The S&P select biotech index rallied through the 200 day moving average, aided by a 2+ sigma move of nearly 6% (third best day of the year) following the latest FOMC interest rate hike.
The market appears to believe the FED has broken the banking system and will soon retreat from its rapid hiking campaign with rate markets pricing in cuts as soon as the fall.
It seems inevitable many more regional banks will fail as they are saddled with long duration low interest rate instruments that offer neither the income needed to enable competitive rates for depositors vs ~5% money market funds nor liquidity near par (Note: smaller banks are not required to mark long dated debt to market if they intend to hold it to maturity, thus balance sheets do not reflect real market value).
Earnings season continued to bring more SMID biotech beats than misses. Specifically, Argenx SE (ARGX), Aurinia Pharmaceuticals (AUPH), BioCryst (BCRX), Collegium Pharmaceuticals (COLL), Dynavax Technologies (DVAX), Harmony Biosciences (HRMY), Intra-Cellular Therapies (ITCI), Kiniska Pharmaceuticals (KNSA), Lantheus Holdings (LNTH) and 2Seventy Bio (TSVT) all reported upside to revenue, earnings or both.
There were a few notable misses from several recent and pending M&A deals though. Pfizer (PFE) reported misses from Nurtec ($163 million vs $220 million consensus, acquired from Biohaven) and Oxbryta ($71 million vs $79 million consensus, acquired from Global Blood Therapeutics) while Amgen's (AMGN) pending acquisition of Horizon Therapeutics (HZNP) was tarnished by a miss for lead drug Tepezza ($405 million vs ~$500 million consensus).
Positive clinical data announcements maintained the exuberant sentiment with Eli Lilly (LLY) reaching an all time high on news the highly anticipated phase 3 trial for Alzheimer’s therapy Donanemab met expectations.
Immunogen (IMGN) was even more striking, with a +135% rally on news of better than expected survival data from a Phase 3 trial in platinum-resistant ovarian cancer.
Favorable sentiment also seemingly provided tailwinds to the IPO of Acelyrin (SLRN) which was up over 30% after pricing an upsized $540 million deal.
Biotech investors and management teams stare down corporate bankruptcies as a normal course of business and remain undeterred by the festering regional banking crisis.