I'm Adding to 2 Core Biotech/Biopharma Names Offering a Refuge From Tariff Wars
Here's the simple strategy I'm using to bulk up in an industry relatively unaffected by the new potential tariffs.
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The tariff wars continue to dominate the financial headlines — and affect the markets — even as potential tariffs on Mexico and Canada were suspended for a month while all parties work towards a longer-term solution.
Ford F got whacked by over 7% on Thursday, even as the automaker's fourth-quarter results beat top and bottom-line expectations. Guidance for 2025 was tepid due to potential impacts from additional tariffs, among other items. This included continued large losses from its EV division projected for the new year.
On the dip Thursday, I rolled my options forward on my existing covered call holdings on Ford. That picked up an additional option premium and will allow me to continue to be patient on this name as well as pick up large quarterly dividend payouts from the automaker.
I also started to add to my existing holdings in several biotech/biopharma names using the same simple option strategy. This sector has been an underperformer for years. However, the industry is relatively unaffected by the new potential tariffs. Valuations in many cases are also much more palatable than the overall market.
Lantheus Holdings LNTH is one of those biotech/biopharma names. The company continues to see more-than-solid growth from its specialized diagnostic radiopharmaceuticals portfolio, primarily from Pylarify. This compound should do over $1 billion in sales in 2024 when fourth-quarter results are posted shortly. Lantheus stock is not expensive, trading at just over 13 times earnings. The company produces significant free cash flow as well.
In addition, Lantheus is starting to put to use the large cash hoard on its balance sheet to drive earnings and build out its product portfolio. The company announced a $250 million stock buyback authorization in late November. So far in 2025, it has made two acquisitions totaling some $600 million upfront with additional earn-outs. These strategic "bolt on" purchases expand both its product portfolio and developmental pipeline assets.
I also added a tad to my stake in Mirum Pharmaceuticals MIRM when it dipped in trading last month. The company is seeing an impressive sales rollout for Livmarli, which is approved for two indications and has label expansion potential. It also has two other approved drugs on the market and an interesting and developing pipeline.
One of these candidates, Volixibat, recently received Breakthrough Therapy designation around cholestatic pruritus in patients with primary biliary cholangitis (PBC). It is in late-stage development and should be on the market in two to three years. Another candidate, targeting Fragile X Syndrome, is kicking off a Phase 2 study.
Mirum's revenue growth should come in around 80% on a year-over-year basis for the company’s 2024. Growth will decelerate into the high 20s in 2025 as Mirum is working off a much bigger sales baseline. The company is rapidly reducing losses from its impressive sales growth and looks like it should be profitable in 2026.
Mirum has a solid balance sheet, and the company has been mentioned more than once as a logical buyout candidate. Given its growth, pipeline, wholly owned assets as well as an approximately $2.5 billion market cap, this does make some sense. However, I am perfectly fine if Mirum remains a stand-alone entity as management is executing well.
At the time of publication, Jensen was long F, LNTH and MIRM.
