
Big caps bounce back for biopharma
Months of share price declines made 2022 a year to forget for many, but large-caps staged a big recovery in the fourth quarter.

A big-cap recovery in the final quarter rescued 2022 biopharma valuations from disaster. The sector still ended down over the year but, considering the deepening declines seen over the first nine months, the situation could have been a lot worse.
A number of factors drove the remarkable bounce back in large caps, including the fading of Zantac litigation risk, Amgen’s buyout of Horizon and growing expectations about the obesity market opportunity. Even mid and small caps managed a small uplift in the final quarter. Is it time to call the bottom?
Almost 700 globally listed biophama stocks tracked by Evaluate Pharma form the basis of this analysis; only pure-play developers, and only those that started 2022 with a market cap of at least $250m, are considered.
The $567bn surge in combined market cap in the fourth quarter for this universe added back almost six months' worth of losses. It is too early to call this a recovery, but hopes that a floor has been hit might not be misplaced.
Evaluate Vantage has been tracking the performance of these companies over the year; the graphs below concern four market cap brackets, into which developers were sorted at the beginning of 2022.
Almost across-the-board gains drove the 11-strong big pharma group higher in the fourth quarter, led by Merck & Co. Roche was the one exception, with the failure of the Alzheimer’s project gantenerumab taking the wind out of the Swiss group’s sails.
Meanwhile, recoveries at a number of flagging big developers, including Moderna, Gilead and Beigene, boosted the large-cap segment. Somewhat remarkably, Novo Nordisk put on the most market cap of this group in the final months of the year, with investors apparently unalarmed by the growing threat of Lilly's impressive diabetes and obesity drug Mounjaro.
Perhaps investors are becoming more appreciative of big biopharma’s defensive nature, as uncertain economic times persist.
The smaller end of the sector was less buoyant, though overall the fourth quarter saw the strongest performances of the year. The mid-cap group benefited from Horizon adding $11.6bn in market cap as a result of Amgen's approach; this stock is still included in the analysis because the deal has yet to close.
A handful of notable clinical wins just about managed to outweigh the disaster stories found among the small caps, though the situation at this end of the sector is of course much more precarious. Cash is running out for many of these groups, and the prospect of raising any more is poor.
Over the whole of the year, only a fifth of the 532 small-cap stocks ended up in positive territory. The large caps might be have regained their mojo, but outside this group 2023 promises to be tough – floor or no floor.
Note: The 11 big pharma groups in this analysis are: J&J, Lilly, Pfizer, Abbvie, Merck & Co, Roche, Astrazeneca, Novartis, Bristol Myers Squibb, Sanofi, GSK.