What happened

Whatever happened to healthcare companies being recession resistant?

On Monday, shares of Emergent Biosolutions (EBS 15.79%) fell 10.5%, BioMarin Pharmaceuticals (BMRN 0.64%) dropped 10.1%, and NuVasive (NUVA) fell 10.2%, all more than the S&P 500, which slipped 7.6% from concerns over the continued global spread of COVID-19, the disease caused by the new coronavirus.

So what

Emergent Biosolutions' drop is the most puzzling of the bunch, since the company develops and sells vaccines against bacteria and viruses. Emergent hasn't said it's working on a vaccine or treatment for COVID-19 directly, but the company does have a contract manufacturing facility that the U.S. government's Biomedical Advanced Research and Development Authority helped establish in 2012, which was expanded in 2017. Beyond the government, there's potential for Emergent to benefit from through developing drugs and vaccines with non-government organizations (NGOs) or other drugmakers that need manufacturing capabilities.

"The rise of COVID-19 and the push to develop response capabilities against this emerging infectious disease is squarely in our wheelhouse," Robert Kramer, president and CEO of Emergent, said on the company's 2019 fourth-quarter conference call last month. "Currently we're working with several organizations, including the U.S. government, NGOs, and commercial parties as to how to best marshal our resources and capabilities, whether it's for the vaccine, a therapeutic, diagnostic, or utilizing our extensive contract development and manufacturing capability."

Doctor listening to a patient's heart

Image source: Getty Images.

BioMarin sells drugs for orphan diseases, which will still need treatment even in the face of a larger COVID-19 outbreak that might slow economic growth. The biotech has multiple drugs on the market, but BioMarin should see substantial growth in the coming years from its hemophilia A gene therapy, valoctocogene roxaparvovec (valrox), which is under Food and Drug Administration review, with a decision expected on or before Aug. 21.

Of the three healthcare companies, NuVasive is probably the most justified of the group that dropped greater than the market, but even the argument for NuVasive is weak given the disruptive technology.

NuVasive sells minimally invasive lateral systems for spine surgery. Some patients might be able to put off surgery because of a recession -- if COVID-19 pushes the economy there -- but the company has been steadily chipping away at traditional spine surgery companies over the years. Even if there's some slowdown in the overall procedure growth, NuVasive should be able to continue to take an increasingly larger percentage of the market from traditional spine surgery companies.

And it's not like the patients who delay therapy are going to get better on their own; they'll eventually need surgery, and NuVasive will be ready to deliver.

Now what

Investors should look past the effects of the COVID-19 outbreak and focus on the long-term prospects of the companies beaten down by the short-term prospects for the economy. Emergent, BioMarin, and NuVasive all have the potential for growth either because of a viral outbreak or in spite of one.