Buy the recent dip in Biotech stocks: Jefferies

on Sep 5, 2022
  • Michael Yee says the biotech stocks will likely move higher from here.
  • The Jefferies' analyst explained his bullish view on CNBC's "Closing Bell".
  • SPDR S&P Biotech ETF is down more than 10% over the past three weeks.

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“XBI” – the SPDR S&P Biotech ETF down more than 10% over the past three weeks is an opportunity to “buy”, says Michael Yee. He’s a Managing Director at Jefferies.

Why is he bullish on the biotech stocks?

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Yee sees several tailwinds that will help the biotech stocks move up not just in the balance of 2022 but in the next year as well. Speaking with CNBC’s Carl Quintanilla on “Closing Bell”, he said:

I really like the recent rally off the bottom. It’s an important data point that we’ve had. Bunch of positive clinical data sets, a bunch of financings, a bunch of good news. I think we’re headed higher into the end of the year and then in 2023.

At the current valuation (a little over the pandemic low), he added, the Inflation Reduction Act and the consequent restrictions on drug pricing is not very likely to be a threat for the biotech stocks.

M&A in biotech is keeping investors excited

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Versus its year-to-date low, the exchange-traded fund is up more than 30% as sentiment improved in recent months on news of merger and acquisitions, which, as per Yee, will remain a tailwind moving forward.

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You’ve had a bunch of deals in the past two months. Pfizer is being particularly aggressive, deploying a lot of their COVID money across the space, has got everybody excited. You’ve got Merck looking at Seattle Genetics.

J.P. Morgan is scheduled for its “41st Annual Healthcare Conference” on January 9th, 2023 in San Francisco. The Jefferies analyst expects “that” to be a catalyst for the biotech stocks as well.  

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