As Everyone Watches the Fed, I'm Watching These 2 Biotechs
Despite my skepticism around the markets, these two small cap biopharmas have more upside to go.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Next week all eyes will be on the Federal Reserve as it is widely expected to lower interest rates by a quarter-percentage point at the conclusion of its Federal Open Market Committee meeting. Yesterday’s slightly hotter than expected consumer price index reading probably took any hopes for a half-point reduction off the table. But not to worry ... Morgan Stanley now sees four-straight quarter-point cuts in the offing over the next few quarters.
My regular readers know I believe slight reductions to the Fed Funds rate will do little to boost the jobs or real estate markets.
And, indeed, investors have been treated to a series of abysmal readings around the jobs markets in recent weeks: the large downward revisions to the June and July initial employment estimates, a dismal August jobs report, and this week’s annual Bureau of Labor Statics revision that knocked over 900,000 positions off their original estimates of job creation from March 2024 to March 2025.
Also, both yields on the 10-Year Treasury and mortgage rates have already come down substantially, front running these reductions. The actual announcement of the Fed Funds cut could end up being a classic buy the rumor, sell the news inflection point in the market.
Two Biotechs to Watch
It has been another solid week for investors in the market. Therefore, I will end the trading week on an optimistic note and update the investment thesis on two recent biotech recommendations. Back in late May, I highlighted that the recent dip in the stock of Travere Therapeutics TVTX was a buying opportunity. That call has turned prescient as the company crushed both top and bottom-line expectations with its second quarter numbers in early August.
Sales from its non-immunosuppressive kidney-targeted therapy Filspari soared 165% on a year-over-year basis, thanks partly to its recent approval in Europe. This spike in revenue triggered an unexpected profit in the quarter. This week the shares have been boosted by a decision by the Food and Drug Administration to not require an Adcom Panel for its potential label expansion for Filspari. The stock is up over 60% since I last touched on it, but I will still add to my stake in Travere on any decent pullback.
I last gave Syndax Pharmaceuticals SNDX a positive shout out five weeks ago. This small cap biopharma has two approved products on the market, Revuforj and Niktimvo. I noted it my last article on Syndax that management boosted the potential markets for these two compounds from $4 billion to $10 billion. That view seems to be catching on within the analyst community. Citigroup boosted its price target on SNDX from $46 to $51 a share since I last profiled the stock. Three other analyst firms including Stifel Nicolaus have initiated the shares as a new Buy as well. Stifel now sees both Revuforj and Niktimvo with over $1 billion in peak sales. SNDX has a market cap of $1.4 billion, over $500 million of cash on the balance sheet, and the stock feels like it can go significantly higher from here.
At the time of publication, Jensen was long SNDX and TVTX.
