US big biotechs lag in the opening quarter of the year

A look at sector share prices in the opening three months of 2019 reveals a resurgent big pharma and a strong showing from the world’s other large drug makers, with US big biotech largely lagging.

A couple of big M&A moves and resurgent global stock markets helped biopharma put on a pretty good showing in the first quarter of 2019, though there were a couple of notable exceptions. 

Investors continue to fret about Abbvie’s chances of containing the pain of the loss of Humira, while few seem convinced that buying Celgene is the right thing to do for Bristol-Myers Squibb. Biogen was another notable poor performer during the opening months of the year after the failure of its Alzheimer’s project aducanumab. These US laggards stand in stark contrast to some strong gains from large Asian drug makers. 

A look the broader indices puts these moves in context. The NBI staged a strong recovery in the first quarter, bouncing off a trough reached in late December. Broader pharma indices have performed less impressively, particularly in the US, where a handful of standout disappointments weighed heavy. 

Stock index 3-mth % change 
Nasdaq Biotechnology (US) 15%
S&P Pharmaceuticals (US)  5%
Dow Jones Pharma and Biotech (US)   7%
S&P 500 (US) 13%
DJIA (US) 11%
Dow Jones Stoxx 600 Healthcare (EU)   12%
Thomson Reuters Europe Healthcare (EU) 9%
Euro Stoxx 50 (EU) 12%
FTSE-100 (UK) 8%
Topix Pharmaceutical Index (Japan)  10%

Turning to the big pharma sphere, the quarter's fallers were all US-based, with Abbvie leading the journey southwards. A gloomy outlook given during the company’s preliminary results in January set a downbeat tone, and expectations of substantial business development moves are not helping to lift spirits.

Bristol was dented by its own big idea, and its $64bn bid for Celgene meant that the big biotech led the gainers among other large drug makers. Despite significant investor disquiet, several outspoken groups have dropped their efforts to derail the bid, meaning the imminent shareholder vote on the buyout is likely to go in the companies’ favour.

Pfizer was the only other decliner among the world’s 11 big pharma companies in the first quarter, though mediocre advances from the likes of Astrazeneca and Sanofi were unlikely to have pleased investors.

At the other end of the table was Roche, which has been enjoying something of a recovery since the middle of last year. After fretting about the impact of biosimilars, investors now appear to be focusing on the launch of two new therapies expected to be hugely successful: the novel haemophilia treatment Hemlibra and the multiple sclerosis therapy Ocrevus.

Meanwhile, Lilly has been on a tear for several months now, seemingly triggered by plans to spin off its animal health business, Elanco, unveiled last summer. The huge success of its diabetes franchise, most notably Trulicity, will also be helping; the company’s stock closed at a record high of $131 at the end of March.

Big pharma: top risers and fallers in Q1 2019
  Share price  Market capitalisation ($bn)
  3-mth chg 29 Mar 2019 3-mth chg
Top 3 risers
Roche 13% 238.6 28.1
Lilly 12% 134.4 11.8
Novartis 12% 222.2 23.9
Top 3 fallers      
Abbvie (13%) 119.1 (19.6)
Bristol-Myers Squibb (8%) 77.9 (7.0)
Pfizer (3%) 235.8 (16.5)

Among the world’s other big drug makers, apart from Celgene the leaders are dominated by ex-US businesses. Vertex was the best-peforming large US drug stock in the first quarter, with an 11% gain, while the likes of Gilead and Amgen managed only single-digit advances.  

But Vertex was still outclassed by stocks including Jiangsu Hengrui, which is emerging as a strong oncology player in China, and several Japanese drug makers. Investors appear to have got over Takeda’s deeply unpopular takeover of Shire, while outside the top three risers Chugai and Astellas also climbed 19% and 18% respectively. 

Celltrion was an outyling Asian underperformer. The South Korean biosimilar player has suffered as market realities set in – namely, intense price competition and narrower than expected profit margins. Bayer, meanwhile, has been hit by fallout from its buyout of Monsanto.

Biogen took the wooden spoon this quarter, largely down to the widely predicted failure of its Alzheimer’s project aducanumab. This served as a reminder of just how precarious the company's prospects are, and many investors have decided not to stick around to find out what plan B might look like. 

Other big drugmakers ($25bn+): top risers and fallers in Q1 2019
  Share price  Market capiltalisation ($bn)
  3-mth chg 29 Mar 2019 3-mth chg
Top 3 risers
Celgene 47% 66.3 21.4
Jiangsu Hengrui Medicine 24% 42.6 14.6
Takeda 22% 64.9 38.8
Top 3 fallers      
Biogen (21%) 46.5 (14.1)
Celltrion (19%) 20.2 (4.4)
Bayer (5%) 61.3 (3.8)

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