The Trend

This is the Hottest Sector of 2017



It was one of the most powerful moves we’ve ever seen.

Between January 2012 and 2015, the iShares NASDAQ Biotech Index (IBB) rallied from a low of 109.03 to 400.  All thanks in part to billions of dollars in mergers, 80 million retiring baby boomers, millions of newly insured Americans, and new innovation.

“Price gouging like this in the specialty drug market is outrageous.  Tomorrow I’ll lay out a plan to take it on,” Hillary Clinton tweeted.  It was enough to knock 20 points off the IBB in days.  Now, with new threats of regulation and price gouging, the rally was over.  The IBB would fall to 243.35 and remain in a tight range for the rest of the year.  No one wanted to touch it.

But we’re not counting the sector out just yet.  In fact, it’s offering what many consider to be the buying opportunity of a lifetime at such lows.  Already, in the first 10 days of the year, the IBB is up 8%, as compared to a 1% gain for the S&P 500.

Most of that gain is thanks to new mergers.  Not even two weeks into the New Year, we’ve seen $6.9 billion worth of deals, up $1.1 billion from this time last year.  Takeda for example just announced it is buying Ariad Pharmaceuticals in a $5.2 billion deal to strengthen its oncology portfolio.  Merrimack Pharmaceuticals announced that it’s selling the rights to its cancer drug to Ipsen in a deal valued at $1.02 billion.

Better yet, some of the biggest pharmaceutical companies in the world are sitting with $220 billion in cash, ready to acquire and strengthen their aging pipelines.  Much of that could be unlocked if Donald Trump allow the repatriation of offshore cash, and reduces corporate tax.

In short, the opportunities in biotech are just beginning again. 

Within the biotech and pharmaceutical space, we have our eye on two sectors, including CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) and the marijuana trade.   

New advances in gene-editing technology could make it possible for us to harness the immune system of bacteria, and tweak it.  With such technology, we may be able to edit genes quickly and cheaply within days rather than weeks.  Think about that.  We’re working on a tool that could allow us to control which genes get expressed in animals, plants and maybe, humans.  It could allow us to remove undesirable traits and potentially add new ones.

Then there’s the excitement in biotech with marijuana.  In fact, there are many in the space interested in looking into the effectiveness of the drug for potential medical breakthroughs.

Biotech may have had a rough outing over the last two years.  But with new developments, new mergers and acquisitions, and heavy demand from baby boomers and newly insured Americans, this is a boom you may not want to miss.