Covid-19 hits Europe drug stocks hardest

US drug stocks were shielded from bigger falls in the first quarter by leading coronavirus researchers, leaving groups listed in Japan and Europe to tumble harder.

Even the defensive pharmaceutical sector suffered widespread share price falls in the first quarter, with hundreds of billions wiped from global valuations, a previous Evaluate Vantage analysis found (Covid-19 infects global drug stocks, April 3, 2020).

A look at how these losses were incurred regionally shows that the US was shielded to a certain extent by having several of the leading companies leading the charge to find potential treatments. Europe was hit hardest in the opening months of 2020, as Italy and Spain became the focus of the pandemic in March, with Japanese drugmakers not escaping much either.

In a new project Evaluate Vantage has started tracking the stock market performance of almost 600 global drugmakers covered by EvaluatePharma. This universe excludes micro-caps, defined as those worth less than $250m, and includes only dedicated drug makers; companies whose business is primarily medtech or diagnostics, for example, are excluded.

The US contributes the largest number of drug makers to this universe – 238 companies out of the 579 in total – and therefore accounts for the biggest chunk of market cap. This was eroded by 11% over the first quarter of 2020, with a huge proportion of stocks registering share price declines and a big proportion losing more than a quarter of their value.

Drug stock performance: a look across the regions
  US  Europe Japan
# of companies in universe 240 100 67
% of companies down over Q1 80% 82% 79%
% of companies >25% market cap loss 39% 35% 28%
Source: Evaluate Vantage analysis.

Still, those US stocks that rose did so spectacularly. Vir Biotechnology (+173%) and Cytodyn (+167%) topped the table for share price gains, in the US and across the whole universe. The country contributed four of the 10 biggest share price jumps across the universe, with Forty Seven and Inovio climbing strongly as well. 

In terms of valuation, huge market cap gains from the big US biotechs Regeneron (+$12.3bn) and Gilead (+$11.9bn) helped protect the region from the sort of losses seen elsewhere. It goes without saying that the vast majority of risers were fuelled by hopes for their experimental Covid-19 treatments.

The disparate countries of Europe contribute 100 drugmakers to this universe, all but 18 of which saw their share price fall in the first quarter. At 18% this fall was the biggest hit to a region's total market cap. 

Biontech, the German mRNA player, represents a rare bright spot: its 75% share price gain was the region’s most impressive over the three months, while its $5.6bn valuation boost topped the European cohort. France’s AB Science (+29%) and Spain’s Pharmamar (+22%) also benefited from coronavirus efforts, though these are very small companies.

In Japan, Chugai stands out, a remarkable performance given that the company is one of the country’s biggest pharma stocks. Its 24% share price gain over the first quarter added the equivalent of $11.4bn to its market cap, taking the stock to a record high.

This was largely down to Chugai’s exposure to the IL-6 approach, having discovered Actemra; Roche, which owns 50.1% of the company, pays substantial royalties to Chugai on sales of the antibody.

Kyorin was another big gainer; the company said that in mid-April it would launch a test for the coronavirus that takes only 15 minutes; shares in the small-cap drug developer gained 15% over the first quarter.

These bright spots are far from common, however. Drug indices have not fared as badly as other sectors, but this is cold comfort for now, and executives and investors will be hoping that, for the remainder of the year, the only way is up. 

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