In 2020, the biotech sector stood out against oil, real estate, but also the tech sector. Because of the vaccine race, the course of each sector now depends on what is happening in the biotech sector. The pandemic will come to an end at some point, but what is certain is that biotech stocks will never be the same.
Coronavirus biotech news has catapulted the entire stock market. Some of the major swings in the stock market have revolved around coronavirus and biotech companies. Since May 18, when US biotechnology Moderna announced some positive data for its treatment with coronavirus, the Biotech stocks sharpen further.
Hoping to benefit from the first cure for Covid-19, investments in young, innovative biotechnology companies have grown significantly in recent months. But be careful of scrapping, the biotechnology market is one of the riskiest.
The race for the Covid-19 vaccine drives the price for biotech
Biotech companies have seen a real boom in the financial markets in recent months. The Covid-19 pandemic is causing many investors to bet on start-up companies that are likely to find a cure for the virus.
American biotech companies have raised more than $ 9 billion on the stock market in the past few months, compared to "only" $ 6.5 billion in all of 2018, according to Dealogic data. As of May 18, when Moderna posted positive results, the Nasdaq rose 2.4% and the S&P 500 rose 3.2%.
This blind race for drug vaccine or miracle could leave individual investors behind as biotech is one of the most volatile markets. Biotech companies often have only one or two product candidates for treatment in stock and often none on the market.
They therefore have to finance their research and development without having any significant income. Even as a specialist, you need a very differentiated diversification and risk assessment approach.
Wave of IPOs
Bio World’s report shows that as of July 23, 2020, 495 experimental treatments for coronavirus have been performed and 158 potential vaccines are under development. Moderna's innovative technology is one of them. American biotechnology's share price soared from nearly $ 19 in January 2020 to nearly $ 70 in late August, a valuation of more than $ 26 billion.
These numbers correlate with Operation Warp Speed. It was initiated by the Department of Health and Human Services to deliver 300 million doses of vaccine by January 2021.
But the promises made by its biotech companies are too good not to attract investors looking to make a quick profit. It is obvious that there is a positive correlation between the daily Covid daily falls and the Nasdaq Biotech Industry Index. Young companies benefit from this.
The number of IPOs for young biotech companies has increased. With every new addition, the prices have risen. Such is the case with the German CureVac, which launched on Wall Street on August 14 and has a market capitalization of around $ 10 billion.
States are also participating in the struggle. The US government has signed a $ 1.3 billion deal with Moderna to purchase one million cans. His contender for the vaccine is one of the most advanced in the world.
It is in Phase 3 clinical trials, as are the alliances between Oxford University and AstraZeneca or Pfizer BioNTech. The money inflows from states do not, however, reduce the risk.
The stock market, which is driving up the prices of young biotech companies, increases the risk of a small financial bubble bursting.
Biotech companies that fail before they get to market – that is, the vast majority of them – will drastically reduce their value. Such risk to a professional financial actor is generally kept under control as it is diluted with other values.
So, if you want to be a biotech investor, the most important skill is to look beyond the headlines and risk management.