I'm Eyeing This Drug Co. to Add to the Dips

Equities have settled in markedly in recent trading sessions as the VIX has plunged from north of 50 last Thursday to around 30 at the close of yesterday. That hardly means stocks are out of the woods. Citigroup just slashed its year-end price target on the S&P 500 from 6,500 to 5,800. It also reduced its fiscal 2025 S&P 500 earnings bogey from $270 to $255 a share. That leaves the index trading at just over 21-times forward earnings. Hardly a bargain, given the uncertainty around the global economy and with the index providing a just over 1.3% annual dividend yield.

That said, the recent pullback in the overall market has brought lower entry points on many equities that were already trading at reasonable values. Biotech and biopharma have notably pulled back. These are some of the stocks I am adding to via covered-call orders in this space when the market has a down day. Here, I'll talk about how and why I will be averaging down and adding to my stake in mid-cap biopharma Neurocrine Biosciences, Inc. NBIX on the next dip in the overall market.

The stock is down some 30% year to date. Neurocrine’s flagship drug Ingrezza, which treats tardive dyskinesia -- a type of neurological syndrome that causes involuntary body movements -- continues to increase sales at a decent pace and should contribute at least $2.5 billion to overall sales in fiscal 2025. Recently approved Cressenity is the first advanced treatment for congenital adrenal hyperplasia, or enlarged organs, in decades. It should eventually become a blockbuster in its own right. I have seen projections of up to $1.5 billion in sales by fiscal 2030.

These two drugs should power revenue growth in the mid-teens over the next couple of years. The equity has an approximate market capitalization of $9.6 billion. The stock is not expensive at roughly 15-times earnings. Note, the company ended fiscal 2024 with some $1.8 billion in net cash and marketable securities on its balance sheet. Management recently added a new $500 million stock buyback authorization after completing a similar program in February. RBC Capital just upgraded the shares noting the lower entry point the markets have provided. I concur.

Other biopharma and biotech names I will add to in any further dip in equities are Dynavax Technologies DVAX, Acadia Pharmaceuticals ACAD, and CorMedix Inc. CRMD. All of these are small-cap names I have covered in recent articles. All three companies have rock-solid balance sheets, are reasonably valued, should have minimal impacts from tariffs and are seeing good sales growth.

Finally, a last word on Viking Therapeutics VKTX. I am not adding yet to this name as clinical stage concerns are very out of favor in this market. But it should be noted Viking has a solid balance sheet and potential game shifting trial results coming up in the second half of 2025. In addition, Pfizer PFE just dropped its primary GLP-1 oral candidate after it did meet expectations in trials and experienced liver toxicity. It is hard to see this drug giant abandoning its efforts to gain entry to this huge market that is currently dominated by Eli Lilly LLY and Novo Nordisk NVO. If Pfizer does go shopping, Viking should be in the top handful of potential acquisition targets as Viking is also developing an oral GLP - 1 pill targeting obesity.

At the time of publication, Jensen was long ACAD CRMD, DVAX, NBIX, PFE and VKTX