I Have a Brand New 'Go-To' Biopharma on My Radar
Here's why this name looks attractive now in an uncertain market environment.
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There was a weak try at a bounce following the gap down open on tariff panic, but it didn’t last long. After some OK construction spending and ISM manufacturing data, stocks rolled over again and hit intraday lows. However, now the market is bouncing back a little more energetically on news that Mexican President Sheinbaum had a good conversation with Trump and tariffs on Mexico will be paused for a month.
Breadth is horrendous at about 4 to 1 negative, but the new 12-month lows are only around 300 since we are still far from the lows that hit a few weeks ago.
The biggest problem the market faces right now is uncertainty. Negotiations with Canada and Mexico are likely underway, but details are not readily available, and no one knows when progress on agreements may be made.
At this point, just about everything is being sold, regardless of whether tariffs impact it. Bitcoin has bounced back, but small-caps IWM not as much.
I’m looking for stocks that aren’t impacted by tariffs but are being sold anyway. Small-cap biotechnology is a good example. Xeris Biopharma XERS, which is one of my favorites, has already turned positive, but there is very little bottom fishing taking place.
A new name that I have on my radar is Emergent BioSolutions EBS, a turnaround biotechnology company that is quickly becoming profitable. EBS sells Narcan, a drug for heroin, fentanyl, and opium overdoses. EBS lost its patent for the drug, but it is now approved for sale over the counter without a prescription. Also, EBS recently purchased the rights to Kloxxado, which is a stronger drug used for opioid overdoses. With fentanyl in the headlines, these EBS products are even more important.
Another division of EBS develops drugs and vaccines for public emergencies such as anthrax, typhoid fever, Ebola, botulism, monkeypox, and smallpox. It also has a skin decontamination kit that removes chemical warfare agents from the skin. Its customer base is both governments and consumers.
After losing its patent protection on a key drug, the company brought in turnaround expert Joseph Papa in February 2024. He closed several facilities, settled a lawsuit, refinanced debt, and streamlined operations. As a result, the company went from a large loss to a profit of $1.37 in the third quarter and is currently predicted to earn $2.07 in 2025, which works out to a forward P/E of just 5.
Technically, the stock is testing overhead resistance at around $11.75. It is a "go-to" name for any public health emergency because of its ability to quickly develop vaccines and treatments. It is unclear how much it is impacted by tariffs, but it does sell in the Canadian market.
The stock is trading down on the tariff scare, but I anticipate that it will bounce back as it moves closer to earnings around March 5.
At the time of publication, Rev Shark was long XERS and EBS.
