Biotechnology continues to be a sector on the rebound after a punishing 2016. In the first two months of this year, the Nasdaq Biotechnology Index (IBB) has already climbed +12%, compared to the S&P (SPY) gain of +6% and the Nasdaq (QQQ) rise of +8%. The Prudent Biotech Portfolio also moved higher with a gain of +26% for the same two-month period. 

The biotech benchmark, IBB, stands poised at 52-week highs, at a technical level of 300, which has been a strong resistance level in the past but was recently breached earlier this month.

Source: GraycellAdvisors.com

In an article in November 2016, “Biotech Bonanza – 5 Reasons for Biotech Stocks to Shine,” we had noted:

“The pendulum has swung in the other direction, in favor of biotechs, and Biotechnology is poised to become a leading sector heading into 2017.”

We believe biotechnology stocks are well-positioned to accrue further gains and build on the early stages of the sector rally. 

Nominee for FDA Commissioner

The Trump administration announced Scott Gottlieb as its nominee to lead the Food and Drug Administration (FDA). Of the three candidates whose names were short-listed, Gottlieb was favored by the industry and considered more mainstream compared to the other two candidates, who either advocated drug testing to be focused solely on safety while letting the market and the patient population determine the efficacy or were anti-FDA.

Scott Gottlieb, who has a physician background and was Deputy Commissioner of FDA under the George W. Bush administration, has a record of supporting regulatory reform to speed up the drug approval process and consequently bring down costs. A focus on the drug approval process is an approach that President Trump has been shifting towards to bring down the prices, instead of pushing for Medicare price negotiation ability. As recently as the State of the Union address, Trump mentioned:

As the nomination makes its way to the Senate floor for confirmation, more will be learned about Gottlieb’s deregulatory approach. Overall, we believe this is a major positive for the biotechnology sector which will be a prime beneficiary of any process streamlining that speeds up drug approvals and reduce costs.