So far, 2022 has been a dark year for the stock market in general and for the biotech industry in particular. Following a very weak start to the year, the situation is starting to improve somewhat. The Nasdaq Biotechnology Index has been down as much as 30 per cent, but has recently risen by over 18 per cent with large parts of the industry following suit.
In May, BioStock reported on the major downturns that characterised the stock market in 2022 and their impact on biotech companies. The sour climate had pushed market capitalisation of many companies to below the company’s cash position. In an analysis, the investment bank Jefferies noted that 128 small and medium-sized North American biotech companies had had a negative technology value, something that was described as historical. Even in Sweden, a similar pattern was visible, which BioStock wrote about here.
The gloomy stock market climate has made investors increasingly selective, with guarantors often having to take large parts of new share issues.
Some light in the tunnel
Recently, however, stock markets around the world have to some degree found their foothold, which has also supported the hard-pressed biotech sector. Since the start of the year, the Nasdaq Biotechnology Index has been down at most 30 per cent. The index has since recovered and is at the time of writing down about 16 per cent since the start of the year.
During the period, the sector has also seen a number of major acquisitions, where, among others, the American pharmaceutical giant Pfizer has been an active player, taking advantage of the depressed valuations. For example, the company’s acquisition of migraine specialist Biohaven Pharmaceuticals for 11.6 billion USD coincided with Nasdaq’s biotech index bottoming out in May. Since then, it has also acquired Global Blood Therapeutics – a specialist in sickle cell disease – for 5.4 billion USD.
Several surges testify to increased risk appetite
In addition to major deals, we have also seen some news-driven surges in the sector. One of the winners during this summer’s biotech comeback is American Rhythm Pharmaceuticals. The company’s stock has risen by over 400 per cent after it reported positive phase II data with the drug candidate Setmelanotide, which is being developed for the treatment of hypothalamic obesity.
Sweden has also seen some strong movement. Retail investor favourite Oncopeptide’s share has gained over 300 per cent following a European approval for the drug candidate Pepaxti, which is being developed for the treatment of patients with triple-class refractory multiple myeloma. According to the company, it aims to launch the drug on the German market in the fourth quarter of 2022.
Another Swedish company that has gained strong momentum is WntResearch after announcing new clinical discoveries regarding the drug candidate Foxy-5 in patients with colon cancer. Recruitment for the ongoing phase II study NeoFox is paused and the company plans to restructure the study to capture the candidate’s full potential. Viewed over the past three months, the stock has gained 100 per cent.
The company’s CEO Pernilla Sandwall visited BioStock’s studio to comment on the latest discoveries, in an interview that you can watch here.
Investors increasingly optimistic
Whether news flows and price developments will remain positive, the future will tell, but by all accounts, investors are starting to regain their optimism. According to a survey by Royal Bank of Canada, just over 60 per cent of investors believe the biotech sector is undervalued and believe it will outperform the market as a whole for the remainder of 2022. 58 per cent of respondents also stated that they plan to increase their exposure to the sector. This can be compared with the autumn of 2021 when only 49 per cent of investors thought biotech was undervalued.
The Canadian bank expects a continued high pace of new advances in research, which in turn will continue to drive enthusiasm around the biotech sector.