A big biogen boost in the Alzheimer’s news could win back biotech investors
© Reuters. FILE PHOTO: A sign marking a Biogen facility in Cambridge, Massachusetts, USA January 26, 2017. REUTERS / Brian Snyder
By Lewis Krauskopf
NEW YORK (Reuters) – US regulators’ approval of a drug from Biogen Inc (NASDAQ 🙂 on Monday for the treatment of Alzheimer’s disease could stimulate broader investor interest in biotech and pharmaceutical stocks that hit 2021 .
Biogen’s shares rose 38% to close at their highest level in over six years after the company’s aducanumab was approved as the first treatment for a likely cause of Alzheimer’s disease. The approval has boosted stocks of other companies developing treatments for the brain-wrecking disease, helping put major biotech stocks on their best days in months.
The renewed focus on biotechnology and pharma was welcomed by investors who saw these stocks lagged in 2021 as the focus shifted to companies expected to take off as the US economy rebounded the coronavirus pandemic are flourishing.
“The biotech sector needed a spark and that was an explosion,” said Kevin Gade, a portfolio manager with a focus on biotech and pharmaceutical stocks at Bahl & Gaynor.
Gade said Bahl & Gaynor owns shares in drug maker Eli Lilly (NYSE 🙂 and Co, which are up 10% as the company develops an Alzheimer’s drug similar to Biogen’s.
Ahead of Monday’s news, the iShares Nasdaq Biotechnology ETF, the second largest healthcare ETF by asset based on Lipper data, was up just 1% in 2021, well below the 12% plus for the benchmark, while the S&P 500 Pharma Index had only gained 4.7%.
But on Monday the Nasdaq biotech ETF was up 3.4%, its largest daily percentage gain in seven months. Driven by Lilly stocks, the pharmaceutical index also rose 0.66%, outperforming the S&P 500’s 0.08% decline.
Biogen itself added over $ 16 billion in market value on Monday.
“This could just be the catalyst biotech investors need to get this group back on track,” said Sahak Manuelian, head of stocks trading at Wedbush Securities.
Ahead of the decision, Wall Street analysts were divided on aducanumab’s prospects for approval, which sparked a big stock price reaction on Monday as the decision surprised some investors.
The approval “generally creates a little halo for biotechnology, so you can see the entire group is trading higher now,” said Walter Todd, chief investment officer at Greenwood Capital Associates in South Carolina.
With U.S. President Joe Biden not yet having to appoint a permanent head of the Food and Drug Administration – the industry’s most important regulator – that uncertainty has clouded the outlook for biotech and pharmaceutical stocks, Gade said. The industry has also seen some high profile setbacks in the past few months, such as disappointing clinical data for Sarepta Therapeutics (NASDAQ 🙂 ‘muscle disease drug as well as a number of significant regulatory delays, investors said.
More broadly, Todd said, many health stocks have fallen out of favor as investors turned investor attention to banks, energy and other stocks as the US economy re-opened, while US stocks lagged due to the potential for soaring US stocks As before, concerns about biotech and pharmaceutical stocks are regulating the prices of prescription drugs.
“The room has been in this purgatory since the election,” said Todd.
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