Despite market wobble, pharma still a winner in 2015

Data Insights

You cannot stop the biotech bull market – you can only hope to contain it. That was the lesson of 2015, which saw the incredible run of big and small biopharma groups alike ebb in the second half on pricing and sustainability jitters, only to finish the year in the green by a few points.

Unlike the preceding year, when investor enthusiasm roared back after a mid-year wobble that removed all of the year-to-date gains, 2015’s crisis of confidence meant that that the key Nasdaq biotech index has yet to regain its mid-July peak. Contained within this are a host of bigger winners and losers, of course; however, given that many of the broader market indices finished the year negative, biopharma still made for a decent investment.

Of course, 2015 shows that the best time to have invested in pharma and biotech was sometime between two and five years ago, as the greatest gains were recorded in 2013 and 2014. Investors who bought into a Nasdaq biotechnology exchange-traded fund three years ago and cashed out in July had the fortune of tripling their investments.

Indeed, a mere 11% rise in the Nasdaq biotechnology index over the full 12 months of 2015 is being seen as a disappointment for anybody whose investment horizon dates back less than five years. Those whose memories include the last boom, however, might be a bit more sanguine – after all, nearly a decade’s worth of activity from year-end 2001 to year-end 2010 yielded only a cumulative 7% rise.

Stock index % change in 2015
NASDAQ Biotechnology (US) 11%
S&P Pharmaceuticals (US)  3%
Dow Jones Pharma and Biotech (US)   4%
S&P 500 -1%
DJIA -2%
Dow Jones STOXX Healthcare (EU)   16%
Thomson Reuters Europe Healthcare (EU) 0%
Euro STOXX 50 5%
FTSE-100 -5%
TOPIX Pharmaceutical Index (Japan)  33%

The big ones

Big pharma, as represented by the Dow Jones pharmaceutical index, had a modest year, although this still constitutes a rise where the Dow Jones Industrial Average fell off by a few points. In the small universe of traditional big pharma, the numbers of winners and losers were equal, but on balance the big risers outweighed their falling counterparts.

Lilly, which issued its guidance today, was the top big pharma riser, a surprise given its major commitment to internal R&D as well as laboratories that have not always fired on all cylinders. The Indianapolis-based group can chalk up most of its gains to the May-June period, when investors anticipated encouraging data from the Expedition-EXT trial of solanezumab in Alzheimer’s disease (Sola fails to wow, but does sustain hope, July 22, 2015).

Bristol-Myers Squibb is perfectly placed in the industry’s sweet spot, having the fastest-growing marketed drug in immuno-oncology in Opdivo and a whole host of clinical activity to expand its use in anticancer combinations.

Big pharma companies: top risers and fallers in 12 months
Share price (local currency) Market cap ($bn) 
Top 3 risers YE 2014 YE 2015 Change YE 2015 12mth change
Eli Lilly  $68.99 $84.26 22% 93.4 16.6
Bristol-Myers Squibb  $59.03 $68.79 17% 114.8 16.8
Sanofi  €75.66 €78.60 4% 115.2 (12.1)
Top 3 worst performers 
AstraZeneca  $70.38 $33.95 (52%)* 85.8 (3.1)
AbbVie  $65.44 $59.24 (9%) 96.8 (7.4)
Novartis  $92.66 $86.04 (7%) 230.3 18.3
*Also reflects 2-for-1 ADR split; AstraZeneca and Novartis ADRs are considered because these European groups report in US dollars.

Sanofi saw a return to investors’ favour in 2015, in spite of pressure on its diabetes franchise. A new chief executive in Olivier Brandicourt, some licensing and a statement of intent for more dealmaking seem to have reassured shareholders that the company can execute a strategic shift as it nears the post-Lantus era.

On the negative side of the ledger, even accounting for the 2-for-1 split of AstraZeneca’s US-listed shares the UK group was off for the year. AbbVie’s decline is a little surprising, given its presence in hepatitis C and acquisition of Pharmacyclics for the cancer drug Imbruvica; uncertainty about the entry of Humira biosimilars probably weighs heavy on AbbVie shares (Read my lips: no Humira biosimilars until 2022, November 2, 2015).

Novartis’s decline is equally puzzling, especially for a group that is fighting for a place atop the global pharmaceutical sales ranking and had one of the biggest drug launches of 2015 in Entresto. Its exposure to the price-competitive respiratory market perhaps is a factor, as its new products Utibro, Seebri and Arcapta have seen a combined $836m trimmed from their 2020 forecasts in the past 18 months.

Other big fish

In the category of big cap companies outside the universe of traditional big pharma, Novo Nordisk had a storming year as its shares rose 54%, adding $30bn to its market capitalisation. Much of the gain was registered early in the year after the company gathered the cardiovascular data necessary to submit new long-acting insulin Tresiba to the US FDA (Novo’s Tresiba devotion rewarded with 2015 submission, March 27, 2015).

Other big (>$25bn) pharma companies: top risers and fallers in 12 months
Share price (local currency) Market cap ($bn) 
Top 3 risers YE 2014 YE 2015 Change YE 2015 12mth change
Novo Nordisk  DKr260.3 DKr399.9 54% 124.1 30.5
Regeneron Pharmaceuticals  $410.25 $542.87 32% 55.5 14.6
CSL A$86.68 A$105.31 21% 40.3 (1.0)
Top 3 worst performers 
Valeant Pharmaceuticals International  $143.11 $101.65 (29%) 34.7 (13.4)
Shire  $212.54 $205 (4%) 40.5 (1.3)
Baxter International $39.82 $38.15 (4%) 20.87 (18.85)

Regeneron Pharmaceuticals benefited from Praluent’s launch, while other assets in its Sanofi partnership continued to perform well commercially and clinically.

As with Astra in the big pharma ranking, Baxter International’s drop was the result of external factors, namely the division of its biopharma arm Baxalta into a standalone company. Valeant, meanwhile, suffered from disclosures about its pricing practices. Shire’s pursuit of Baxalta, ill-timed with the late summer market wobble, has not received the investor support the group would have hoped for.

Eking out market gains – double-digit ones in the case of the broad Nasdaq biotech index – in an otherwise flat year for publicly traded investments is nothing to sniff at. It is not clear that the sector can continue the growth story, especially given that the last six weeks of 2015 have given little indication of which way 2016 will go.

* This story has been republished to reflect the adjusted historic share price for Baxter International following the spin out of Baxalta

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

Share This Article