Investor sentiment still backing growth for pharma and biotech sectors, but the length and severity of COVID-19’s impact globally has yet to be seen.
Confirmation that the coronavirus has reached pandemic status on 11 March has darkened the mood worldwide, raising fears about the rapid spread of the disease outside China, and increasing chances of a worldwide recession.
The US, the EU and other nations have hurriedly announced financial remedies, including lowering interest rates and providing loans and tax relief to small businesses, but markets have nevertheless slid downwards again.
The World Health Organization (WHO) is now using the pandemic term (describing a disease spreading between people in multiple countries at the same time) because of a rapid rise in cases in European nations and the US.
There are fears authorities have not acted swiftly enough, with WHO chief Dr Tedros Adhanom Ghebreyesus expressing deep concern about what he called “alarming levels of inaction” over the virus.
US President Donald Trump has announced sweeping new travel restrictions in a bid to combat COVID-19 infections, banning all flights from most of Europe (the UK and Ireland excepted) for 30 days.
Meanwhile European nations now look likely to follow Italy’s ‘lockdown’ methods in order to lessen the impact of the disease.
However Trump’s measures did nothing to reassure the markets: US futures tumbled and markets in Asia and Europe lost gains made in recent days, while the UK’s FTSE 100 exchange hit levels not seen since the post-financial crisis period of June 2012.
Ursula von der Leyen, president of the European Commission said: “The crisis we face because of coronavirus has both a very significant human dimension, and a potentially major economic impact. It is therefore essential that we act decisively and collectively, to contain the spread of the virus and help patients, and to counter the economic fallout.”
Surveys of the biopharma sector have found its leaders confident that the industry can ride out the disruption caused, but sector analysts think a shutdown in global travel could disrupt clinical trials and new drug launches throughout 2020.
In a research note published on 11 March, Credit Suisse concluded that “investors are cautiously optimistic that COVID-19 volatility will resolve in the near-term”.
Its survey of 107 investors found that around 71% of respondents said their investment approach and outlook was unchanged this year, and approximately 59% said they expected the sector to rebound within six months, with 12% expecting recovery within 1-2 months.
However even one day later, this outlook looks overly optimistic, especially as most countries are moving towards strict enforcement of travel restrictions and ‘social distancing’. This will ‘flatten the curve’ of the disease – lessening the number of infections and giving healthcare systems time to deal with the most acute cases. However this could also cause serious disruption across the global economy, which the biopharma sector could find hard to avoid.
In the Credit Suisse survey, investors saw a handful of companies at greatest risk of a downside impact. These were: Amgen Inc., AstraZeneca PLC, Johnson & Johnson, Pfizer Inc., and Merck & Co. Inc.. Those seen as being possible beneficiaries were Gilead Sciences Inc., Moderna Inc. and Regeneron Pharmaceuticals Inc., reflecting their work in developing novel anti-virals against the disease.
The survey also found that 65% of respondents forecast pharma and biotech revenues to continue to grow this year, by an average of 5%, while 24% of respondents indicated revenue growth would be flat, with a similar view on earnings.
The analyst note said this was in line with its view that company fundamentals had not yet been “meaningfully impacted” by COVID-19 including supply chains or clinical development programs.
However as the situation worsens in Europe and the US, societies and business sectors are being confronted with a huge challenge, with the course and length of the pandemic still uncertain. While hopes had been held out that the arrival of spring in the northern hemisphere would help eliminate the virus, governments are bracing for a much longer term impact throughout 2020.
As one European biotech exec told Scrip: “Any forecasts at this time are valid for the next two hours. We are just at the start and we will have to take this day by day.”