Biopharma shares keep riding the Covid wave

The pandemic remains the dominant storyline for drug stocks at the nine-month mark, with Vertex and Horizon rare non-Covid-related risers.

Quarterly shareprice performance

Surprising fact of the day: Gilead stock is now worth less than at the beginning of the year. Its shares were up by a third in April, reflecting hopes for the company’s Covid-19 antiviral, Veklury; the fleeting nature of these gains provides a cautionary tale for investors who continue to chase the promise of pandemic treatments.

That search for the next weapon against the virus continues with enthusiasm, among both shareholders and drug developers – the vast majority of the best-performing biopharma stocks at the nine-month mark of 2020 are involved in Covid-19 research. From big pharma’s Eli Lilly, to Lonza and Regeneron of the big caps and Moderna and Biontech among the smaller ranks, there really is only one storyline for biopharma right now.

Data confirming that Veklury is far from a magic bullet arguably help keep investors interested in what comes next from the rest of the sector. Still, Gilead can probably be excused for some disappointment at the lack of recognition it seems to be getting for the $10bn in revenues that Veklury drug is forecast to bring by the end of 2022. 

Biopharma's biggest risers to September 30
Company 9-mth share price change  9-mth mkt cap change ($bn) Mkt cap at 30 Sept ($bn)
Big caps 
Eli Lilly ($) 13% +15.4 141.6
Astrazeneca ($) 10% +13.0 143.8
Johnson & Johnson ($) 2% +8.1 392.0
Other big drug makers (+$25bn)
Lonza (SFr) 61% +19.0 45.4
Regeneron ($) 49% +18.0 58.5
Vertex ($) 24% +14.6 70.9
Mid-caps ($5-25bn)
Moderna ($) 262% +21.4 27.9
Horizon Therapeutics ($) 137% +10.3 17.1
Biontech (€) 126% +8.8 16.5
Small caps ($250m-$5bn)
Shin Poong Pharmaceutical (KRW) 1,647% +5.3 5.6
Korea United Pharm (KRW) 295% +0.7 1.0
Inovio ($) 252% +1.6 1.9
Rising from the micro-caps
Novavax ($)
6,164% +6.5 6.6
Seres Therapeutics ($)
792% +1.9 2.2
Adaptimmune ($)
879% +1.1 1.2
Source: EvaluatePharma. 

The swift recovery of a certain famous patient has put antibody approaches against Covid-19 firmly in the spotlight, and hopes that these therapies can make a big impact on the course of disease has lifted Eli Lilly and Regeneron, the leading developers here.

Other frontrunners in pandemic research need little introduction here, particularly the vaccine players Astrazeneca, Novavax, Moderna and Biontech. A supply deal with Moderna for its mRNA vaccine boosted Lonza, which is a major manufacturer of biopharmaceutical material. 

Somewhat surprisingly Inovio remains one of the most successful small caps, despite its vaccine hopes largely evaporating. And two Korean companies make the grade, both of which have seen retail investors pile in after announcing Covid-19 research projects.

With a 302% jump this year Immunomedics could have been included among small cap risers; however, this was thanks to Gilead's $21bn buyout bid

Given the reach of the pandemic, stocks rising for other reasons really stand out. Both Vertex and Horizon are benefitting from strong positions in rare diseases. The former enjoys a monopoly in cystic fibrosis, with its latest offering, Trikafta, flying off the shelves. Meanwhile, Horizon is experiencing a hugely successful launch of its thyroid eye disease drug, Tepezza, and ongoing strong sales of its gout drug, Krystexxa.

Among the nano-caps, Seres has helped put microbiome players on the map this year with a hit in phase III for a C. difficile project. And after years of glacial progress Adaptimmune finally got investors interested again, with data at Asco providing something of a trigger.

Biopharma's biggest fallers to September 30
Company 9-mth share price change  9-mth mkt cap change ($bn) Mkt cap at 30 Sept ($bn)
Big cap 
Glaxosmithkline (£) -18% -19.8 92.5
Merck & Co ($) -9% -21.8 209.8
Novartis ($) -8% -15.4 199.0
Other big drug makers (+$25bn)   
Bayer (€) -29% -16.9 58.4
Fresenius (€) -22% -10.5 20.2
Astellas Pharma (¥) -16% -5.3 27.3
Mid-caps ($5-25bn)
Amarin ($) -78% -6.1 1.6
Galapagos (€) -35% -4.3 9.1
Sumitomo Dainippon (¥) -35% -2.7 5.2
Small caps ($250m-$5bn)
Nextcure ($) -84% -1.0 0.2
DBV Technologies (€) -84% -0.8 0.2
Urogen Pharma (ILS) -84% -0.3 0.4
Source: EvaluatePharma. 

Of course it is never all good news in the biopharma world, and as always the biggest falls are suffered by the smallest players. Pipeline setbacks took out Nextcure and Urogen, while DBV looks unlikely to see its peanut allergy treatment get to market.

Amarin’s patent woes are well known, while Galapagos has suffered from the FDA’s rejection of filgotinib this is another reason for Gilead's fall from grace this year. And investors seem unconvinced that Sumitomo’s decision last year to hand over $3bn to Roivant will solve its own patent worries – shares in the Japanese company have been in decline since.

Among larger companies, Bayer continues to grapple with the expensive fallout of the Monsanto acquisition, while Merck and Novartis are considered among the more exposed to pandemic fallout in terms of a hit to drug sales.

Finally Glaxosmithkline has had a particularly poor year, despite having Covid-19 efforts in the shape of an antibody deal with Vir and several collaborations over its vaccine adjuvant. Concern that the pharma giant might have to cut its dividend has been weighing heavily on the stock.

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