Typically, this time of year, I’m unpacking my bags after returning from a week at the J.P. Morgan Healthcare Conference in San Francisco.
But for obvious reasons, this was no ordinary year.
The J.P. Morgan Healthcare Conference is the most important healthcare investment conference of the year.
More than 10,000 executives, institutional investors and analysts cram hotel hallways, ballrooms and lobbies; pack restaurants and coffee shops; and even meet in the park, weather permitting… all hoping to get a leg up on the next great healthcare investment.
Every year, big mergers and acquisitions, as well as important clinical trial data and lucrative licensing deals, are announced. Healthcare stocks move sharply on the news coming out of the conference.
And for the following several weeks, things calm down as investors digest all of the information and follow up on their research.
This year, things are different. The meeting was virtual, so there were no crowded rooms and no sea of suits invading Union Square.
In fact, I’d argue the event was a bit of a dud.
That’s not anyone’s fault. J.P. Morgan did a fantastic job with its technology, as meetings mostly went off without a hitch. But the companies didn’t time big announcements to coincide with the conference like they usually do.
What does that mean for investors?
Biotech stocks often run up in advance of the conference, make a big move during the conference if they have an important announcement and then quiet down as the sector corrects a little bit.
Because we didn’t see a lot of major news this year, that means there are lots of catalysts still out there waiting to happen.
For example, there are many companies waiting on Food and Drug Administration (FDA) approval for their drugs, including Regeneron Pharmaceuticals‘ (Nasdaq: REGN) evinacumab to treat patients with very high cholesterol and TG Therapeutics‘ (Nasdaq: TGTX) umbralisib to treat marginal zone lymphoma.
Regeneron and TG Therapeutics expect to hear from the FDA by February 11 and February 15, respectively. An FDA approval could be a big catalyst for the stocks.
There’s plenty of clinical trial data that will be out in the coming weeks, including data for Amicus Therapeutics‘ (Nasdaq: FOLD) drug for Pompe disease and for Novavax‘s (Nasdaq: NVAX) COVID-19 vaccine.
It’s hard to predict what mergers and acquisitions will occur in the sector. Many deals are often announced at the conference, while others are quietly negotiated. But having that face-to-face time certainly moves the process along.
My guess is we’ll still see deals this year, as Big Pharma and biotech need to buy growth. But the timeline may have been delayed without the opportunity to meet in San Francisco.
This time of year, as a biotech investor and writer, I usually catch my breath and start to dig into all of the information I came across at the conference.
This year, I’m not overwhelmed at all, which is a good thing. It means there are going to be a lot of things happening in the sector over the coming weeks and months.
You’ll want to be prepared when they happen. To make sure you profit, follow my three top recommendations for how to invest in biotech in 2021…
It’s not all about COVID-19. Amazing drugs for rare diseases, cancer and cardiac conditions are in development and could move their corresponding stocks sharply depending on the news.
Spread your bets. When investing in biotech, you want to have lots of shots on goal. Don’t invest in just one or two companies, no matter how exciting their drugs or technology sound.
Diversify your biotech holdings among large, medium and small companies that are working to treat a variety of medical conditions, not just one disease.
Manage your risk. Biotechs, particularly small caps, can move 50% or more in a day when news breaks. You don’t want to have too much money in any one stock where a big drop could harm your portfolio.
You also want to be clear about why you’re investing in a stock and stick to that thesis.
If you buy a stock because you expect the company’s cancer drug to be safe and effective and the clinical trial data is inconclusive, don’t justify holding the position hoping that something good will happen. Your thesis was wrong. Sell the stock.
I was disappointed there was no in-person conference this year, but it’s going to be a big couple of quarters for the biotech sector. If you know where to look, you can make a lot of money.