccine - holds true. Deep dive research notes on all 3 stocks are available via the subscribers section.

At present, the likes of AstraZeneca (AZ), Pfizer (PFE) and Moderna (MRNA) are considered front-runners as they receive OWS funding and head into late stage trials, but 2 out of these 3 vaccines use mRNA, a technique that has never been tried before, making them an outside bet on safety grounds, whilst the demand for vaccines is greater than ever (>500m doses per annum will be required in the US alone it has been estimated) which suggests to me that governments will be eagerly anticipating the trial results of NVAX, INO and VXRT, providing near-term price catalysts.

The early stage biotechs I have backed have also been caught in the general sector downturn, making the HB Pure Biotech's performance distinctly average since I seeded it at the beginning of August, but this is a risk-on portfolio, and each investment was based on a longer-term thesis that recent events have not dissuaded me from. Patience and courage will be keys to success - I retain strong belief the catalysts will come.

BioHealth stocks: Weekly Gainers

biotech, pharma, healthcare best performing stocks - past week KPIs. Source: available to all Haggerston BioHealth subscribers.

The past week did see some biohealth stocks make sizable gains however. Tracon Pharmaceuticals (TCON) posted the week's largest gain, as its share price rose 64%, from $1.9 to $3.1, thanks to a large share purchase by Opaleye Management, a ~10% shareholder in the company, and some insider buying by the company's President and CEO Charles Theuer. Tracon develops targeted therapies for cancer, ophthalmic, and fibrotic diseases. The company has a miniscule market cap of $26.3m, but may be on a fast track (according to a recent investor presentation) for approval for its subcutaneous PDL1 inhibitor Envafolimab (pivotal data is expected in 2022) and have 4 clinical assets in development. The company has a model of bringing late stage assets developed in China to the US Market.

Corcept Therapeutics (CORT), a HB Live portfolio pick (my analysis here), also enjoyed stellar (+57%) gains in last week's trading. The catalyst was positive news, supposedly reported by Bloomberg, that the company looked set to win its court battle against Teva Pharmaceuticals (TEVA), protecting its >$300m selling cortisol modulating treatment Korlym from generic drugmaker competition. The company is now trading at $20, its highest level since the beginning of 2018.

Jounce Therapeutics (JNCE) made a weekly gain of 37% after the company announced a licensing deal with Gilead (GILD), in which Jounce will hand Gilead the exclusive rights to develop its pre-clinical immuno-oncology monoclonal antibody candidate JTX-1811, in exchange for an $85m up-front payment, $35m equity investment, up to $658m in milestone payments, and a high-single-digit royalty share on all net sales, should JTX-1811 become commercialised. An IND is expected to be filed in H121. Jounce has 3 other development-stage oncology programs ongoing. Its shares are now trading at $6.65 - their highest price since June. In late 2019, the stock traded >$9.

Medical imaging company Nano-X Imaging (NNOX) continued its impressive post-IPO gains. Nano-X raised $190m at $18 per share in late August, but saw shares trade at $40 on 2nd September before declining slightly to end the week at $36.4. The Jerusalem-based company is a medical screening as a service ("MSAAS") provider and raised $137m from international investors prior to joining the Nasdaq. Its market cap has already risen to $1.62bn.

And finally, Athenex Inc (ATNX) had a strong week, as the oncology focused drug developer had its marketing application for oral paclitaxel and encequidar (Oral Paclitaxel) for the treatment of metastatic breast cancer accepted for priority review by the FDA. The company has a second late stage candidate - a Tirbanibulin ointment for actinic keratosis at the NDA stage (according to a recent corporate presentation). Its share price leapt to $14.55 - a post-pandemic selloff high. The company traded as high as $20 in July 2019.

BioHealth stocks: Weekly Fallers

biotech, pharma, healthcare worst performing stocks - past week KPIs. Source: available to all Haggerston BioHealth subscribers.

Unfortunately, HB Live portfolio pick Akebia Therapeutics' (AKBA) stock took a nose-dive last week, after its lead candidate Vadadustat - targeting anemia caused by kidney failure - missed key safety endpoints in its phase 3 trials. The studies did meet efficacy endpoints demonstrating non-inferiority to Amgen's (AMGN) standard-of-care darbepoetin alfa, and the company says it will file a marketing application in 2021. As such, at a price of $2.7, Akebia's stock looks to be a tempting "buy" opportunity.

Sunesis Pharmaceuticals (SNSS) stock fell 52% to $1.34, having traded as high as $11 in March 2020 prior to the pandemic sell-off, after the company announced a reverse 1:10 split of its shares in order to maintain compliance with the Nasdaq minimum $1 listing requirement. Sunesis is developing its PDK1 inhibitor SNS-510. The company cut 30% of its workforce in July, and is rumoured to be looking at a buyout or merger in order to stay afloat.

Amarin Corporation plc (AMRN) shares fell by 44% after the company lost a bid to revive patents on its heart medicine Vascepa, the company's only candidate, allowing generics to enter the market. The treatment had delivered some positive data and shares traded at $24 in late 2019, before crashing in March this year as its patents for Vascepa were declared invalid. As at Q220, the company had $611m of near term cash, according to a corporate presentation.

Seelos Therapeutics (SEEL) also endured a rough week as its share plummeted by 34% last week, to $0.59 after the company launched a share offering at a price of $0.79 in order to raise ~$7m. The company is focused on developing treatments for central nervous system disorders, including SLS-002, an intranasal racemic ketamine for patients with suicidality in post-traumatic stress disorder and depressive disorder, and SLS-005 for Amyotrophic lateral sclerosis , which recently entered a phase 2b/3 trial. CNS treatments are notoriously difficult to advance, but the bottoming out of the company's may be of interest to risk-on investors.

