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The biotech sector breaks out on the stock market

Record investments and success of the equity sector. Waiting for the vaccine against coronavirus pandemic, biotech companies are experiencing a golden moment. Wall Street is the epicenter of the boom in the biotech sector. According to Bioworld, the sum of all capital contribution transactions for the sector – both for listed companies and private companies – exceeds $81 billion in 2020.

Valerie Harrison

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This picture show a person doing some medical exams.

At the top of the wish list of the biotech companies and the whole world is of course the vaccine that would halt the pandemic. However, for the biotech sector, the prospects are obviously wider. From antivirals to specific therapies, the opportunities are not lacking and in the context of the pandemic, the market seems to have understood it quickly. 

The numbers on the other hand do not lie. The initial public offerings (IPOs) that accompany the companies’ entry on the stock exchange mark a new record. And with the regulated markets, new direct investments by specialized entities, starting with venture capital, are flourishing. The party, in short, has just started and given the circumstances promises to last a long time.

If you want to be the first to find the latest discoveries in the biotech sector and why the companies that entered the race to find a vaccine against COVID-19 are doing so well, download for free the Born2Invest mobile app. Find the latest business news and stay on top of the market.

Wall Street discovers the biotech fever

The world of biotech is in turmoil like never before, a recent Business Insider survey suggested. According to data released in August by Dealogic, in the course of 2020, the initial public offerings in the U.S. market would have already reached a total value of $9.4 billion, breaking, several months in advance, the previous annual record set in 2018. 

And that’s not all: on the first day of stock market presence, companies would have posted an average increase of 34%. That is a sign that the enthusiasm of investors far outstrips previous valuations.

The connection between the biotech sector and the medical one

The link between the biotech sector and the medical sector has been impressively strengthened over the years thanks to the development of three areas: biopharmaceuticals, diagnostics, and vaccines. Since the beginning of the 1980s, Assobiotec Federchimica recalled, the therapies supported by biotechnology have affected over 350 million patients worldwide. Currently, reported the same association, “about 50% of all new drugs and therapies in development for the near future are biotech and the proportion is growing in innovative treatments such as vaccines, monoclonal antibodies for the treatment of tumors and inflammatory/infectious diseases, cell therapies, gene therapy, and regenerative medicine.” 

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In this context, the race for vaccine and coronavirus treatments has helped to attract strong investor interest. “The expectation that the industry can provide one or more therapeutic solutions to the COVID-19 pandemic has acted as a catalyst for the growth of biotech stocks on the stock exchange,” reported, in June, the U.S. company Clarivate’s BioWorld specialized portal and data provider. 

At that time, the specific indicator developed by the Philadelphia-based company itself – the BioWorld Biopharmaceutical Index – jumped 36% year-on-year from -4.6% in the overall Wall Street index, the Dow Jones Industrial Average. The big price spike recorded on the stock market since the end of March was decisive, even to say the least.

Since the beginning of April, the biotech pharmaceutical sector has been booming on the global stock market, outperforming its US counterpart (Nasdaq Biotech) and, above all, the general Wall Street index.

Billions invested in the biotech sector

The USA remains the epicenter of financing but the boom in the sector is a global phenomenon. In August, there were 49 Ipo’s in world markets with total investments of $12.22 billion. A record, of course. As many as 29 stock market debuts were recorded between June and July, attracting $8.7 billion in newborn public companies. 

On June 16th, the U.S. Royalty Pharma plc was listed in New York with a transaction of almost $2.2 billion. Among other debuts with a huge investment are the $799 million raised by SK Biopharmaceuticals for its entry into the Korean stock exchange and the nearly $600 million raked by Danish Ascendis Pharma in July. $345 million were raised from the stock offering of Vir Biotechnology, a San Francisco-based company currently developing a vaccine against the new coronavirus.

Initial public offerings, in any case, represent only a minority share of investments in the sector. Again according to Bioworld, the sum of all capital contribution transactions for the sector – both for listed companies and private companies – exceeds $81 billion in 2020. And yes, it seems superfluous to add this, but this too is a record.

Not only the pandemic influences the growth of the biotech sector

To feed the fortunes of biotech companies, however, there is not only the Covid factor. Last year, the sector had recorded the maximum purchase of the bioscience & nutrition branch of the US company DuPont by its compatriot International Flavors & Fragrances. A transaction worth more than $26 billion that had turned the spotlight on a growing market.

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By 2024, according to a Deloitte report, global prescription sales are expected to reach $1.18 trillion, with a compound annual growth rate of nearly 7 percent over the period. It is plausible, at this point, to assume that the current pandemic may lead analysts to upwardly adjust their estimates.

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(Featured image by Polina Tankilevitch via Pexels)

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First published in valori, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Valerie Harrison is a mom of two who likes reporting about the world of finance. She learned about the value of investing at a young age upon taking over her family's textile business when she was just a teenager. Valerie's passion for writing can be traced back to working with an editorial team at her corporate job, where she spent significant time working on market analysis and stock market predictions. Her portfolio includes real estate funds, government bonds, and equities in emerging markets such as cannabis, artificial intelligence, and cryptocurrencies.