Healthcare haven amidst rocky markets
Despite a tough market environment of the month and the quarter, Healthcare has continued outperforming the market, led by Healthcare services. The outsized moves seen on stock specific news items, even if well-expected show the pent-up nervousness from market participants (Dexcom, Alnylam, Genmab).
Overall, we are encouraged by the continued outperformance of the sector, which we believe is justified given the strong earnings rebound expected this year and the depressed valuations – see our “Chart of the Month” below.
Biotech from China
This month, Novartis and Merck each committed close to $2bn to license phase 2 assets from Chinese companies.
These recent, high-profile deals for cardiovascular and metabolic assets are the latest in an accelerating series of deals by Western companies to acquire assets developed in China.
These deals, often for early development candidates, highlight the breadth and depth of competence and innovation in the laboratories of Chinese companies.
Peter Marks resigns
Dr. Peter Marks, head of the Center for Biologics Evaluation and Research (CBER) resigned on the 28th of March. CBER regulates vaccines in the US. In his resignation letter, Dr. Marks singled out efforts by RFK to undermine the confidence in vaccines.
This resignation comes after RFK announced the reduction of the healthcare department’s staff by roughly 20’000, or 25%
Overall, while these developments are negative for sentiment and may slow down review and approval process for new drugs, we view the impact as limited and primarily affecting small-cap biotech stocks.
Chart of the Month
Since the pandemic ended, we have seen strong demand for healthcare. The chart shows the spike in annual healthcare earnings in 2021 and 2022. In 2023, COVID earnings remained strong due to vaccine boosters, creating a tough comparison for 2024.This means 2025 will be the first year where strong underlying healthcare demand is fully reflected in strong reported earnings growth. Together with more modest valuation levels compared to other sectors this could further improve the sentiment for healthcare.
Check out our video on this subject here.
Top 5 last month:
- HCA 13% Macro
- UnitedHealth 10% Macro and better rates
- Cencora 10% Macro and better rates
- Elevance 10% Macro and better rates
- Alnylam 9% Amvuttra approval
Source: Bloomberg Finance L.P., Kieger
Bottom 5 last month:
- Novo Nordisk -24% Tariffs, trial data
- Dexcom -23% Warning letter
- Pro Medicus -21% IT sector pullback
- Amplifon -20% Earnings, guidance cut
- Grifols -20% Negative headlines
This news article has been issued through Kieger AG and is for distribution only under such circumstances as may be permitted by applicable law. This document is for information purposes only and does not constitute an offer. Past performance is not a reliable indicator of future results. The details and opinions contained in this document are provided by Kieger without any guarantee or warranty and are for the recipient’s personal use only. All information and opinions contained in this document are subject to change without notice. This document may contain statements that constitute “forward looking statements”. A number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. Data source: Statestreet / Factset.
