(This commentary originally appeared on Real Money Pro on Friday. Click here to learn about this dynamic market information service for active traders.)
It has been somewhat frustrating to be a biotech investor over the past two years, as the sector is still down over 25% from its last peak in July of 2015. While the main biotech indices continue to trade in a narrow range, as they have through most of the year so far, investors have had to watch the S&P hit new highs almost on a daily basis and the Nasdaq rise almost 20% this year.
The dearth of M&A activity across the sector continues to be a significant headwind. This part of the market got off to encouraging start to the year, with three deals over $5 billion announced in the first five weeks of the year, but it has been basically crickets since. Until we get clarity on what, if any, sort of tax reform has a chance of passing in a very divided congress, I think the pharma and drug giants will continue to sit on their hands.
Many small- and mid-cap biotech names that have been frequently rumored as buyout targets have been ground down in the market over the last month as a result of this lack of activity. These include concerns like Acadia Pharmaceuticals ACAD, Tesaro (TSRO) , Sarepta Therapeutics (SRPT) and myriad others.
With M&A dead for the moment and with the first quarter earnings season all but over, it is hard to see much that will change the directionless nature of the sector in the near term. I just continue to slowly accumulate names that I think have great long-term futures -- once animal spirits come back to this high-beta part of the market.
We do have the annual meeting of the American Society of Clinical Oncology -- known as the ASCO -- coming up in Chicago during the first week of June. Dozens of companies will be presenting, and I would not be surprised to see some oncology names run up into and during the conference, as this seems to happen quite often historically.
I have added a few shares of Dynavax Technologies (DVAX) over the past week, as they will be presenting some data around their mid-stage oncology asset, SD-101, at the conference. TG Therapeutics (TGTX) , which has been "en fuego" in the sector this quarter thanks to positive late-stage trial results, has an oral presentation of that data on Jun. 3, and could get a further boost from that overview as well.
Ending on another bright note, there are some reasons to be hopeful around the FDA and its new leadership. The agency has approved almost as many new compounds so far in 2017 as in all of 2016. Its new director also seems committed to speed up approval times, especially around generics. This would be good news for many smaller names -- like Adamis Pharmaceuticals (ADMP) , which has been trying to get a generic version of the EpiPen on the market for what seems like forever. Director Gottlieb also appears committed to use his resources to address the opioid abuse scourge that has swept over the nation over the past decade, something that I believe is long overdue.
And that is my view on the biotech sector as we head into the long holiday weekend.