It was a good start to yesterday morning but we got weaker as the day went on.  I still think the sector is not in a bad position but I do not like to see the strength in the morning and weakness as the day went on.  It is only one day and the volume is likely going to be low this week given the holiday, so I would not read too much into the trading this week unless it get pretty clear and significant (but I think that is unlikely).  The range does seem to be narrowing a little and so perhaps we are setting up a larger move but I doubt it happens this week.

1. There was no a lot of news to highlight. There was a lot of discussion of SAVA but that is one that I have never been tempted to look into.  When you have allegations of fraud and now criminal action, it is not even worth a lot of time to dig into whether it is worth an investment.  There could be some who would be interested in entering from the short side but this is also a stock that has a very strong fan base and so the path to the downside might not be very straight.   Case in point, the stock rallied hard yesterday and so I suspect there will be strong, ripping rallies even if this ultimately ends up a lot lower.  I think there are simply too many other options out there to spend time on a company with so many red flags.

2. If you are willing to invest in companies with some robust social media debate, then I would look no further than SRPT. I completely understand the discussion around the approval and how many in the FDA supposedly did not want to approve it, but the fact is that none of that actually matters now.  Sure, it makes for great articles and clicks but the question is whether patients will want it and doctors will prescribe it.  I think the answer to that is a clear yes.  The only issue I would track would be the payors.  I do not think there has been many issues with access and so I would not think one would develop but if I was looking at longer term potential risks, I would look at the payors.

3. All of that being said, I will say again that we should not expected an immediate acceleration in sales but one that is going to take some time to gain momentum. I would think of this label expansion being more of a late 2024 or even early 2025 revenue acceleration story.  Even if that is understood, if we think the market discounts 6 months in advance then it makes some sense to see SRPT move now but I would be aware if consensus estimates move too high in the near term because that could lead to misses to consensus numbers.  I would not say that is the base case but certainly something to watch over the next couple of earnings releases.

4. Speaking of companies that have the potential to expand the revenues, I want to go back to some GILD news. I know there is a lot of negative news around their oncology business and they always seem to have trouble getting that going the way they want but this is hands down the best anti-viral company in the world.  Last week they reported earlier than expected data on the prep market.  GILD had no cases on the treatment arm as compared to the expected 1.5%-2.0%.  I think GILD is going to do well longer term building on their prevention market opportunity.  Why?

5. One of the issues with anti-virals (and antibiotics) is that these are often curative treatments with short term treatment duration. While HIV is not a curative market, there is still a limited patient population, i.e. those with the disease.  The market opportunity for PREP is much larger as it is those who do not have the disease but worry they might somehow contract it.  While I would not say this gets larger than their current HIV sales, I do think it can grow the HIV revenues in GILD in a meaningful way.  The one issue with GILD (and ISI pointed this out) is that California litigation as no one knows what the liabilities would be if GILD loses (or settles).  I wonder if investors come back to GILD in a larger way once there is more clarity around the liabilities but for those willing to take on a little more risk, this is not a bad valuation for GILD.

I will end it here and hope that everyone is having a good week.

Disclosure: No position in stocks mentioned.