Look What I Found While Bargain Hunting in the Biotech Sector
These two biopharma names still offer value after the sector’s huge recent rally.
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With option expiration last Friday, the allocation to short-term Treasuries and cash in my portfolio went from approximately one quarter to just over 40%. A good chunk of that additional dry powder came from expiring covered-call holdings in the State Street SPDR S&P Biotech ETF (XBI) as well as myriad individual biotech and biopharma names.
Given this ETF has risen more than 70% from its April lows, I am not renewing my rental in it until there is a significant pullback. I could easily see biotech experience some sort of pullback early in 2026 given the extent of its nine-month rally. News flow might start to ebb once the huge JP Morgan Healthcare event concludes in San Francisco on Jan. 15. This is especially so if the large uptick in M&A activity the industry has experienced since mid-September starts to fade.
That is not to say there are still not some bargains left in the biopharma and biotech sectors. In this column, I highlight a couple of names in which I am building or restarting positions via covered-call trades.
Let’s start with drug giant Novo Nordisk (NVO) . Tuesday, the Food and Drug Administration gave the green light to Novo’s franchise drug Wegovy as the first GLP-1 oral treatment approved for obesity.
Novo’s main competitor in this space, Eli Lilly (LLY) is not far behind with getting its own orally approved GLP-1 weight loss products blessed by the FDA as well. That said, being first past the post was a nice milestone to close out 2025 for Novo Nordisk. The shares rallied 7% in trading yesterday. But the stock is still down 40% this year. The stock was already in the process of putting in a floor before FDA approval. Novo is not expensive at 14-times earnings and with a 3.3% dividend yield.
BioMarin Pharmaceutical Inc. (BMRN) is another name whose stock looks like it was building a technical floor in recent months. The shares rallied late last week after the company announced the purchase of Amicus Therapeutics (FOLD) for just under $5 billion. The acquisition brought BioMarin two new assets for its product portfolio, both of which have $1 billion peak sales potential.
The company was already on the right path and recently raised the low end of its fiscal 2025 sales guidance to $3.15 billion and outlined a plan to grow sales up to $4 billion in fiscal 2027. The integration of Amicus should accelerate both profit and revenue growth for BioMarin in the years ahead. A couple of analyst firms have already boosted their price targets on BioMarin following the news around Amicus. The stock is also not expensive at 12-times fiscal 2026 expected EPS.
At the time of publication, Jensen was long BMRN, NVO and XBI.
