Please ensure Javascript is enabled for purposes of website accessibility

Biotechs are Getting Routed to Close the Year

By The Daily Upside – Dec 5, 2021 at 9:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The rapid development and production of Covid vaccines sent biotech stocks to new heights last year, especially with shares in BioNTech and Moderna...

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.

The rapid development and production of Covid vaccines sent biotech stocks to new heights last year, especially with shares in BioNTech and Moderna putting up numbers worthy of the NBA All-Star Game.

With the new Omicron variant causing jitters, and demand for booster shots higher than ever, this year would seem poised to continue that streak. Instead, the biotech sector is ending 2021 in a brutal slump that's wiped billions off the investments of some of the industry's biggest hedge funds. There's still signs of life, though.

Comeback City

Even before the Covid pandemic, biotech funds were a shining star in the hedge-fund industry because of years of robust performance in the medical research sector. Perceptive Advisors founder Joseph Edelman bought a $70 million oceanfront mansion in California — the priciest in Orange County history —after his firm's funds rose 49% in 2019 and 31% in 2020.

But now biotech's oceanfront is facing a perfect storm. Inflation in the US has pushed costs through the roof, the Omicron variant has led the FDA to prioritize Covid treatments over others, and some retail and institutional investors with a risky appetite are decamping for the wild world of crypto. It's made for some gruesome returns:

  • The SPDR S&P Biotech ETF, the bellwether for the industry, lost 7% of its value in November, hit by all these compounding problems.
  • Cancer immunotherapy firms Adaptimmune Therapeutics and Agenus each lost 18% of their value last month, and even COVID-19 vaccine developer Ocugen tanked by a shocking 46%, according to S&P Global Market Intelligence.

Hedging Their Bets: The main fund at Perceptive Advisors, which manages $9 billion, lost 30% this year through November, while an $18 billion healthcare fund at OrbiMed Partners lost 40%.

Here's Hoping: The current sell-off is seen by optimists as a blip — and previous declines have given way to bigger rallies. With new Covid-19 drugs on the way, revenues could boost in 2022 — SVB Leerink analysts predict American and European biopharmaceutical companies could have more than $500 billion on hand to deploy by late 2022.


Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.