2 years ago, biotech companies were part of the hottest industry in the stock market. Not only were there rumors of major scientific discoveries, but the biggest opportunity in decades came right in front of them. A pandemic had just taken over the world, and the way to blunt it would be to find a treatment or vaccine. Dozens of companies started R & D for a treatment, and as a result stock prices started to soar. Other diseases were starting to be investigated and biotechs continued to enter the market through IPOs and SPACs, and the sky was the limit for investors.
In 2022, the script was flipped completely upside down. First, vaccine hype has died down since the beginning of the pandemic. Only a few vaccine pursuers won the race, with Moderna, Pfizer, BioNTech and Johnson & Johnson controlling the US market, and AstraZeneca and other foreign startups giving vaccines to the other parts of the globe. Out of these companies, Moderna is the only new player, with the others already well-known and established in the industry. CureVac and Novavax got the short end of the stick, with their share prices collapsing due to little fundamental backing. Next, higher interest rates are dissuading investors from investing due to the elevated risk linked to biotech firms, and this affects the amount of R & D too. The amount of saturation is extremely high in the industry, and many firms are seeing failures in trials, which is never a good thing, and competitive risks loom over their heads. Due to all of this, the industry is in a bear market with the S&P Biotech ETF down by almost 20 percent, and these problems could start to get worse.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.