Several Biotech Stocks Have Been Hitting New Highs Since the Start of the Year, It's Biotech Industry Time to Shine
The promise for a bright 2024 comes after two years of abysmal performance of biopharma stocks. The S&P Biotechnology Select Industry Index surged 43% from its recent low in October 2023, reaching a new high since April 2022.
Source: S&P
A stable-to-improving environment characterized by falling inflation, low unemployment and the easing of hospital staffing pressures position medtech companies for a better year in 2024, BTIG analysts wrote in a note to investors.
Last year,“choppy supply-chain dynamics,” rising interest rates and fears about the impact of GLP-1 drugs dragged on the industry, causing stocks to underperform the S&P 500 despite companies benefiting from the conversion of procedure backlogs that built up during the pandemic.
The BTIG analysts expect some of the factors that held medtech back will ease this year, several biotech stocks have been setting consecutive new highs at the beginning of 2024. $Sarepta Therapeutics(SRPT.US$ has soared over 20% since the start of the year, while $Eli Lilly and Co(LLY.US$ and $Merck & Co(MRK.US$ have also seen gains close to 10% as of Jan.12, 2024.
Source: MooMoo
Meanwhile, the biotech sector is experiencing a frenzy of M&A deals. Last month alone, drugmakers including AbbVie, Bristol Myers Squibb and AstraZeneca announced roughly $25 billion worth of US listed biotech deals, according to data provider LSEG Deals Intelligence.
“After another difficult year, there are signs that biotech is recovering into 2024. A pause or even reversal in interest rate hikes is constructive for biotech financing and M&A (mergers & acquisitions) remains active,” Piper Sandler’s analysts Edward Tenthoff and Thad Barney wrote in a note to investors.
Currently, multiple factors are favoring the biotech industry
M&A bonanza stokes biotech dealmakers
“We've had an uptick of M&A recently, we're seeing stocks rebound with the market recovery and interest rates lowering,” said JPMorgan global head of biotech investment banking Mike Gaito, who will interview CEO Jamie Dimon on the opening day. “People are open for business.”
The valuations of biotech companies are quite attractive
The wider US stock market is approaching record high, while the S&P biotechnology index remains more than 50 % below its early 2021 peak. Following an earlier period of risk digestion, the valuation of the Biotech sector is at a lower level, presenting a more attractive entry point for investors.
Then there were the gains on the regulatory front
$CRISPR Therapeutics(CRSP.US$ won Food and Drug Administration approval for the first gene-editing drug based on CRISPR technology. Shares whipsawed lower, but are making a comeback.
Vertex Pharmaceuticals scored a win in non-opioid pain treatment and Moderna stock rocketed on the promise for its Merck - partnered cancer vaccine in melanoma patients.
“I think it is nascent optimism right now,” said Rahul Chaudhary, head of healthcare equity capital markets at Leerink Partners.. “But hope springs eternal, and there is hope that the lower rate environment will start to help the sector in 2024, you’ll see more companies be able to access capital and importantly you’ll see the generalist investors - who have been absent for three years - start to come back.”
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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