If the theme of the first quarter of 2021 was worry about a stock market correction, the second quarter was all about a resurgence on the back of Alzheimer’s optimism. It seems the FDA, with the controversial approval of Biogen’s Aduhelm, has come to the rescue of biopharma investors.
It was big pharma groups that led the charge, an analysis by Evaluate Vantage shows. Lilly was the biggest gainer, adding nearly $59bn to its market cap in the first half of the year, helped by hopes that its amyloid-beta antibody donanemab might now get a quick US nod.
In the big cap cohort the company that started the Alzheimer’s renaissance, Biogen, was outdone by Moderna. A strong showing by other Covid-19 vaccine developers suggests that, for investors at least, the pandemic is far from over.
This analysis tracks the stock market performance of just over 700 global biopharma groups covered by Evaluate Pharma; it includes only pure-play drug developers with a market capitalisation of more than $250m at the start of the year.
Combined market caps increased by $327bn in the second quarter of 2021, meaning this year still has a way to go to beat the strong performance seen in 2020 (One victory for biopharma over the coronavirus in 2020, January 8, 2021).
Of course, the latest analysis is only a snapshot in time and sentiment can quickly change. But for now, the markets seem convinced that the FDA is amenable, at least as far as Alzheimer’s is concerned.
Whether this leniency will extend to other drugs and indications is an open question. But Aduhelm’s approval has raised the possibility that surrogate endpoints could be used as the basis for accelerated approvals outside cancer, thus providing a lift to the whole sector.
Still, some smaller groups have not had the same FDA experience as Biogen. Acadia, which saw Nuplazid knocked back by the agency in dementia-related psychosis, was one of the biggest mid-cap fallers. And the agency rejected Provention Bio’s teplizumab only this week.
Overall, the smallest drug developers performed less well than their larger counterparts in the second quarter, the charts below show, a reversal of the trend seen in the first quarter of 2021.
As usual there were big gains for some small players, particularly those with positive data. One such group, Intellia, has had an $8bn boost this year, mostly thanks to early results with its in vivo Crispr editing project NTLA-2001, reported last month.
But it was among the big pharma cohort that the biggest increases in market cap were seen, both on an absolute and relative basis. Lilly might have been the standout performer, but there were also strong showings from Astrazeneca, Sanofi and even Glaxosmithkline, which is grappling with the activist investor Elliott Management amid discontent about its pipeline and strategy.
Indeed, of the big pharma cohort, only Merck & Co and Novartis ended the first half in the red.
But with investor interest still strong and the FDA in a supportive mood, there are reasons why biopharma stocks might perform well in the coming months.