Our Large Cap Positions Firmly in The Black
It was a solid week for the biotech sector even in a subdued low-volume market during a holiday-shortened trading week. The main biotech indices are back near the top of a trading range they have been over the last two months or so after a nice double-digit gain off of the bear market bottom the sector had back in late September. It will be interesting to see if we can break through that ceiling next week if we get a “Santa Claus” rally. Some of the smaller cap stocks within the portfolio like Heat Biologics (NASDAQ: HTBX) and Pernix Therapeutics (NYSE: PTX) that have been beaten up since July seem to be getting a boost as tax loss selling for the year comes to a close.
Portfolio News:
Amgen (NASDAQ: AMGN) continued to ride the positive momentum from last week’s announced 27% dividend hike. Biogen Idec (NASDAQ: BIIB) also had a nice week perhaps due in part to Hillary Clinton announcing she plans to hike the budget for researching cures for Alzheimer’s if elected which is a focus area for the company.
Pacific Biosciences (NASDAQ: PACB) continues to be a juggernaut for the portfolio and is now up some 120% since inclusion into the portfolio. pSivida Corporation (NASDAQ: PSDV) had a solid rally after announcing positive Phase III trials results that showed its Medidur injectable insert for the treatment of chronic noninfectious posterior uveitis proved the product was highly effective in preventing recurrence of disease at six months in the intent-to-treat population. The next step is another 150 patient Phase III trial in India. However, given these extraordinary results, approval looks on track by the FDA for the first half of 2017. This news also makes the company a more likely buyout candidate as this implant should help patients avoid the side effects of current therapies such as steroids and biologicals.
Performance Update:
The overall biotech sector is now down 1.22% since the start of May not accounting for dividends. This is using the iShares Nasdaq Biotechnology ETF (NSADAQ: IBB), the largest ETF focused on the biotech sector with almost $9 billion in assets.
Our large cap core positions are now firmly in the black and up 4.16% on average while our small cap portion of our portfolio is a mirror image of the performance of our core positions and is down 4.14% on average, both not including dividends. Using the minimum 50% allocation recommended to our core positions gives us a blended gain of .01%, 123 basis points above our benchmark. The most conservative allocation of 75% dedicated to the large cap core positions results in a gain of 2.09%, 331 basis points above the benchmark.
Outlook:
It is nice to be back in the black as we head into the homestretch of 2015 and nicely above our benchmark. Next week we will see if we do get that Santa Clause rally and see if our small caps continue to benefit by the end of tax loss selling as we head into 2016. Finally, I want to wish everyone in the Biotech Gems community a healthy and prosperous New Year.