Healthcare stocks have become a haven for investors ditching tech

By Jaimy Lee

AbbVie, Lilly and J&J's shares all closed at all-time highs

AbbVie's announcement that it plans to acquire Apogee Therapeutics boosted its stock by 14% this week.

Shares of AbbVie, Eli Lilly and Johnson & Johnson ended Friday at all-time highs, in the latest signal that investor appetite for the biopharmaceutical sector is back.

There are a few likely reasons for the stocks rallying this week, according to RBC Capital Markets analyst Trung Huynh. These are three of the most solidly positioned drugmakers - all of which largely avoided the missteps that required other drug companies to restructure in recent years - and they've made some of the industry's biggest and smartest acquisitions to further build out their pipelines.

Their rallies also indicate a broader rotation away from tech and semiconductor stocks and toward healthcare companies.

"The quality companies are benefiting," Huynh said. "On a company level, these are the companies outperforming on fundamentals."

This week, AbbVie (ABBV) announced a $10.9 billion acquisition of Apogee Therapeutics (APGE), which has an experimental atopic-dermatitis drug with the potential to one day compete with Dupixent, Regeneron Pharmaceuticals (REGN) and Sanofi's (SNY) powerhouse immunology drug. The deal is one of biopharma's biggest this year.

It's also a smart move for the drugmaker, which already has the commercial prowess and teams in place to market this kind of therapy. AbbVie's shares closed at $251.52, gaining about 14% over the past five days and 36% over the last year.

Lilly (LLY), the world's most influential drugmaker and the only one to have a $1 trillion market capitalization, also saw its stock hit yet another record, closing 7% higher at $1,206.51 on Friday.

The company had a stream of good news this week. It's about to start selling two of its weight-loss drugs to Medicare beneficiaries for the first time, in what should be a major boon to its business. That's one reason why analysts at Leerink Partners this week raised Lilly's price target to $1,232, from $1,119. It also closed a major acquisition of the sleep biotech Centessa Pharmaceuticals and made a small but telling investment in Absci (ABSI), a biotech developing a new kind of hair-loss treatment, a popular new category for investors. Absci's stock has surged 44% over the last five days.

Then there's J&J (JNJ). The company is the third major pharma player to have its stock hit a record high. In recent years, the company has simplified its business, setting out plans to move away from the consumer and surgical products it was known for and doubling down on pharmaceuticals, particularly in cancer. It's expecting $100 billion in revenue this year, another first.

Moderna (MRNA), a pandemic darling that has struggled to find its next blockbuster, may be finally on the mend, with shares closing about 13% higher on Friday. During its annual Science Day on Thursday, Moderna detailed its new mRNA strategy, which includes its experimental mRNA-based flu shot. The company believes the Food and Drug Administration will approve that vaccine sometime by early August.

So far over the last year, the State Street Health Care Select Sector SPDR ETF XLV is up 19.4%, while the State Street SPDR S&P Biotech ETF XBI has soared 85.7%. The S&P 500 SPX has rallied 19.7% over the past 12 months.

-Jaimy Lee

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06-26-26 1625ET