Biotech Stocks Stumble Despite Broad Market Rally
March 10 2020 - 6:21PM
Dow Jones News
By Caitlin McCabe
Biotech stocks were expected to be a bright spot in a stock
market battered by worries over the coronavirus.
The shares initially surged when the rest of the market tumbled
as companies raced to develop vaccines and treatments for the
virus. But investors may be realizing that the path to containing
the pathogen is more complicated than originally thought.
Shares of biotech and pharmaceutical companies working on
coronavirus medications tumbled Tuesday despite gains across the
broader U.S. market. Drugmaker Gilead Sciences Inc. fell as much as
6.4% shortly after the market opened, before ending the day down
1.6%. In contrast, the benchmark S&P 500 jumped 4.9%.
Moderna Inc. also retreated, falling 8%. Inovio Pharmaceuticals
Inc. fell 42%, Vir Biotechnology Inc. slumped 23% and Regeneron
Pharmaceuticals ended the session up a mere 0.1% after spending
much of the day in negative territory.
Analysts said some of the declines across the sector could be
tied to lingering questions about how successfully coronavirus
treatments could be monetized amid rising political pressure to
keep virus medications affordable. There are also worries about how
long development of treatments will take. Some research trials for
drugs aren't expected to be completed for several years, long after
the coronavirus has done its damage.
"We've seen this in the past with other pandemics historically,"
said Brian Abrahams, senior biotech analyst at RBC Capital Markets,
noting that biotech stocks can rise sharply "just on pandemic
potentials."
For weeks, large, well-entrenched drugmakers and smaller
startups have been jostling to find treatments for the coronavirus,
which has killed more than 3,800 people and infected more than
109,000 world-wide. No treatment or vaccine currently exists for
the virus, which has spread quickly, in part, because many people
don't begin showing symptoms until several days after exposure.
Gilead and Moderna are widely considered to be leaders in
developing vaccines and treatments for the virus, with products
from both companies already in the early stages of trials.
Researchers at the University of Nebraska started testing Gilead's
experimental treatment, called remdesivir, in February. The
National Institutes of Health is also expected by the end of April
to start testing a vaccine developed by Moderna.
Smaller companies including Vir Biotechnology, Inovio
Pharmaceuticals, Novavax Inc. and Altimmune Inc. are also all
working to develop medical solutions to the coronavirus.
Investors since late February have rewarded these biotech
companies by piling into the stocks while the broader market was
tumbling. On Feb. 25, for example, Moderna's share price
skyrocketed 28%. On Feb. 28, Novavax, jumped 36%.
Other companies, including iBio Inc., which in early February
announced a partnership with Beijing CC-Pharming Ltd. to develop a
plant-based coronavirus vaccine, have seen their shares rise by an
eye-popping amount this year. Delaware-based iBio's stock price is
up 474% year-to-date.
Analysts said Tuesday's declines may have also been spurred by
broader gains in U.S. stocks, which surged as investors took
comfort in U.S. government officials' plans to try to offset any
economic slowdown from the coronavirus.
"It seems like you have this coronavirus basket of stocks
inversely trading to market performance," said Edward Tenthoff, a
senior biotechnology analyst at Piper Sandler Cos. "When the market
does a little bit better, coronavirus fears [may be] subsiding a
little bit."
Within the biotech sector specifically, Dr. Abrahams, of RBC
Capital, noted investors may also be reacting to concerns about how
the coronavirus will affect company operations.
"It could be difficult to enroll clinical trials when mobility
and travel is limited," he said. "And from a regulatory standpoint,
with the [U.S. Food and Drug Administration] potentially being
preoccupied with management and containment of the coronavirus
outbreak, they could have less resources for the review of new drug
applications."
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
(END) Dow Jones Newswires
March 10, 2020 18:06 ET (22:06 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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