The gloom deepens for biopharma stocks

With most glimmers of hope extinguished in the third quarter, 2022 is shaping up to be an annus horribilis for sector share prices.

A few months ago, it looked like there might be some reasons to be cheerful about the state of biopharma. But the sector’s stock market performance in the third quarter has had even the most optimistic of investors feeling down.

Evaluate Vantage’s quarterly look at sector-wide share price movements shows that there is always further to fall. The plight of big pharma, usually a popular safe haven in times of strife, is particularly alarming: the world's 11 largest drug makers collectively lost a staggering $294bn in market cap in the period. 

“Winners” and losers

Of this group, only Roche and Lilly did not see a quarter-on-quarter decline, buoyed by the surprise success of Biogen and Eisai’s Alzheimer’s project lecanemab; both big pharma companies have amyloid-beta antibodies of their own. Still Lilly was merely flat, despite the hopes pinned on its Alzheimer’s asset donanemab and its potential diabetes and obesity mega-blockbuster Mounjaro, illustrating just how tough the climate has been.

The biggest losers were GSK and Sanofi, which were hit by worries about Zantac litigation, a concern that was a big contributor to this cohort's collapse in valuation last quarter. The spin off of GSK's consumer arm, Haleon, also caused a readjustment in that developer's market cap. 

Still, previously feted names like Abbvie also did badly, against the backdrop of the threat of US drug pricing reform. This has caused some serious investor disquiet, largely because the potential long-term impacts are unclear.

This all came on top of the wider market downturn, amid continuing fears about inflation and the war in Ukraine.

This analysis is constructed from the almost 700 globally-listed drug makers covered by Evaluate Pharma, sorted by Evaluate Vantage into four cohorts based on year-end 2021 valuations. Companies remain in their grouping throughout the year; nano-caps worth less than $250m are not considered.

Aside from big pharma’s disastrous showing, things were not great for the rest of the sector either, with mid-cap developers faring particularly poorly.

Investors in these groups are often gunning for a takeout, so the fact that a hoped-for pick-up in M&A has so far failed to materialise probably hit sentiment here.

There were some winners in the third quarter. This includes Alnylam, which had positive data with Onpattro in amyloidosis cardiomyopathy, and the aforementioned Eisai.

Sarepta, meanwhile, rose 48% quarter-on-quarter on the mere promise of accelerated approval for its DMD gene therapy candidate, SRP-9001, bucking the current trend for caution around gene therapy names.

As for large players outside big pharma, there were almost as many losers as winners. Those that kept the faith with Biogen will be celebrating a Lazarus-like resurrection, while Daiichi Sankyo continued to ride the Enhertu wave, and Regeneron got a boost from a win with its long-acting version of Eylea.

Overall, though, this analysis shows that success stories have been few and far between, both in the third quarter and in 2022 so far. It is always dangerous to call the bottom, but the sector has to hope that there is not too much further to fall.

13/10/22 note: For this analysis the ADRs of Novartis and Astrazeneca are used, rather than main listings, and text in this article has been amended to reflect this. 

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