Let there be drugs: What happens to pharma and biomed stocks?

The pharma, biotech and biomed stocks that soared in the heyday of the Corona, fixed their gates down.

Despite the declines, most companies are still trading at higher rates than before the plague.

The "table does not lie" section examines: Will health stocks advance a cure for the next blow?

Roast Greenberg

23/12/2021

Thursday, 23 December 2021, 16:33 Updated: 16:48

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The main thing is health?

Not when it comes to the capital market.

Although the corona plague has returned investors' spotlight to the shares of health and pharmaceutical companies, the return of global economic activity to routine alongside the corona has shifted the spotlight back to real activity.

As a result, some health care companies have not been able to benefit from the warm light of the cash spotlight, whose movement mimics billions of dollars from the value of the companies in the field, along with millions of shekels that have been erased from the value of Israeli companies traded on the Tel Aviv Stock Exchange.

The five largest companies trading in the field in the US lost an average of 15.3% each of the peak value to which they jumped during the corona, and the 5 largest Israeli companies in the field and traded on the Tel Aviv Stock Exchange lost an average of 41.7% of the peak value during the corona period. Lose height.But

despite the declines and large write-offs, most companies are still recording highs against the value at which they were traded pre-Corona, and there are also those who continue to hover up against the backdrop of vaccines.

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Pharma, biotech and biomed companies (Photo: Walla !, no)

"Some of the healthcare companies have made a handsome return this year," explains

.

But you have to make a distinction between investments in health made during the corona and the increases experienced companies in the field at that time, and the separation begins the funds invested by governments and giant corporations in the health sector - particularly in the US.

For all the focus of health care systems in the world, including the American one, aimed at solution Health, because of the corona epidemic, to which all the system's resources have been directed, so when you look at the companies that trade in the field, you can see an increase of hundreds and thousands of percent, mainly in two companies: Modern and Beyond Tech, which is Pfizer's partner. .

The continued value flooding the companies stems mainly from the fact that in the Western world there is a recognition of the need for a third vaccine dose, and that it continues to be vaccinated in the first and second doses. In addition, there is an understanding that we may also have to reach a fourth and fifth vaccine dose, and the shares of these companies benefit from this.

It is true that other companies that started vaccine or corona drug developments benefited from one value flood or another at that time, but they failed to achieve the same result of vaccine efficacy as the two mentioned earlier did, nor at the time they implemented it.

Beyond that, the health systems, and especially in the United States - which is the world's largest supporter of the biotech and biomed markets, did not converge into other medical fields.

For example, there is a strong emphasis in the world of biotechnology on solutions for various cancers, but most have not functioned so well in the last two years, partly due to the inability of some companies to perform experiments.

So why did some companies still get flooded with value?

The answer to this is mainly in the index, since some of the investments in the field during the Corona period were made through the purchase of ETFs for the biotech index, and not necessarily an investment in a specific company.

In this context, it is important to separate the large companies in the field from the small companies, since the majority of investors have wanted and want to focus on the large companies and the indices that are biased towards large companies.

So if you buy an ETF for the biotech index, most of the money will go to the big companies that carry more weight in it, than to the small companies, which also benefit, but little. "

Sergei Vaschonok, Senior Analyst at Oppenheimer Investment House (Photo: PR)

An expensive and long process

Vaschonok goes on to explain: "To this can be added that hedge funds in the field, which are the main players in small stocks, did not really function after the start of the corona, and that the biotech sector does not interfere with the real economy. has a correlation to the real economy.

connecting everything together explains why the sector declined Focus, and especially the big investors such as institutional Israelis and Americans, despite pricing biotechnology companies are still considered cheap.

in terms of investment in small companies it is important to note that investors in the field have already learned from experience and one of the data in front of them is The amount of supply of companies exceeds tens of times the amount of exits that the field experiences, and then the investor thinks to himself why invest in a binary and risky field when the stock market is good?

Another statistic that pushes against investing in small companies in these areas is that it is an expensive business;

"The process of developing a drug from beginning to end, for the benefit of a large population, takes about 10 years on average and costs about $ 1 billion on average - $ 100 million a year."

Uri Hershkovitz, Life Sciences Analyst at Psagot Investment House (Photo: Private)

Increases that led to redemptions

The impact of investments on the US healthcare sector has had a direct impact on the Israeli healthcare sector, which has experienced even sharper declines, including Compugen and IceCure, which are traded on the Tel Aviv Stock Exchange, down 79.06% and 77.85%, respectively.

" "Uri Hershkovitz, a life sciences analyst at Psagot Investment House, adds," but it should be remembered that the data show that the rise to the peak was very sharp.

The U.S. Biotechnology Index (XBI) has tripled since its inception with the onset of the corona plague in early 2020, rising from $ 60 to $ 180 in a short period of time.

In addition, the index that affects the pricing of all biotechnology stocks in the world, including in Israel, has been in one of the sharp declines in its history for about a year - about 60%, and this situation has led to sharp declines experienced in biotech funds.

The declines in the funds led to huge redemptions, which led to forced sales, and the continued feeding of the declines. In fact, a wheel of decline has been created that repeats, God forbid, and in this case the troubles of the gentiles are not even half a consolation for the local biotech, which will have to wait for the XBI index to recover before we see Israeli stocks rise as well.

In addition, some of the biotech shares in the world and in Israel flew up on a platform of promises to find a vaccine or medicine for Corona, and the fact that Pfizer was the one who garnered fame on the subject did not benefit the shares of Israeli companies.

Neither did point-by-point clinical failures, as experienced by Floristem, Protelix and others, benefit them. If you analyze Walla!'S table data! Money and Maariv Business, it is possible to indicate in Kamda the termination of the production agreement for Takeda, which is currently in effect.

And 'natural' claims in the price it pays Haofiiatim last year alongside the general weakness in the prices of generics in the US. Detriment 'Aiiskior complies with its IPO in New York made a very deep discount, and led to a sharp fall in the share.

But there is also a boost, you can get a wave of acquisitions "Experienced in the field in the last two months, in which American and European biotech companies are acquired by pharma giants, and some see this as a marker of their price reaching the bottom, ie: the price of the companies' shares is already at its bottom, and the way down will not lengthen."

Vaschonok adds that "it should be noted that each biotechnology company is a story in itself, very unique to a very specific population, and that at the end of the day these are companies trying to develop a drug. In this context companies have a huge market as demand increases as life expectancy increases."

The question being asked in the capital market today is mainly what is the life expectancy of biotechnology and medical companies in the post-Corona era, and the answers do not necessarily wish for complete medicine.

But alongside the companies' return to the fight for fundraising in favor of completing a series of experiments and waving the last feathers in favor of being acquired by the big pharma companies, some see light above the treatment bed;

"In 2022 While there are many variables, but innovation is the height and the large pharmaceutical companies eager to take credit for it," adds Herskovitz, "and therefore, in my estimation, seems to be the wave of acquisitions in the area continues.

I also definitely see the index XBI gives outperform next year, which should To give a boost to biotech stocks in the country.However, it should be remembered that Biden is still constantly trying to pass a reform in U.S. drug prices that could push the index down.

In addition, it should be borne in mind that in light of the sharp declines investors are tending, at this time, towards the older companies in the field, which are in development stages of Phase 3 and above, and which are already operating commercially with income and profits.

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