Biotechnology is one of the most dynamic healthcare sub-sectors. But for more than a year, the industry has been heavily shaken up by the market.
Hi, it’s Anja Tsai from Kieger.
Biotech stocks this year got off to an exceptionally bad start. Especially for the small and mid-cap companies with a market cap below USD 5 bn the suffering is big. The equal-weighted XBI biotech index fell almost 40% year-to-date. This weak performance follows a tough 2021, where the index already lost roughly 20%.
In the past, M&A was a substantial performance driver for smaller biotech companies. But during the pandemic, M&A has almost completely dried up. And so today, big biopharma corporations pile on large amounts of cash. Currently, the top 20 biopharma firms could theoretically buy up nearly the whole small and mid-cap biotech universe with their cash on-hand.
It still might take a while before we see more active M&A in the pharma and biotech world. Biotech companies are reluctant to lower their take-over price expectations and big biopharma corporations do not seem to be in a hurry. However, many smaller biotech firms now are trading below their net asset level and we know from the past that extreme situations will not last forever. We as healthcare investors should stay patient and it will be interesting to see how the situation will unfold.
For this month, our "Chart of the Month” becomes a “Discussion of the Month”. View Urban Fritsche's, Raphael Oesch and Flavio Mancino key takeaways from this month's conferences in the US.
We attended the 43th annual Goldman Sachs Healthcare Conference 2022 from June 13th to 16th in Los Angeles, where we focussed mostly on Medtech and Service companies. We came away convinced that the healthcare sector will once again prove its defensive qualities as the dynamics of the healthcare market are less affected by the current macroeconomic backdrop.
The Kieger Healthcare team attended the Jefferies Healthcare Conference in New York from June 8th to June 10th 2022. This year, the overarching theme was the state of the Healthcare sector in the current cloudy macro environment. Many presentations touched on the pain-points investors are currently dealing with. In general, companies painted a confident picture for the future.