Jared Holz

Biotech is having a great run, supported by two very relevant factors: significant changes at the FDA that did not derail the group, and an unprecedented M&A tailwind that is virtually guaranteed to make this a record year for biotech M&A. Additional money flows have come from reduced enthusiasm for crypto and broader risk-asset appreciation.

Healthcare outperformance is being driven mainly by rotation out of large-cap tech/momentum and into defensive or value-oriented areas. Investors view healthcare as defensive, so any tech skittishness pushes money into the sector. This rotation has been the most prevalent factor behind a 10% gain in about a month.

Holz highlights that NVO shares are back at 2024 lows while LLY has outperformed, despite both having similar duopoly status in the obesity market. The valuation gap has become "alarming." NVO's new pill (Wegovy oral) has 15x better uptake than the injection launch, and they are aggressively suing compounders (HIMS) to protect their moat. LONG NVO / SHORT LLY. Expect mean reversion as NVO resolves supply issues and flexes legal power. LLY's oral candidate could outperform; compounding pharmacies might win legal battles.