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  • Jonathan Poyer

Healthcare Now the Largest Item In the Federal Budget

The S&P Biotechnology Select Index achieved a "golden cross" (when the 50 day moving average crosses above the 200 day moving average) for the first time since May of 2020, while the S&P 500 continues to plumb new lows.

Goldman Sachs noted the S&P 500 is now below where is closed on inauguration day despite >$5 trillion in QE and extra fiscal spending since then.

Healthcare is now the largest line item in the Federal budget (and many state budgets) positioning the industry to increasingly benefit from fiscal tailwinds, despite increasingly tight monetary policy.

Earnings season should show healthcare companies, in particular pharmaceutical and biotech companies, have sustained demand in large measure supported by government budgets. M&A and major clinical / regulatory news was relatively quiet in the past week, but the theme of creative destruction continued.

BioMarin Pharmaceuticals (BMRN) announced a 4% workforce reduction and restructuring to help optimize profitability. BMRN has been speculated to be an acquisition target for many years for its multi billion dollar orphan drug business, but has not historically focused on margins. The stock price is outperforming a majority of publicly traded companies being ~flat on the year as investors look forward to a potential doubling of revenue over the next several years with new product launches.

Oncosec Medical (ONCS) is on the other end of the spectrum in announcing a 45% workforce reduction to enable advancement of their lead clinical program to near term data milestones.

More selective allocation of capital will continue to increase the overall risk / reward profile of the sector moving forward

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