In the extraordinary saga of 2020, the BioTech sector has emerged as a standout performer, outshining even oil, real estate, and the tech sector. The current course of every sector now hinges on the events in the Biotech industry. While the pandemic will eventually ebb, the ripple effects on Biotech stocks are bound to be enduring. 

The Biotech news linked to the coronavirus has sent ripples across the entire stock market. Some of the most dramatic fluctuations in the stock market have revolved around the coronavirus and Biotech firms. Since May 18, when US Biotech company Moderna unveiled promising data for coronavirus treatment, the Biotech stocks have continued to surge. 

Fuelled by the prospect of profiting from the first Covid-19 cure, investments in innovative young Biotech companies have witnessed substantial growth. However, amid the allure, it's essential to tread carefully, as the biotechnology market is one of the most perilous. 

The surge in Biotech stock prices due to the race for a Covid-19 vaccine 

In recent months, Biotech companies have experienced a financial boom in the markets, propelled by the Covid-19 pandemic, which has encouraged numerous investors to bet heavily on young companies expected to develop a cure for the virus.

American Biotechs have raised over $ 9 billion in the stock market in recent months, compared to “only” $ 6.5 billion in all of 2018, based on data from Dealogic. Following Moderna's positive results announcement on May 18, Nasdaq surged by 2.4%, and the S&P 500 by 3.2%. 

The relentless pursuit of a drug or miracle vaccine poses a risk of leaving individual investors in the lurch, given that the Biotech market is one of the most unstable. Many Biotech firms have only one or two product candidates for treatment in stock, and often none in the market.

These companies must therefore fund their research and development without significant income. Even for seasoned professionals, navigating this market requires a very astute diversification and risk assessment approach. 

Wave of public offerings 

According to Bio World’s report, there were 495 experimental treatments for coronavirus as of July 23, 2020, with 158 potential vaccines in development. Moderna’s innovative technology is among them. The US-based Biotech has witnessed its share price surge from nearly $19 in January 2020 to nearly $70 at the end of August, with a valuation of over $26 billion. 

These numbers align with Operation Warp Speed, initiated by the Department of Health and Human Services to deliver 300 million vaccine doses by January 2021. 

The promises held by these Biotechs are too tempting to resist for investors seeking quick gains. There is a clear positive correlation between the daily Covid-19 cases and the Nasdaq Biotech Industry Index, benefiting fledgling companies.

The number of public offerings by young Biotechs has surged, with each new entrant witnessing a rise in their prices. One such example is the German company CureVac, which was introduced on Wall Street on August 14 and holds a market capitalization of around $10 billion. 

Governments are also joining the fray, with the US government signing a $1.3 billion contract with Moderna to purchase one million doses. It is at the forefront of the global vaccine race.

Already in phase 3 clinical trials, much like the partnerships between the University of Oxford and AstraZeneca or PfizerBioNTech. However, influxes of state funding do not diminish the risks involved. 

Final thoughts  

The soaring prices of young Biotechs in the stock market raise the specter of a potential financial bubble burst. Biotechs that fail before hitting the market – which represents the majority – will see their value plummet. For a professional financial player, the risk management is usually well-managed through a careful diversification of assets.

Hence, those considering investment in Biotechs must possess the crucial ability to look beyond surface-level headlines and effectively manage risks. 

Other posts you may find interesting:

Boost Your Affiliate Marketing Campaigns with These 4 Amazing Tips

Exploring Lucrative Niches for App Development: A Profitable Venture