Covid- 19: the race for a vaccine

by | Mar 31, 2020

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Person wearing face mask in Covid-19 pandemic

What is the outlook for the sector?
Stephanie Sirota, Director at RTW Venture Fund and Partner at RTW Investments LP, said: “High-beta sectors like biotech typically sell off hard during periods of stress and generalist investor sentiment can remain tepid for a while. That said, we are encouraged by the quality and the pace of scientific development and we are hopeful that positive catalysts will help drive the recovery. We are seeing compelling opportunities in this market given where valuations are and how well capitalised company balance sheets are. Getting past the current crisis, we think the future is bright, especially in genetic medicines, targeted oncology, and across rare diseases.”

Paul Major, Manager of BB Healthcare Trust, said: “Healthcare stands apart from the wider economic cycle and consumer sentiment. We consume these services because we need them, not because we want to. When the dust settles and COVID-19 has thankfully become a historical consideration, the ‘new normal’ will still feature the same demographic and societal drivers of a growing and ageing population. In the short term, there will be a tailwind as the backlog of postponed elective procedures is addressed.

“Moreover, the crisis has highlighted the stark inefficiencies and general under-investment in the healthcare system over many years, and political and consumer resistance to paying for more service resilience in future has melted away.”

Ailsa Craig, Manager of International Biotechnology Trust, said: “If you look at the performance of the Nasdaq Biotech Index over the past month, the sector has only fallen back to Autumn 2019 levels which is significantly better than many other sectors. This is remarkable considering that biotechnology is deemed to be a high-beta sector and such sectors tend to underperform in down markets.

“We think this shows that investors understand the sector’s defensive characteristics: regardless of an economic downturn, the global population will still grow, people are living longer and more of them are able to purchase medicines, people will still get sick and society will still need medicines. In the longer term, the virus outbreak will subside and investors will start being drawn back in by the attractive valuations. We are in a strong position with cash and potential gearing which we can put to work over the coming weeks and months.”

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