The S&P Select Biotechnology Index pulled back nearly 5% to start the week, sending the sector back down to the 100 day moving average and into negative territory for the year. The S&P 500 and NASDAQ also saw significant drawdowns as the bullish macro narrative lost steam with rising expectations for a peak federal funds rate based on incoming data.
January's headline producer price index (PPI) increased 0.7% and the PPI excluding food, energy, and trade services increased 0.6%, nearly doubling consensus expectations. Pockets of speculation had been building as liquidity was added back into global markets. Notably, the BOJ expanded its QE program to a magnitude that was greater than the FED's QT. Apparently the FOMO rally motivated an options binge, with nearly half of the contracts traded on the major indices over the past month being zero days to expiration (0DTE). The VIX responded with a rally into the low 20s after spending most of the year in the teens, trough levels since 2022.
Despite the selloff, biotech investors cheered new FDA drug approvals for Travere Therapeutics' (TVTX) Filspari (sparsentan) to reduce proteinuria in adults with primary IgAN and Apellis Pharmaceuticals' (APLS) Syfovre (pegcetacoplan) for the treatment of geographic atrophy secondary to age-related macular degeneration (AMD).
Both drugs will launch with a premium price and will serve patients that have limited or no therapeutic options.
Several SMID companies reported revenue of recently launched drugs ahead of expectations, but nevertheless sold off which may catch the eye of potential acquirers.
BioCryst Pharmaceuticals (BCRX) reported 4Q Orladeyo sales in-line with the preannouncement and reiterated 2023 expectations for revenue to be "no less than $320MM". Harmony Biosciences (HRMY) reported Q4 Wakix sales ahead of consensus, but declined to offer 2023 guidance despite apparently robust growth. Ultragenyx Pharmaceuticals (RARE) reported Q4 revenue ahead of expectations, with strength from orphan drug Crysvita. Karyopharm therapeutics (KPTI) offered FY23 guidance ahead of brackets consensus at the midpoint ($160M-175M v $162.3M).
Several companies in the broader health and wellness ecosystem reported favorable earnings reinforcing the theme of the defensive nature of the sector. Embecta Corp (EMBC) beat top and bottom line numbers and offered FY23 guidance above consensus.
Strong fundamentals will be critical to enable companies to successfully navigate through this period of increasing cost of capital and broad economic uncertainty.
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