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Special Situations & Volatility Investor, Wall Street Background
Significant discounts to broader pharmaceutical industry valuations on projected 2031 earnings make some high-quality mid-cap biotech stocks attractive. Many have cleared Phase 3 trials or reached more advanced stages, and some may reach profitability without more capital, an advantage if financing tightens. Selling these stocks to chase speculative biotech or large pharma at historically elevated multiples makes little sense. x.comÂ
Approved and de-risked healthcare stocks, including Viatris, Jazz, BioMarin, Neurocrine and United Therapeutics, were sold to fund the Moderna-led biotech frenzy and now look very cheap. The 18 names trade at an average 44% discount to industry 2030 multiples of about 11.75x, needing about 80% to catch up, and the gap widens as they outgrow the industry. With the patent cliff here, 13 are possible takeover targets. The retail-driven trend could persist if Moderna's next trials succeed. x.comÂ
Madrigal is cheap relative to its peak revenue potential, making it the only biotech worth buying right now. Its peak revenues exceed those of Protagonist and Mirum, putting it back among the top three commercial biotech picks; everything else in biotech has risen too much. x.com x.com x.comÂ
Insmed, Protagonist Therapeutics, BridgeBio and Praxis Precision Medicines are the four biotech horsemen with pipelines that could make them mega-caps someday, and they are the only four biotechs that look cheap. x.comÂ
Axsome and Cytokinetics miss the biotech pick list on drug breadth, while Arrowhead gives away too much upside through partnerships. Auvelity is Axsome's only real blockbuster; Cytokinetics has one great drug, two potentially smaller ones and prior omecamtiv trial failures. Arrowhead kept lackluster cholesterol drugs. The strict screen favors good phase 3 to early-commercial assets, best- or first-in-class drugs, more than one drug and a price below intrinsic value. x.comÂ
Small- and mid-cap biotech looks like one of healthcare's more asymmetric setups after a four-year bear market, as AI speeds drug discovery and Big Pharma faces a patent cliff. Over $300B of pharma revenue goes off patent in the next few years, M&A is already ramping hard as pharma hunts for assets, and many small and mid-cap names still trade at reasonable valuations, making them potential takeover targets. x.comÂ
Cogent Biosciences warrants an investment because its lead drug is up for approval in three indications, two with breakthrough therapy designation, and could reach $5-7 billion in peak sales. Management is good and the drug competes well; it was the top rival to Blueprint's. Early pipeline programs in KRAS, JAK and PI3K could add more potential if they repeat the success seen in KIT. x.comÂ
Ionis relies too heavily on partners, which has hurt its stock for years. It has never appealed and never will. x.comÂ
BridgeBio's top four drugs could reach $12.5 billion in sales, a massive commercial expansion as three PDUFA dates arrive over the next six months. Attruby, a best-in-class ATTR stabilizer, could do $3 billion or more, Encaleret $1.5-2 billion, BBP-418 about $1 billion and achondroplasia $3-4 billion. Management runs trials and sells drugs well but makes amateur financing mistakes. It holds $1.7 billion of cash against about $3.5 billion of debt and should be cash-flow positive in 2028. x.comÂ
Abivax's risk-reward still makes a ton of sense because buyout comps point to a large premium. @seedy19tron's analysis suggests a 105% premium to the current price, about $218 a share or roughly $20 billion, would get a deal over the line for Pfizer, Lilly, Takeda, AbbVie or AstraZeneca. x.comÂ
Neurocrine Biosciences is best avoided because its management is weak; it now looks dumb and desperate, which confirms the decision to dismiss it during a review of biotech stocks. x.comÂ
Abivax looks worth more than its roughly $9.7 billion market cap. A quick analysis of its indications points to about $5 to $6 billion in sales, implying a value of around $12 to $15 billion. Earlier reservations were not about its mechanism of action but that it has only a single drug. x.com x.comÂ
