Biopharma stocks go back to bleak

Hopes for a better 2023 look optimistic as markets take another turn for the worse.

At the end of last year it seemed like things might be looking up for biopharma stocks, with big pharma riding high. The first quarter of 2023, however, has fallen back into an all-too-familiar pattern, with large losses for many of companies in the Evaluate Vantage universe.

Big pharma crashed, losing $199bn in value overall. And a boost in the large-cap group was flattered by the rocketing share price of Seagen on the news that the group was being acquired by Pfizer. Hopes that the bottom of the market had been reached now look premature.

This analysis includes around 500 globally listed biophama stocks tracked by Evaluate Pharma; only pure-play developers, and only those that started 2023 with a market cap of at least $250m, are considered. Companies are assigned to their cohort at the start of the year, and will remain there throughout 2023. The changes to these groups versus 2022 make a direct comparison with last year’s analyses difficult.

In addition the large-cap cohort this year comprises players with a market cap of $20bn or above; previously, this bracket included $25bn-plus groups.

Notwithstanding these caveats, the charts below show a reverse in fortunes for big pharma, often considered a relatively safe haven during turbulent times.

Pfizer had a particularly rough ride, losing 21% of its market cap in the first quarter. The group’s Covid franchise is waning and patent expiries are looming, while there are doubts about its R&D pipeline. Pfizer is buying furiously to fill this hole, spending $43bn on Seagen last month, following last year’s bolt-ons of Biohaven and Global Blood.

Other big pharma groups also suffered, with falls almost across the board. Only Astrazeneca and Sanofi escaped the bloodbath, with the latter’s 12% rise due to success with its own big seller, the Regeneron-partnered Dupixent, in COPD.

Aside from Seagen – which is included in this analysis as the deal has yet to close – there were other gainers in the large-cap cohort. This included Regeneron, also boosted by the Dupixent COPD data, and Novo Nordisk, which is seeing strong demand for its obesity drug Wegovy.

There has been some discussion about whether Novo, among others, should be included in the big pharma cohort, but for now the group’s relatively narrow therapeutic focus means that it has stayed in the large cap bracket.

Even excluding Seagen the large-cap cohort added $21bn in market cap, an increase of 1% – representing a win, albeit a small one.

Mid and small-cap players were not so lucky. On a relative basis these did just as badly as the big pharma group. There were some success stories here, driven by the usual mix of clinical and regulatory wins – see Apellis, Bridgebio, Protagonist and Reata – and takeouts such as those of Albireo, Amryt and Provention Bio.

But only around a third of the mid and small-cap groups ended the first quarter in positive territory. The longer the current market gloom continues, the tougher it will get for those at this end of the spectrum – but this latest analysis shows that big groups are not immune either.

Note: Evaluate Vantage’s universe is constructed from pure-play drug developers listed globally, with the majority sited in the US, Europe or Japan. Chinese developers must have a dual ex-China listing for inclusion. The big pharma cohort consists of 11 companies: Pfizer, J&J, Merck & Co, Lilly, Abbvie, Roche, Astrazeneca, Novartis, Bristol Myers Squibb, Sanofi, GSK.

April 6, 2023 - Figures updated to reflect a market cap correction.

April 11, 2023 - Universe corrected to 500 from 700. 

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