The biopharma Industry fundamentals are usually sound, with leading companies reporting revenues and earnings ahead of expectations and improving future guidance. Nonetheless, the sector’s performance continues to lag behind the overall market. The major cap pharma DRG index was up a historically strong 18.7%, owing mostly to Pfizer’s 60.4 percent gain, which was propelled by predicted revenues of $36 billion in 2021 and possibly another $30 billion in 2022—a once-in-a-lifetime windfall.
However, since the Industry peaked in February 2021, coinciding with the release of the COVID-19 vaccinations and the start of the reopening trade, it’s been all downhill for biotech. Investors turned to growth stocks and the biopharma sector in particular during the initial abyss of COVID for a variety of reasons: they were more resistant to the “shutdown,” benefited from the clearly underway innovation renaissance, and were viewed as the light at the end of the tunnel with the potential to lead us out of isolation with vaccines and therapeutics.
Another arrow in the growth sector’s quiver has been a hawkish Fed hinting at rate hikes. The anguish of today isn’t limited to the biotech Industry. At press time, the S&P 500 was down about 10% year to date, putting it on track for its worst January in its nearly 100-year history. OUCH.