These Biopharma Names Don’t Have the Flash of SpaceX, but They’re Reliable
The Nasdaq has treaded water this week after a 4.2% pullback on Friday. Space Exploration Technologies Corp. ($SPCX) and their investment bankers are likely sweating a bit right now. They are hoping SpaceX’s debut goes well and Anthropic, OpenAI and Databricks are pushing their own massive public offerings forward as they try to raise tens of billions before the IPO window closes.
A surge of IPOs in 1999 and 2021 marked the tops in those bull markets. I expect 2026 will follow the same path in the end. My portfolio has been quite insulated from this recent hiccup in the market. It ended within 1% of its high water mark on Tuesday. I have roughly 30% in my portfolio in short-term treasuries and cash awaiting lower entry points in the market. The rest is largely in covered-call positions around the few stocks with reasonable valuations. Mostly these are value or growth at a reasonable rate stocks. In today’s column, I will tag a few of these within the biopharma sector.
I highlighted a covered-call trade around Ascendis Pharma A/S ($ASND) over the weekend that was typical of this kind of GARP holding I have within my portfolio. In addition, I have recently added to mid-cap name Acadia Pharmaceuticals Inc. ($ACAD) in recent trading sessions. These moves are mostly as some of my current covered-call holdings in this name will expire in the money next Friday. Acadia has been range-bound for just over a year now and is trading near the lower end of that range. Despite revenues rising in the low- to mid-teens and profitability that is projected to ramp up substantially starting next year, the shares have not done much. But they have been a terrific rinse, wash and repeat covered-call trade. Liquidity in the options against the equity is good, and the option premiums are solid.
It is basically the same story for slightly larger BioMarin Pharmaceutical Inc. ($BMRN). The stock trades for under 12-times this year’s forward earnings. Investors are not pricing in the positive impacts to both revenue and earnings growth from its recent acquisition of Amicus Therapeutics.
On the value side, I have Pfizer ($PFE), who has been around for more than a century and a half. In that time the company has never committed the cardinal sin in the pharma space: coming up with an actual cure for a disease. It has a product portfolio that manages chronic diseases and has expanded its footprint into oncology via a series of acquisitions in recent years. The company is projected to see slight declines in revenues and earnings over the next few years. But at under nine-times earnings and a 6.7% dividend yield, this is fully priced into the stock. I don’t expect the shares to rise much, but with a covered-call strategy I can enhance the dividend yield and profit nicely if the shares just continue to trade flat.
None of these plays are nearly as exciting as anything in the AI space. But they will hold up well if the overall market finally has an overdue correction.
At the time of publication. Jensen was long ACAD, ASND, BMRN, PFE.
