COVID-19 put a damper on the international economy in the first three months of 2020. In fact, the first quarter of 2020 represented the worst quarter ever for the Dow Jones Industrial Average or DJIA, with a year-to-date loss of 23% and impacts seen in all 11 sectors of the economy.
However, analysts now believe the economy is making a v-shaped recovery, as the current year-to-date change of the DJIA stands at a loss of just 3.9%. Over the past few months, the DJIA has recouped its year-to-date loss by about 20%, and international economies reopen, analysts believe that things will only improve.
Biopharma has Thrived in the Time of COVID-19
Biopharma is one of the industries which has the most to gain from the COVID-19 pandemic, as activity in the sector has ramped up in recent months to yield curative therapies and vaccines for the novel coronavirus. The health sector, which includes biotech and pharmaceutical companies, has outperformed the S&P 500 in recent months despite the pandemic, making it one of the few areas of the economy that has actually thrived in the current environment.
Biopharma Deals of 2020
While 2018 and 2019 were exciting years for Biopharma mergers and acquisitions (M&A), 2020 has been relatively uneventful for biopharma deals. In 2019, worldwide biopharma M&A in terms of completed and announced deals reached a record $254 billion, an increase of about $100 from 2018. Notable deals in 2019 included BMS/Celgene (valued at $74 billion, and the third largest acquisition in pharma history) and Abbvie/Allergan (with a valuation of $63 billion). This year, the worldwide economic slowdown and COVID-19-related downturn interfered with the normal day-to-day operations of all businesses. It is likely that, as the economy picks up again and the DJIA hits a new record, with ramifications for biopharma businesses which seek to expand and acquire smaller companies, but it remains too early to tell.
Biopharma Outlook for Q3 and Q4 of 2020 May Be Tied to Operation Warp Speed and COVID-19
Clearly, the COVID-19 crisis has presented new opportunities for biopharma companies which conduct work relevant to treatments and vaccines for the novel coronavirus. It is therefore likely that economic growth in biopharma in the remaining quarters of 2020 will be tied to progress towards a vaccine or cure to combat the global pandemic. In the United States, President Donald Trump has announced federal partnerships with several biotech companies in what is being called Operation Warp Speed (OWS) to facilitate and expedite the development of a vaccine to help Americans and people around the world get back to their normal day-to-day lives and avoid further deaths and economic destruction as a result of COVID-19.
Appointed to lead OWS is Dr. Moncef Slaoui, a venture capitalist and former Chairman of Global Research and Development and Chairman of Global Vaccines at GlaxoSmithKline. The five finalists in this effort are AstraZeneca (US:AZN), Pfizer (US:PFE), Merck (US:MRK), Johnson & Johnson (US:JNJ), and Moderna (US: MRNA).
These companies will likely see economic growth due to their leadership on the COVID-19 vaccine effort, and are likely to outpace other companies in biopharma as the world works toward developing a safe an effective vaccine to defeat COVID-19.
COVID-19 has dramatically changed the world that we live in, and it is likely that global efforts to develop a vaccine may be responsible for the growth of biopharma in the last two quarters of 2020 While nobody can predict the future, it appears likely that economic growth will remain tied to those areas of the economy that interface directly with and are tied to the COVID-19 pandemic.