Amid Volatility, These Two Biotechs Steadily Strengthen
The sector continues to show some muscle, despite the turmoil in the overall market. Here are two names I'm watching.
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Investors experienced one of the sharpest intraday reversals in the market in recent memory on Thursday. Excellent third-quarter earnings results from AI kingpin Nvidia (NVDA) set the stage for a massive rally in equities Thursday. And stocks got off to a marvelous start to the trading day with the Nasdaq quickly advancing more than 2% with the Dow gaining more than 700 points.
But the rally was short-lived. A delayed September jobs reports showed significantly more strength in the labor market than expected. This quickly reduced the perceived odds of another Fed Funds rate cut at the next Federal Open Market Committee meeting in mid-December. This was enough combined with the myriad other concerns, which I highlighted in this recent article, within the market, to send equities into a tailspin. By the end of trading Thursday, the Nasdaq was sporting a loss of 2.15% and the Dow was down nearly 400 points. It was the largest intraday reversal in the market since April.
One sector of the market that continues to hold up well is biotech, which has been buoyed over the past two months from a notable uptick in mergers and acquisitions. As I try to do on Fridays, I will end the week highlighting a couple of improving stories in the industry.
We will start with Nuvation Bio (NUVB) , a small-cap story I have touched a couple of times over the past six months. The narrative around Nuvation is brightening and the stock is up over 40% in what has been a volatile week for the overall market. The company’s recently Food and Drug Administration-approved oral antitumor agent Ibtrozi that treats certain patients with non-small cell lung cancer or NSCLC, appears to be off to a better-than-expected initial marketing rollout.
The Food and Drug Administration approval came in June. Management noted in early November, that Ibtrozi was already seeing sales traction at roughly a $55 million annual run rate and is taking market share at a notable clip. This week B.Riley Financial assumed coverage on the stock with a $12 price target. The analyst there noted he believes based on Ibtrozi’s initial ramp up, the consensus sales estimate for fiscal 2026, is too low by $50 million and fiscal 2027’s bogey is likely to be off by $80 million. This is likely to trigger some similar reconsidering by analysts in coming weeks. Ibtrozi’s initial success also could make Nuvation a more likely buyout target as well.
Arcutis Biotherapeutics (ARQT) , which I last highlighted two months ago, also is experiencing stronger-than-expected revenue growth. The company posted an unexpected profit in its third quarter results, which were posted in late October. The substantial bottom- line beat was driven by better than 120% year-over-year sales growth, which blew through the consensus. The company should see explosive profit growth going forward as sales rise at a projected 30% compound annual growth rate over the next several years. The shares have moved up some 30% since third-quarter numbers were posted, which triggered several significant upward price target revisions by analyst firms. I am not chasing the rally but will add to my position via covered call orders on any decent dip in the market.
At the time of publication Jensen was long ARQT, NUVB.
