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Biotechs boom while Boeing goes bust 📉
Biotech stocks are dominating today's watchlist. Plus, get the full story on the Boeing 737 Max 9 incident...
Chris Dinello
January 08, 2024
Good Morning!
It's Chris from Elite Trade Club, here to give you this morning's premarket trading news.
Happy Monday! I hope you had a great weekend. Now, let's get ready to trade!
Markets 📈
The market closed out last week on a positive note, albeit by a razor-thin margin. None of the day’s gainers managed to crack the 0.2% mark.
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Futures are in the red again as we head into the week’s first trading session. S&P 500 are down by less than 0.1%, but Dow futures are currently showing a 0.4% loss due to a drop in shares of Boeing; more on that shortly.
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Premarket Highlights 🔎
Photo of damage to a Boeing 737 Max operating under Alaska Airlines that compelled the FAA to order an immediate nationwide grounding of the aircraft. (Credit KTLA)
🛬 Boeing Tumbles After FAA Grounding of 737 Max 9 Aircraft
Boeing [BA] has hit a bit of turbulence this morning, following the FAA's directive to ground numerous Boeing 737 Max 9 planes for urgent safety inspections.
This development poses a fresh challenge for Boeing, whose CEO, Dave Calhoun, has been striving to stabilize the company after a series of setbacks, including two fatal crashes, supply chain issues during the pandemic, and various quality defects.
🚨 FAA's Urgent Inspection Order
The FAA's order came after an alarming incident on an Alaska Airlines [ALK] flight from Portland, OR to Ontario, CO, involving a door plug blowing out at approximately 16,000 feet.
This incident adds another layer of scrutiny to Boeing, particularly its best-selling 737 Max model, which has been closely monitored by the FAA since the tragic crashes in 2018 and 2019.
🔍 Details of the Grounding
The FAA's emergency airworthiness directive affects around 171 planes, targeting U.S. airlines and carriers operating within U.S. territory.
The largest operators of the 737 Max 9 model are Alaska Airlines and United Airlines [UAL], with the model having about 215 planes in service globally.
United Airlines has 79 of the grounded aircraft, Alaska Airlines has 65, and the remainder is distributed among six other airlines.
🛫 Quality Concerns
The incident raises questions about Boeing's quality control as it attempts to increase the production of the Max.
Concerns are being voiced about the impact of inexperienced labor on Boeing and its supply chain, especially given that the affected aircraft was relatively new.
📝 NTSB Report
The National Transportation Safety Board noted the severity of the incident in its report, noting that the failure resulted in physical damage inside the aircraft.
A large section of the plane’s wall opened up and forced an emergency landing. The seat closest to the hole’s upholstery was ripped off due to the wind force from the opening. Fortunately, no one was killed in the incident.
As Boeing and regulators work together to address these safety concerns, the grounding of the 737 Max 9s places renewed pressure on Boeing's recovery efforts and its standing in the aerospace industry.
Interestingly, Boeing’s biggest - and arguably only - competitor, Airbus [EUR: AIR-FR] is edging higher on the news.
What to Watch Today 👀
Follow Up to a Poor Performance
Stocks have had a rough start to the New Year. In their first week of trading, most major indexes notched declines in three out of four sessions last week. This week, I’ll be watching closely to see if this trend continues. So far, it’s looking like we’re headed for a lower open, but we’ll
Featured Earnings 💲
Helen of Troy Limited [HELE] ... AM
Jefferies Financial Group [JEF] ... PM
Accolade [ACCD] ... PM
Economy 🏗
Consumer credit [Nov] ... 3:00p
Running Hot 🔥
Gainers
Spectaire Holdings [SPEC] >> +67.4%
Ampio Pharma [AMPE] >> +15.1%
Axonics Modulation [AXNX] >> +20.2%
Decliners
Solo Brands [DTC] >> (34.6%)
Dada Nexus [DADA] >> (25.0%)
Spirit Aerosystems [SPR] >> (13.0%)
Harpoon Therapeutics [HARP] - Last Close: $10.55
Big Pharma just landed another acquisition. This micro-cap biotech has agreed to be acquired by Merck [MRK] in a $680 million all-cash deal.
Under the terms of the agreement, Merck will pay $23 for each outstanding shares of HARP common stock to acquire the company through a subsidiary.
The companies expect to close on the deal in the first half, and Merck expects to record a $650 million non-tax deductible charge as a result of the deal.
HARP is leading the premarket with a 109.6% gain on 800K shares traded.
My Take: HARP is currently sitting just below the proposed acquisition price, so- as is usually the case with these post-buyouy announcement rallies- there’s not a lot of upside left on the table here.
Ambrx Biopharma [AMAM] - Last Close: $13.63
Not to be outdone, pharma giant Johnson & Johnson [JNJ] announced an all-cash buyout deal for this pharma firm worth a whopping $2 billion.
J&J will pay $28 per share to acquire Ambrx Biopharma through a subsidiary in a deal representing a 105% premium over AMAM’s Friday closing bid.
The deal is expected to close in the first half of 2024.
AMAM is a top mover with a 98.5% gain on nearly 2 million shares traded.
My Take: AMAM is currently sitting just above $22 per share, so there’s a little more upside margin than in the previous buyout pop. However, the risks of a blown deal might outweigh the meager potential rewards.
Vincerx Pharma [VINC] - Last Close: $1.18
Newly unveiled clinical data is lifting shares of this low-float biotech stock.
Over the weekend, Vincerx announced promising clinical results from a Phase 1 trial of enitociclib combo therapy to treat relapsed/refractory lymphoma.
The company said the drug produced high response rate and tolerability across the patient pool, as well as “compelling evidence of synergism.”
News of the strong clinical results lifted VINC to a 38.6% gain on nearly 11 million shares traded in today’s premarket.
My Take: VINC was up 87.3% over the past month before today’s rally, so momentum is on this stock’s side. However, I worry that this move may become overextended, increasing the risk of a sudden pullback.
Cellectar Biosciences [CLRB] - Last Close: $2.71
Yet another micro-cap biotech stock is rounding out our list today, after announcing positive topline data from a late-stage clinical study.
Cellectar said a pivotal study of its Iopofosine I 131 targeted radiotherapy candidate in Waldenstrom’s Macroglobulinemia hit its primary endpoint.
The therapy produced an overall response rate of 75.6%, with 100% of patients experiencing “disease control.”
One of the CLOVER WaM study’s lead investigators said, “the safety profile and deep durable responses with a high proportion of patients remaining treatment free is impressive.”
CLRB is only up 12.5% on the news, but volume is soaring with 6.5 million shares traded in the premarket.
My Take: CLRB is on pace to break through stiff resistance at the $3 mark on this news, and massive volume spike could mean more gains ahead for the stock. As of Dec. 15th, its short rate stood at 7.18%, so the rally could also get a boost from the shorts if they start to feel pressured.
That's it for today! Thanks for reading, and good luck out there!
Best Regards,
— Chris D.
Elite Trade Club
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