What happened
Shares of several biotechs jumped on Tuesday as the overall stock market rebounded from a major downturn yesterday on reports that a huge federal stimulus package could be in the works. Biogen (BIIB +1.47%) stock was up 9.3% as of 3:13 p.m. EDT. Shares of GW Pharmaceuticals (GWPH +0.00%) were rising 15% higher. Vertex Pharmaceuticals (VRTX +0.96%) stock was climbing 11.2%.
So what
A federal stimulus package could help individuals and businesses ride out the rough patch the coronavirus outbreak is causing. It's perfectly understandable that investors cheered the news that the U.S. government could make a significant move sooner rather than later.
Image source: Getty Images.
But details of a potential stimulus package haven't been announced yet. There's no guarantee that a bill will be signed, especially if proposed legislation includes controversial provisions. More importantly for these three biotech stocks, though, is that their businesses aren't likely to be impacted very much regardless of what a federal stimulus package might include.
Biogen makes most of its revenue from its multiple sclerosis and spinal muscular atrophy drugs. GW Pharmaceuticals' primary moneymaker is cannabidiol drug Epidiolex, which is used to treat two rare forms of epilepsy. Vertex's sales come from its cystic fibrosis (CF) drugs. Physicians aren't going to be more likely to prescribe any of these drugs nor are patients going to be more likely to take the drugs whether or not there's a massive stimulus program.
Now what
The main thing to focus on with Biogen, GW, and Vertex is each company's pipeline progress. Biogen should soon file for FDA approval of experimental Alzheimer's disease drug aducanumab. GW Pharmaceuticals expects an approval decision from the FDA for Epidiolex in treating tuberous sclerosis complex (TSC) later this year. Vertex awaits European approval for its newest CF drug Trikafta.
That's not to say, though, that these biotech stocks won't be impacted by what happens in the overall stock market. All three stocks have dropped during the stock market crash over the last couple of weeks even though Biogen and Vertex have held up better than most stocks have. Good news for the stock market, in general, should translate to good news for each of these drugmakers.
