The biotechnology sector, which experienced a spectacular boom during the Covid pandemic driven by the global need for medical solutions, is now going through a correction phase. Companies like Pfizer, which reached all-time highs with their shares hovering around 59 euros at the end of 2021, have fallen to 25 euros today. Other companies such as Johnson & Johnson, with a value of 150 dollars per share, barely exceed the levels of December 2019, when they were 140. Sanofi, for its part, is listed at 92 euros, barely an advance from 83 at the end of 2019. This scenario reflects a sector that faces challenges after its pandemic boom.
Javier Hombría, professor of the master’s degree in stock markets and financial markets at the Institute of Stock Market Studies (IEB), highlights that the stock market performance of the pharmaceutical and biotechnology sector has not been positive in recent years. According to data from Spanish Stock Exchanges and Markets (BME), the sector has lost almost 50% of its value in the last five years, reflecting a context of correction, according to a graph provided by Hombría.
Mathieu Racheter, Head of Equity Research Strategy at Julius Baer, notes that the healthcare sector has underperformed this year, reflecting investors’ rotation towards cyclical sectors benefiting from the economic recovery. Additionally, potential reforms in the United States, such as lowering drug costs and increasing scrutiny of pharmacy benefit managers (PBMs), increase political risks, Racheter says. Although the sector is trading at a 7% discount to the general market, compared to its historical premium of 3%, current challenges require a selective strategy, especially due to regulatory pressure and the potential impact on biotech and pharmaceutical companies, he adds.
Another challenge facing the sector, according to Hombría, is the review of high healthcare costs in the US, where President-elect Trump has appointed Dr. Martin A. Makary as head of the FDA. This approach, adds Hombría, includes scrutiny of the price of medicines and the approval of new compounds that provide little progress over generic solutions already available.
Global challenges
On the other hand, there are many opportunities in this sector, says Raúl C. Sararu, founder and CEO of DQA. He believes that biotech remains attractive to long-term investors, especially for its ability to address global health challenges through innovation. Sararu highlights that the pandemic exposed the need for scalable and sustainable solutions, leading DQA to develop a blockchain-based telemedicine platform. Furthermore, it highlights that the synergies between biotechnology, digital health, wellness tourism and medical technology create new markets and reinforce existing ones, consolidating the value of the sector.
Saruru considers that the integration of blockchain is key to the growth of biotech, by providing security and transparency in data management, clinical trials and product authentication. It also highlights personalized medicine, driven by AI and genomics, along with tokenization, which redefines financing and attracts global investors, strengthening the sector.
Regarding investment opportunities, market analyst Javier Cabrera believes that the American market offers outstanding values such as Moderna. Despite its stock market decline this year, the company has solid potential thanks to its diversified product portfolio. Cabrera points out that, although vaccination against Covid-19 has lost pace globally, in the United States the campaign is advancing faster than in previous years, with an increase in the vaccinated population from 14.5% to 18.9%.
This progress, together with Moderna’s market share, which ranges between 40% and 50%, could be positively reflected in its results, he says. Additionally, the company seeks to expand its presence in vaccines for respiratory diseases and develops a cancer vaccine based on messenger RNA, with promising results and planned for before 2030, he comments. This advance could consolidate its position in the sector and significantly impact its price, he says.
In Europe, Cabrera points to Sanofi and Novo Nordisk as attractive investments. Sanofi stands out for its double-digit growth in revenues and profits, driven by a diversified portfolio, where new launches already represent 10% of its revenues, and a robust pipeline with 27 products in phase 3. In addition, it is trading at reasonable multiples with respect to its historical average. Novo Nordisk, for its part, excels in the treatment of obesity, a market whose global cost could reach $4 trillion by 2035. However, Cabrera warns that its high multiples reduce its attractiveness as an investment. In general, it concludes that large companies, although less risky, offer greater reliability than smaller firms.
However, the biotechnology sector also faces important challenges that investors must consider, explains Javier Cabrera. Among the main risks, the inherent volatility of these companies stands out, since investments in R&D work like bets: if they are successful, they generate great profits; If they fail, they lose residual value and affect prices, he says. For this reason, Cabrera recommends that investors interested in the sector opt for ETFs that represent the global behavior of the market, especially if they do not have the time or knowledge necessary to analyze in detail the potential of the products under development.
Another relevant factor is the impact of monetary policies, which have a double effect on the sector, according to Cabrera. Rate cuts facilitate access to cheap financing, allowing biotechnology companies to invest more in R&D, he points out. However, this environment can also foster what Cabrera calls “malinvestment», where resources are allocated to excessively risky projects or with uncertain horizons, which could harm shareholders, he warns. In contrast, an environment of high interest rates forces companies to be more selective and responsible, prioritizing projects with greater potential and optimizing their resources, he adds.
Furthermore, Cabrera emphasizes that regulation and competition are constant challenges for the sector. Strict drug approval regulations can slow the development of new products, he says. Added to this is the intense competitionespecially in areas such as oncology and gene therapies, where companies must differentiate themselves to remain relevant, he notes. Despite these challenges, the biotechnology sector continues to offer significant opportunities for investors who know how to identify companies with innovative portfolios and solid business models, he concludes.
Finally, Cabrera recommends adopting a diversified and long-term strategy to invest in this sector. Large companies, although they offer less potential for revaluation, stand out for their reliability and ability to invest in R&D, he says. However, startups also present attractive opportunities for those willing to take greater risks, he adds. In this sense, Cabrera identifies key trends such as personalized medicine and therapies based on messenger RNA, which are defining the future of biotechnology and could transform the sector in the coming years.
Leading technologies
The biotechnology sector is experiencing a revolution driven by emerging technologies that promise to transform health and the industry. Gene editing, with tools such as CRISPR-Cas9, allows genes to be modified with unprecedented precision, offering solutions to genetic diseases and opening the door to personalized therapies. Synthetic biology, for its part, is gaining ground by designing living organisms capable of fulfilling new functions, essential for developing biofuels and sustainable materials. Artificial intelligence also stands out, increasingly integrated into the analysis of genomic data and the accelerated discovery of new drugs. Finally, biomanufacturing is optimizing the production of biological products, achieving more efficient and environmentally friendly processes. These innovations position biotech as a strategic pillar to face the great challenges of the next decade.
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