Finally, Vir Biotechnology (VIR) shares lost 29% last week, and now trade at $28.5, having hit $53 in late August. The clinical-stage immunology company focused on infectious diseases had been gaining on the promise of its SARS-Cov 2 treatment pipeline, and also has an HBV portfolio in development with partner Alnylam (ALNY). According to its recent corporate presentation the company hopes to initiate a phase 2/3 trial of candidate VIR-7831 for treatment and prevention of SARS-Cov 2 and future coronavirus outbreaks. COVID-19 associated stocks have been in freefall in recent weeks but this may be a company to keep an eye on, with the pandemic entering a fresh period of turmoil amid a gloomy overall outlook.

BioHealth stocks - HB Live top-rated stocks

biotech, pharma, healthcare HB picks of the week - past week KPIs. Source: available to all Haggerston BioHealth subscribers.

Align Technology, Inc. (ALGN) has been on radar for some time and is a stock I wish I had bought back in March when it was trading at $148. The company's shares have gained steadily to reach $309 at time of writing, but are still some way off their July '19 peak of $395. Align has a market cap of $24bn - a 14.4% premium to its enterprise value (as calculated by TradingView) and posted revenues of $2.4bn (EPS of $6) in FY19, with net profits an impressive 18.4%. Align is engaged in the design, manufacture, and market of orthodontics, restorative, and aesthetic dentistry products. Based on my analysis of 25+ data points, rated 1-5, with 1 being the best score, Align scores fifth-highest out of my universe of >1,200 biohealth stocks. The company's share price tends to undergo peaks and troughs, hence it may be worth waiting for a pullback before opening a position. There is no dividend, but its solid, recession-proof revenue streams and impressive growth (FY revs have grown to $2.4bn from just $387m in 2010) offer much promise.

Bio Rad Laboratories (BIO) is a stock I have recommended in the past and currently hold in the HB Live portfolio. Bio Rad shares hit an all-time high of $537 at the end of July, but are currently trading at $484 after being caught up in the systemic biotech sector slump.

Although the company's 2 main business divisions - Life Sciences and Clinical Diagnostics - generate so-so profits ($74m in Q120 and $51m in Q220) the company has a 35% equity stake in Sartorius AG, a German company whose share price growth has been exceptional in the past year, meaning Bio-Rad has realised huge gains, and posted incredible EPS of $32.5 in Q220 and $23 in Q120. It is difficult to determine if these gains will continue - if they do not it could lead to a share price slump, but at current price, buying Bio-Rad stock may represent an opportunity to realise short-term gains. I would look to increase my holding in the company if the price drops below $470. A par value for Bio Rad shares is likely to be in the region of $500.

XBiotech (XBIT) is another stock I have covered recently and am holding in the HB Live portfolio. I like the company's novel approach to developing its True Human™ (naturally occurring) monoclonal antibodies, which proved highly successful when its IL-1a blocker Bermekimab was sold to Janssen in a $750m deal, plus a potential $600m in milestone payments, last December.

This sale has given XBIT a huge funding war chest, but investors have backed away from the company - unsure where the next big deal or potential blockbuster deal is coming from - which has dropped the share price from a Jan '20 high of $25, to $18.3 at the time of writing. XBIT is engaged in developing convalescent plasma solutions for COVID-19 treatments and has seen its stock climb as a result, but the long-term value is in its unique technology and stable of candidates - which includes a new IL-1⍺ candidate, targeting brain damage and neurological deficit after stroke, its infectious disease pipeline, and strong cash position, supplemented by ongoing revenues from the Janssen deal. Based on my scoring system of 1-5 with 1 being the best score, XBIT is ranked third overall (out of >1,200 stocks) with a score of 2.29.

Amgen (AMGN) is another stock that scores very highly based on my analytical scoring system. The company's shares hit an all-time peak of $261 in mid-July but have since pulled back to $248 at the time of writing. The company has a large market cap of $145.5bn but trades at a discount to its enterprise value of $162.4bn. In FY19 EPS was $13 on revenues of $23.3bn, representing a PE of 20x. The net profit margin was an impressive 34%.

Amgen has a large and diverse portfolio of commercialised drugs, led by Enbrel, a rheumatoid arthritis (and other chronic diseases) treatment which made sales of $5.2bn in 2019, white blood cell booster Neulasta ($3.2bn of sales) and osteoporosis treatment Prolia ($2.7bn of sales). The company also pays a dividend which yields 2.58%. As such, Amgen strikes me as a strong and steady long-term hold opportunity with plenty of upside potential - the company has an exciting development pipeline hence there will be no shortage of upcoming price catalysts.

Finally, Novo Nordisk (NVO) came onto my radar this week owing to its strong HB Live score of 2.4 - the fifth highest score in my biohealth stock universe. Trading at $65.1 at the time of writing, close to its 52-week peak of $69, the Danish drug manufacturer that specialises in Diabetes treatments has grown revenues from $10.9bn in 2010 to $18.3bn in FY19, achieving a net profit margin of 32% and posting EPS of $2.5 for a PE ratio of 25x.

The diabetes treatment market is growing as the condition is becoming more prevalent - especially Type-2 diabetes, a market that is expected to nearly double in size from $31.2bn in 2015, to $58.7bn by 2025. There are numerous competitors in the field, but Novo has leading products in most treatment markets - such as orally administered and recently approved Rybelsus, injectable Ozempic ($1.65bn of sales in 2019), and best-seller Victoza - and blanket reimbursement coverage in place in the US market.

Analysts are forecasting 5.9% annual revenue growth for the company through 2026, to $27.3bn, and I can see such growth pushing the share price to new highs.