My Biotech Experiment Got Wild on Wednesday (As Usual)
Let's look at trading on the last open day of the year and one stock I added.
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Investors finally put the markets into the book on Wednesday. It was another solid year for equities. The S&P 500 rose 16.4% and the Nasdaq climbed 20.4%. While returns came in under those of 2023 and 2024, they were far above the historical average. Healthcare once again underperformed the major indexes. The State Street Health Care Select Sector SPDR ETF (XLV) , which has some $40 billion in assets under management and whose top holdings include names like Merck (MRK) , Eli Lilly (LLY) and AbbVie (ABBV) , advanced just over 12.5% last year.
Over the past five years, this ETF has risen less than 40% while the Nasdaq has nearly doubled over that time. One result of this divergence is that defensive sectors like consumer staples and healthcare now account for only 17% of the global allocation to equities. That is the lowest level since just before the dot-com crash. Over that two-and-a-half-year bear market, these sectors would vastly outperform the overall markets.
Being a natural contrarian, I am overweighting this area of the market as we enter 2026. The sector also has more reasonable valuations than the overall market. That said, biotech and biopharma stocks can be a fickle beast, especially in the small- and mid-cap areas.
Take Wednesday, which was pretty much business as usual for someone who holds 50 to 70 biotech and biopharma stocks in their portfolio. Let's look at three stocks that went in different directions:
Corcept Therapeutics (CORT) , which I'm in, was cut in half after the Food and Drug Administration declined to approve its hormone disorder therapy treatment. This came as a large shock to the market and to Corcept’s management. The government agency cited "inadequate data" for its surprising move. This likely means Corcept will have to initiate and execute a more exhaustive trial if it hopes to eventually receive the FDA’s blessing.
That said, the extent of the selloff was probably an overreaction. The company is already profitable and should deliver just over $800 million in revenues when the book closes on its fiscal 2025 and Corcept is seeing sales growth in the mid- to high teens. The company also has just over $500 million in net cash on the balance sheet. With the pullback bringing Corcept’s market capitalization down to just under $3.7 billion, I added significantly to my existing position using covered-call orders on Wednesday.
Going in the opposite direction on Wednesday was Vanda Pharmaceuticals (VNDA) , which rose 25% in trading following the FDA’s approval of its motion sickness therapy Nereus (tradipitant), which was developed in partnership with Eli Lilly (LLY) . I profiled Vanda as my covered-call trade idea of the week in mid-October.
Wrapping up my Wednesday, I also opened a new position in Xeris Biopharma Holdings, Inc. (XERS) , which should benefit from Corcept’s setback and is experiencing rapid sales growth from its drug Recorlev.
At the time of publication, Jensen was long CORT, VNDA and XERS
