I'm Moving on Three Biopharma Names Amid Market Worries
Here are several covered-calls I'm making on weakness.
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The market had the faintest whiff of fear on Friday as the Dow fell over 750 points for its worst daily loss so far in 2025. Continuing concerns about tariff threats as well as increasing worries around softening consumer demand were a couple of key factors behind the selloff in the overall market on Friday. In addition, the University of Michigan’s consumer sentiment reading on Friday came in significantly lower than the consensus.
Most concerning was that the report showed consumers expect inflation to rise at an annual rate of 3.5% over the next half decade. This is the highest level of inflation expectations measured since 1995 it should be noted. Paying $10.99 for a dozen eggs will do that for some consumers, evidently. Combined with the January consumer price index and producer price index readings, it seems the Federal Reserve might have jumped the gun with a 50 basis point cut to the Fed Funds rate at the September federal open market committee meeting. If so, it certainly isn’t the first recent policy error by the mavens at the central bank and is unlikely to be the last.
My regular readers know I have been quite cautious on the overall market for some time now and have a higher-than-normal amount of dry powder in my personal portfolio. I put some of that ammo to work on Friday by executing three covered-call orders. Let's look at them:
- I opened a new position in Harrow, Inc. HROW, which I discussed in detail in my weekend trade idea. One of Harrow's key products is Iheezo, which is an ocular anesthetic gel that was launched in the spring of 2023 and now makes up approximately 20% of overall sales. Another is Triesence, which is a potential complement to Iheezo. Harrow also holds minority ownership interests in two small drug companies, including the clinical stage developmental company Melt Pharmaceuticals. Melt is developing non-intravenous, sedation and anesthesia drugs for medical procedures.
- In addition, I added some additional holdings in Collegium Pharmaceutical COLL late last week. The stock is down a bit over 10% from its highs earlier this year. This is despite management giving initial fiscal 2025 revenue guidance in January that nicely exceeded the existing consensus estimate at the time. Sales growth is expected in the high teens in fiscal 2025. The stock certainly not expensive at under six times earnings.
- I also added some more shares in my stake in mid-cap BioMarin Pharmaceutical Inc. BMRN. The stock is up decently from where I highlighted it as my covered-call trade idea of the week at the end of January. Last week the company posted fourth-quarter results that solidly beat both top- and bottom-line expectations. Management also provided an encouraging view for 2025 that included 10% revenue growth and highlighted the success of a program to cut $500 million out of annual costs. That brightens the story around this name from my initial view just a month ago.
This will probably be my game plan in the months ahead, just making incremental moves when equities rip lower. It feels like investors are going to have to deal with some choppy waters for a while given all the uncertainty around trade policies, inflation and the overall health of the economy.
At the time of publication, Jensen was long BMRN, COLL, HROW.
