Biotech Analysts See Return to Normal After Virus-Driven Frenzy
Biotech Analysts See Return to Normal After Virus-Driven Frenzy
(Bloomberg) -- The rush of investors seeking a crash course in drug development and biology has waned even amid a rising number of coronavirus infections, and Wall Street biotechnology analysts and health-care trading desks are increasingly seeing operations return to normal.
In the throes of the pandemic, investors unversed in the ways of medical science flooded analyst in-boxes and voicemails with requests, trying to gain a better understanding of what was happening with the novel coronavirus and what the time frame for a vaccine, or a drug to treat it, would look like.
Now, things are about as normal as one could expect, despite most of Wall Street continuing to work from home.
“It’s back to the fundamentals now. If you called me three months ago that wasn’t what it was about,” Umer Raffat, a biotech analyst at Evercore ISI, said in an interview. “Conversations have been catalyst-specific and fundamental-specific” as opposed to discussions about what the next three to six months would look like.
With the S&P 500 trading about 8.5% below February’s record high, and the closely-watched Nasdaq Biotechnology Index near an all-time high, Raffat’s experience is similar to what other biopharmaceutical analysts and members of sell-side trading desks are seeing. Even with concerns among Wall Street strategists around the rising number of virus cases in some states, investors seem to have come to terms with where the U.S. economy is today.
Biotech’s rise to fresh record highs might be expected to draw a spike in interest from generalist investors, especially as the conversation in Washington shifts, for now, away from a push for drug-pricing changes, says Baird health-care analyst Brian Skorney.
But that hasn’t been the case.
“Most of the generalist interest that I’ve had has been less about what is a good stock to buy in biotech as it was about what investors should do with their airline stocks or their automotive stocks” amid the pandemic, Skorney, who covers companies studying drugs to combat the virus, like Gilead Sciences Inc. and Regeneron Pharmaceuticals Inc., said in an interview.
Conversations around Gilead and remdesivir, its drug that won emergency approval for hospitalized patients with severe Covid-19, were less likely to focus on whether an investor wanted to buy the company’s shares and more about whether a reopened U.S. economy could thrive if doctors were armed with a drug to treat the infection, Skorney said.
After being deluged for two months, most biotechnology analysts surveyed by Bloomberg News reported that, today, things have returned to normal. The recent close of the American Society of Clinical Oncology (ASCO) meeting and a European Hematology Association (EHA) conference, paired with companies’ quarterly earnings, have helped further the normalization of investor conversations heading into midyear, William Blair analyst Raju Prasad said.
Data Focused
“In biotech in particular, I think people understand where therapeutics are and where the vaccines are, and within biotech investing you’re talking about longer timelines for drug development,” Prasad said in an interview. “There were several catalysts at meetings like ASCO and EHA and investors in all of those stocks were really focused on the data.”
Analysts agreed that the spike in infections in Florida, Arizona and elsewhere could bring back the squad of generalists looking to get an understanding on updated vaccine development timelines and how it might affect the global economy. But for the time being, specialists remain focused on stock-specific catalysts as well as the euphoria surrounding newly public companies.
“In general, there’s been a good sense of the long-term nature within biotech,” Prasad said.
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