Investing.com – The healthcare sector has received intense investor scrutiny in 2020 amid the coronavirus pandemic. The COVID-19 outbreak has enabled biopharmaceutical companies to shine a light on their operations and provide an opportunity for active development. Meanwhile, their shareholders are looking for ways to make money on this.
Now the pharmaceutical industry is the second largest segment by capitalization ($ 4 trillion) in the US stock market, Otkritie Research analysts say in a commentary to the Financial Gazette. “Investing in biotech venture capital stocks is like buying an option. In the sense that the current share price is a payment for the possibility of future multiple growth, ”they explain.
At the same time, they acknowledge that many market players avoid the sector due to difficulties in understanding the end product, as well as assessing the prospects and fundamental value of the stock. There is also political risk. According to Denis Buivolov from BCS, after the growth of the segment in the first half of the year, at the beginning of the second there was a profit taking due to the leading Democrat Joe Biden in the US presidential race.
“Democrats want to reform the healthcare system, which could lead to lower drug prices in the United States and hit revenues for pharmaceutical and biotech companies,” he warns.
As for the race for the presidency of the United States, last week it became known about the coronavirus infection of the current head of Donald Trump. His treatment is carried out with a combination of two drugs: Remdesevir from Gilead Sciences and REGN-COV2 from Regeneron Pharmaceuticals, writes the author of the Telegram channel 2Stocks Dmitry Polyansky.
It is on the shares of these two companies that investors' attention is focused today. The shares of Gilead Sciences, the creator of the first drug Remdesevir, cannot yet serve as a source of income for market players. It is known that the drug, the effectiveness of which is now being debated, potentially mitigates the course of the disease. It is already being used to treat COVID-19, but its use will be questionable after more advanced drugs, such as vaccines, are introduced, Polyansky notes. This factor is embedded in the quotes of Gilead Sciences: they have not shown growth since the beginning of the pandemic and are now at lows in seven years.
At the same time, great hopes are pinned on the second drug – REGN-COV2 from Regeneron Pharmaceuticals. The cocktail of antibodies that reduce viral load has already passed two phases of testing. Against this background, the quotes of Regeneron Pharmaceuticals have risen by 50% since the beginning of the pandemic. Now the tool is waiting for the third and final stage of testing. If the drug enters the market, then investors can win back this news, making a profit on growth at the moment, says Polyansky.
Data from the third phase of vaccine trials from Pfizer and BioNTech could be the next turning point in the development of the vaccine as a whole, Buffolov adds. They are expected in October, he says.
The text was prepared by Yana Shebalina