Even as most countries started seeing rapid vaccination campaigns being rolled out, major pharmaceutical companies including Moderna, Johnson & Johnson, and Pfizer saw their stocks slide as the year drew to a close.
Volatile Markets and Underperforming Stocks
At close on Tuesday, 8 February, vaccine makers, including Novavax (NVAX) and Moderna (MNRA) fell by 11.97% and 4.43%, respectively. Novavax is down more than 60% since its peak in November, with Pfizer (PFE) slipping 8.07% over the month, and still declining well into February.
On the other hand, J&J (JNJ) stocks fell by almost 1%, at 0.91% on average over one month between January and February 2022. The newest data showed that new pharmaceutical research, tools, and other medical devices helped give the company a boost in the fourth quarter.
The S&P 500 has been bearish in recent days, rallying red with day-to-day losses at the opening bell.
Over the last year, biotech stocks on the iShares Biotechnology ETF were down by 12.8%, below the Russell 1000’s return of 21%. Even as the new year closed in, major biotech stocks would slip below their peaks.
Now as the S&P is slipping out of control, biotech stocks look to regain their reputation on the market. Investors are reconsidering whether these stocks are still worth the high risk for the year ahead?
Approval Rates are Dropping
But it’s not just a volatile market that has kept biotech stocks from reclaiming their position among investors. Tightening of approval from drug and pharmaceutical regulators such as the Food and Drug Administration (FDA) has left the lucrative sentiment for biotech stocks erratic.
Approval rates from not just governments, but the general public have also been decreasing, as evidence reveals that some vaccines aren’t as effective as initially proclaimed. When vaccines were first designed to boost immunity against alpha and beta variants, researchers found that newer and more contagious variants have decreased vaccine efficacy.
Although vaccines can perhaps still provide the needed immunity against the novel coronavirus, some are speculating that newer and more infectious variants of the virus will lower the trajectory of not just public support, but also how biotech stocks perform on the market.
J&J Shares a Different Outlook
Vaccine maker, J&J claimed that their vaccine sales will help boost annual revenue by more than 46% in a media release published by The Economic Times on 25 January. Vaccine sales in 2021 brought in more than $1.62 billion at the start of the fourth quarter. Once the company approved booster shots for its initial single-shot dose, sales jumped nearly double, ending the quarter with $2.48 billion in vaccine sales for the year.
Earnings for 2021 were around $2.13 per share, with sales topping more than $42.8 billion for the fourth quarter. The company reported that the coming year will see share earnings reach between $10.40 and $10.60.
While J&J is mostly riding on the success of their vaccines and booster shots which have been proven to still offer around 85% immunity against the Omicron variant, the company is still diversifying their research and product development – focussing on other niche product lines.
But it’s not just companies such as J&J that are looking to improve vaccine efficacy as the ongoing pandemic strains healthcare systems across the world. Some companies are struggling to keep up with demand, and manufacturing has been slowing as the U.S. experiences supply and labor shortages.
Biotech Stocks you should be looking at
Investors are still feeling somewhat reluctant to invest in biotech and biopharma stocks in the coming year. While share returns may have decreased over the last few months, and the market remains volatile, some under-the-radar companies are proving to provide more benefits and guaranteed returns for investors.
Seagen Inc. (SGEN)
Seagen develops therapies and pharmaceuticals that help treat oncology patients. The company has undergone major scrutiny in recent months following its approval of Tvidak in September 2021. Seagen Inc provides a more diversified outlook on the market, with experts citing that stock prices will jump between $40 and $50 in the next few months.
Gritstone Bio (GRTS)
Researchers at Gritstone Bio have been working to develop an almost “second generation” mRNA vaccine, similar to that offered by Pfizer. Over time, investors, and analysts have been keeping a close eye on Gritstone, with the company not only working to develop more highly effective vaccines but also for its research and innovation in the field of oncology.
Seres Therapeutics Inc. (MCRB)
The microbiome therapeutics giant helps develop drugs that work to restore and repair dysbiotic microbiomes. In the third quarter, the company reported revenues of more than $60 million, with year-over-year returns jumping above $120 million. In 2021, Seres underwent a collaboration with Nestle Health Science to boost efforts for ongoing research in therapeutic drug development.
Ascendis Pharma (ASND)
The Danish-based company, Ascendis Pharma has gained a reputation for Skytrofa, a treatment for pediatric growth hormone deficiency. The company has an exciting year lined up, as Ascendis is in to receive increased support and licensing collaboration from leading global biotech brands. Stocks are targeted to reach around $180, with prices currently hovering close to $110.84 per stock as of 25 January
Edgewise Therapeutics Inc. (EWTX)
Investors who are willing to bet less, Edgewise is a biopharma company focussing on treating rare muscle disorders. While some Wall Street analysts have claimed that Edgewise may still be a high-risk stock in its infancy, with stock prices below $15.00 as of January 2021, some expect stock prices to reach more than $30 closer to the fourth quarter.
While opinions over whether biotech and biopharma stocks are double-sided, some still feel that the year ahead will have leading vaccine and pharmaceutical manufacturers stocks slip below their highs of 2021.
Market volatility has raised concern over whether running the high risk with biotech stocks is worth it or not. There’s still a chance that 2022 will see some smaller names in the pharmaceutical industry surpass current predictions.
Investors will still need to consider the risk factor that trails biotech stocks in a volatile market. As the world, and investors hold their breath for the coming year, the development of more effective vaccines and better pharmaceutical research will help not only companies see more support from their regulators, but also help investors see the potential these companies can have for the biotech industry.