Prior to this year, the biotechnology industry had underperformed the broader market since reversing a multi-year trend that had seen superior returns since coming out of the Great Recession. But biotech has been a brighter light in 2024. In 2021 and 2022, the equal-weight SPDR Biotech ETF (XBI) Index, which includes more small-cap, development-stage companies, declined 21% and 26%, respectively, compared with a 27% gain and 18% decline for the S&P 500. The trend continued in 2023, with XBI gaining 8% compared with a 24% advance for the S&P 500. We attribute this underperformance, particularly for development-stage companies, to factors including a "risk-off" environment among investors amid elevated inflation and increasing interest rates, which contributed to challenging financing markets and a near closing of the IPO window. In addition, an elevated number of biotech companies traded below their cash reserves and explored strategic alternatives or bankruptcy. We also note increased scrutiny over runaway drug pricing weighing on the industry. But the tide may be starting to turn. Biotech has outpaced the broader Healthcare sector YTD in 2024 and, looking ahead, mergers and acquisitions (M&A) and the ability to raise capital are major keys to the future growth of the industry. We are encouraged by the return of some larger scale M&A deals and a seemingly healthy appetite for deals from larger biotech and big pharma players, as a new wave of patent expirations for many high-revenue-generating medicines is expected in the second half of the decade.

At midday Thursday, the major benchmarks are flat and trading feels tentative. Individual stocks are where the drama is. Micron Technology (MU) is lower after reporting earnings and saying it sees lower profits ahead than expected. International Paper (IP) is down as it is no longer an acquisition candidate of Brazilian paper company Suzano. Wall Street is waiting to see what happens with the first U.S. Presidential debate tonight. This is bringing up chatter on how the candidates stack up on inflation, rates, jobs, and other economic issues, and who might be better for driving stocks up. The Labor Department reported that jobless claims rose to nearly 1.84 million for the week ended June 22. Also, key inflation indicator, PCE, is due tomorrow morning.

Amgen, based in Thousand Oaks, California, is a leading global biotech company. Its key products include Prolia, Enbrel, Otezla, Xgeva, Tepezza, Repatha, Nplate, Kyprolis, Aranesp, and Evenity. The shares are a component of the S&P 500.

In this edition, online commerce set for acceleration, consolidation; the market may be missing changes afoot at Veolia; an overview of the moat ratings for big biotech firms; and Kraft Heinz, Tyson Foods, and Nutrien.