The Age of Biotech: Moderna, Pfizer, and how COVID-19 helped an adolescent industry mature
Insights on how an industry has grown up thanks to a global pandemic
With last week’s announcement of Pfizer’s trial COVID-19 vaccine success, markets rallied at new heights in hopes of a grueling crisis coming to an end. Then, yesterday, something big happened. Moderna announced a 94.5% effectiveness rate with preliminary data from its vaccine trials, and markets soared. The Dow Jones Industrial Average is now cruising at 29k points; these are heights that have never been seen before, especially during a global pandemic. But this shows something more than just the effect of two companies on the entire global economy. It shows the coming of age of the Biotech industry.
The question of Biotech, an industry once forgotten
Pre-quarantine times seem to be so far away, almost forgotten in the current crisis. Nevertheless, it is vital to remember when biotech wasn’t in everyone’s portfolios, when it wasn’t on the top of people’s heads, and how it wasn’t trusted as a solid investment.
Many pharmaceutical companies were once seen as dirty, controversial, and sometimes a worrisome long-term investment — one could never really know when the next big lawsuit could pop up. This should most definitely not be forgotten, especially now as it seems that most governments are willing to bend over backward to make the pandemic just a little more bearable. However, that sentiment should not limit the industries’ development as a whole. Biotech is evolving, and the firms within it are too.
The sick game: diseases as a money maker
As the global population continues to grow, the demand for land will too. This results in deforestation, which, besides impacting the climate, also affects diseases. According to the CDC, over 60% of emerging human diseases are zoonotic, meaning they originate in animals. One way that these diseases transfer to humans is when humans enter the ecosystem of animals. This can eventually result in the mutation of animal diseases to be able to manifest themselves within humans, and hence, leads to a new infectious disease.
So, as deforestation continues, these zoonotic diseases will become more and more common. This can potentially lead to more pandemics. Although this is bad for society, it is great for the financial statements of biotech companies: this is the moral dilemma. It is good that firms that make cures for such diseases can grow to become more efficient, but in the end, they profit off death. While this fact may not resonate well with some investors’ moral compass, the reality of the future of epidemics might attract others. In the end, this is the decision of the individual investor.
Biotech: Steroids or Adulthood?
The biotech industry has developed a lot throughout the pandemic. Moderna’s stock went from trading below $20 at the beginning of 2020 to a bit above $100 just yesterday. What does this mean for the industry? It’s too soon to tell, and here is why.
The case of Pfizer
Pfizer has long been associated with controversy. With Bextra and Trovan, it’s been hard for Pfizer, and it’s not entirely certain that a vaccine could save them. It also seems that the market has been pointing oppositely and favoring Moderna. Pfizer’s stock has been down from its 52-week high, and it’s not looking good. The recent Moderna announcement led to a 3% drop in price and might end up worse. Pfizer’s stock’s poor performance can suggest several things: the death of an old industrial hegemon, or an unripened industry.
Pfizer may be losing its ground to new players, which might not indicate the poor performance of the biotech industry as a whole, but could be a sign that biotech is beginning to revolutionize. With the passing of old kings come new heights, which should be a path to be considered. However, what if it’s on the flip side?
The lack of unison between companies in this industry can lead to uncertainty for investors. Who knows which companies will survive? The risk that comes with the uncertainty should be heavily considered, as companies that may be booming during COVID-19 might end up crawling on the sidelines after this all changes. This leads to the second point.
One time thing?
This pandemic has lead to times which one could’ve never have expected back in 2019. With staying-home now becoming a legitimate form of work and school and masks now entering the virtual catwalk, these are changes that practically nobody could’ve expected a year ago. We’ve even seen the rise of certain companies and the fall of others. So what does this mean for the biotech industry?
Although biotech seems to be booming now, we must understand that this might not last past the pandemic. Circumstances have been created which allow these industries to practically have free-reign over the entire economy, but these might not last. Although they may be a sign to bulls to make a quick buck during the recently bearish times, this could be a signal to bears to eye potential victims.
So… what now?
Although recent attention has helped the biotech industry gain traction and grow, the risks involved must be equally considered. Diseases are likely to become more common, so the market for cures will also increase. This could lead to biotech soon becoming the Deputy Captain of the global economy, only coming above deck every few moments to steer the ship to calm waters when the Captain is sick. But that still means that biotech is just the deputy — not the ship’s Captain.
The opinions expressed in this piece are merely that of the author. They are not intended to provide specific advice or recommendations for any individual or any particular security or investment product.