Even Pharma Rallied On Monday

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Bear Market Rally Breaks out

In a post here last Thursday (Still A Bear‑Market Rally?), I argued the April–May bounce was a policy‑fragile technical rally. On Monday, market technicals looked a lot less fragile:

Breadth thrust – Over 50% of S&P members closed above their 200‑DMA (first time since February).
Index breakout – S&P finished ~1 % above its own 200‑DMA (~5 750).

Even Pharma Joined In

Everyone expected a rally on Monday after the ceasefire in the U.S.-China trade war over the weekend. What I didn’t expect, though, was pharma stocks to join in that rally, in light of President Trump’s executive order lowering drug prices. In a post written before the market open (Profiting From A Pharma Panic), I mentioned about a couple of pharma trades I had teed up if the sector opened in the red:

Company A – Platform Cash Machine With Royalty Armor

Fundamentals

Piotroski  F‑Score 9 / 9 – pristine balance sheet, rising margins, no accounting red flags.

FY‑24 royalty revenue +27 % y/y; operating cash‑flow margin 45 %.

Net debt: $‑170 M (yes, net cash) after another quarter of buybacks.

Technicals

Price has stair‑stepped higher since October.

Price is above both 50 and 200 day moving averages – a textbook rising channel.

Why MFN risk is minimal

Company A doesn't set list prices; its drug‑delivery platform earns a mid‑single‑digit royalty on net sales paid by its partners.

Those partners are market behemoths—Johnson & Johnson (JNJ), Bristol Myers Squibb (BMY), Pfizer (PFE)—that can afford to yank products from low‑margin jurisdictions until pricing equilibrates.

How I'm playing it

Bull‑put credit spread: Taking advantage of expensive puts to collect a net credit which we’ll get to keep if the stock doesn’t fall further over the next few months.

Equity kicker: Allocate part of that credit to Jan 2026 OTM calls. Theta from the spread finances the lottery ticket.

Company B – The Diabetes Moon‑Shot

This one is a pure speculative bet—but with asymmetric payoff.

Catalyst

First‑in‑human trial just made its debut participant insulin‑independent after 30 years of Type‑1 Diabetes. Not only doesn’t he need to take insulin, but he doesn’t need to take any immunosuppressant drugs either. No safety issues so far.

Balance sheet

~$800 M cash against a ~$400 M annual burn → roughly 24 months of runway with zero debt.

Risk

Biology can always surprise.

FDA hurdles, capital raises if share price pops.

Position sizing

Treat as a lotto ticket: less than 1% of portfolio in common shares—small enough to torch without blinking, big enough to matter if the therapy works.

As it happened, pharma joined in the tariff‑pause relief rally. The Health Care Select Sector SPDR® Fund XLV ripped +2.47 %, and my two pharma names both closed in the green. Not the sector you would have expected to join Monday’s rally, but the move priced me out of clean entries intraday.

Maybe We’ll Get Better Entries Today

With futures red in the pre-market, that seems possible. If you’d like a heads up when I place those pharma trades, feel free to subscribe to the Portfolio Armor trading Substack below.

And if you’d rather limit your risk here, you can download the Portfolio Armor app by aiming your iPhone camera at the QR code below (or by tapping here, if you’re reading this on your phone).

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