Email of the day on biotech
Comment of the Day

January 18 2022

Commentary by Eoin Treacy

Email of the day on biotech

I enjoyed your feedback from your Saudi Arabia Conference. Question: could you please give me your opinion on Moderna and Biotech, do you see potential? I made good profit, then bought these stocks again and sit now on a position down 45%. Take the loss and run? thank you for your attention.

Eoin Treacy's view

Thank you for this question which others may have an interest in. The biotech sector has just seen the promise of MRNA technology vindicated in real time. That ensures there is a strong pipeline of potential products that will create value for years to come. There are trials underway for universal covid vaccines, solutions to the common cold, an HIV and a malaria vaccine to name a few.

The challenge in the near term is threefold. The first is permitting was accelerated because of the urgency of the COVID pandemic. It is questionable whether that streamlined approach and immunity from liability will be rolled out for additional MRNA solutions.

The second is trading in the biotech sector was characterised by a winner takes all strategy for most of 2020 and 2021. When it was likely that Moderna was the leading solution, the sector did well and the share became the dominant weighting in both the biotech ETF and the IPO ETF. At present Pfizer is leading the field and that is weighing on the biotech sector because it is not a constituent. Additionally, Pfizer’s CEO believes we will be back to normal before long. That’s not great news for the share.

The third challenge is interest rates. Biotech companies rely on ready access to funding and spend a long time losing money during the clinical trials process. Bonds yields are breaking out all over. That’s bad news for liquidity hungry, loss making portions of the market.

I remain bullish about the long-term prospects for the sector and I’ll be a buyer at some stage but there is not evidence of bottoming activity yet.

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