In 2020, the healthcare sector has received intense investor attention amid the coronavirus pandemic. The COVID-19 outbreak has enabled biopharmaceutical companies to shine a light on their operations and provide an opportunity for active development. Meanwhile, their shareholders are looking for ways to make money on this.
Now the pharmaceutical industry is the second largest segment by capitalization ($ 4 trillion) in the US stock market, Otkritie Research analysts say in a commentary to the Financial Gazette. “Investing in biotech venture capital stocks is like buying an option. In the sense that the current share price is a payment for the possibility of future multiple growth, ”they explain.
At the same time, they acknowledge that many market players avoid the sector due to difficulties in understanding the end product, as well as assessing the prospects and fundamental value of the stock. There is also political risk. According to Denis Buivolov from BCS, after the growth of the segment in the first half of the year, at the beginning of the second there was a profit taking due to the leading Democrat Joe Biden in the US presidential race.
“Democrats want to reform the healthcare system, which could lead to lower drug prices in the United States and hit the revenue of pharmaceutical and biotech companies,” he warns.