Market analysis 12/8/21

Healthcare sector gainers/losers (mid/large cap)

SPY relatively flat today (+0.06% at 13:30ET). XLV +0.40%. XBI +1.46%

Biggest gainer in the SPY ETF is Catalent (ticker: CTLT +2.88%). CTLT produces oral, injectable, and respiratory delivery technologies for therapeutics. The company traces its roots to the 1930s and the development of the first soft-gelatin capsules for drug delivery.

Annually, Catalent produces more than 70 billion doses for nearly 7,000 customer products. Their customers include 87 of the top 100 branded drug marketers, 23 of the 25 top generics marketers, 24 of 25 of top biologics marketers and 17 of the top 25 consumer health marketers. Some selected names include AZ, BMS, GSK, Janssen, Moderna and Pfizer.

Some of their products include:

  • Several softgel tablet technologies
  • Zydis, a proprietary fast-dissolve orally disintegrating tablet (ODT)

CTLT has an attractive risk profile with strong outperformance of the benchmark healthcare ETF. As a business-to-business purveyor of essential services to life sciences businesses (therapeutics delivery), CTLT deserves a sharper focus.

Biggest loser in the SPY ETF is Becton Dickinson and Company (BDX) at -1.25%. BD makes a lot of disposable tools (wipes, syringes) for healthcare providers and consumers. It is a large and diversified company.

Only catalyst I can see for today’s drop is an analyst downgrade this morning, possibly as a result of a recent divestment BDX made to spin off its diabetes care business unit as a new company, ’embecta.’ BD traces its roots back to the 1920s and the introduction of the first insulin syringes. Given this long legacy it raises the question in my mind: why spin off something with such long-established success?

I need to do a deeper examination of diabetes care, given that the space could be disrupted by potential revolutionary stem cell therapeutics for type 1 and existing diabetes maintenance tools like Dexcom (DXCM). My initial thought is that BD may be splitting off their diabetes unit because the future of insulin delivery may not involve syringes or other legacy systems and competitors are already well-positioned to enter this market. A possible short position would be DaVita (DVA), the gigantic kidney dialysis provider which could be a zero given the chances that stem-cell therapies are emerging that might ‘cure’ diabetes.

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