Biotech in a Post-Pandemic World

Biotech in a Post-Pandemic World
 
 
In 2020, the pandemic put a halo over a great deal of biotechnology companies, particularly those that were racing to find a vaccine. Moderna was the most exciting company in that period, with sales that jumped from $60 million in 2019, to $803 million in 2020, and then soared to $18.47 billion in 2021. Last year was just as robust for Moderna with revenue of $19.26 billion, as the vaccine continued to be distributed around the world, and boosters were administered.
 
Today, however, we are all weary of the pandemic. Whereas a great deal of us took the vaccine and the first few boosters, today, fewer of us are interested in getting jabbed, when the virus keeps mutating and vaccine efficacy can be questionable. (Moderna has some good news on this front. Keep reading.) Not surprisingly, Moderna and other pandemic stocks’ earnings have been negatively impacted. Share prices are down.
 
What lies ahead for biotech? Which companies are doing well? Is there hope for any of the pandemic high-flyers to soar again?
 
A Biotechnology Fund
Before we dive into the details of a few individual companies, let’s discuss the safest way to play this industry – with an ETF. The benefit of a fund is that you have exposure to the biotechnology industry without the volatility of investing in individual companies. As we stress in our books and retreats, individual companies require babysitting. You must buy low and sell high. You must understand how to be forward thinking and how to evaluate what’s going to happen rather than trade on the headline of something that has already occurred. (When you wait for the headlines, you’re late. Professional investors, who drive the market, are forward-thinking.)
 
With the biotechnology fund, it can be more of a “money while you sleep” approach, which is not a Buy & Hope strategy as you do have to wake up at least once a year. Our pie chart system with regular rebalancing (1-3 times a year) prompts us to capture gains when biotechnology shoots the moon, and add more at a lower price when the fund price plunges down to Earth again. This system works in bull and bear markets, particularly when you are properly diversified and know what is safe in a Debt World (all things we teach at our online Financial Freedom Retreat).
 
The iShares Biotechnology ETF (symbol: IBB) hit a high of $173 on August 31 of 2021. Since then it has dropped as low as $113 and is currently trading at $125. This is still relatively high on the 10-year price chart, especially as we head into what is traditionally the worst performing month of the year, September. Therefore, rather than just filling up the entire slice, we might take a dollar-cost-averaging approach. Think of it as a Stock Layaway Plan that takes about 18 months to completely fill in. We discuss this and more in greater detail at our online Financial Freedom Retreat, which is scheduled for October 7-9, 2023.
 
Biotechnology: Pandemic vs. Endemic
If we look at the Biotechnology Stock Report Card, it’s really a tale of pandemic vs. endemic. Almost all companies that soared during the pandemic, whether it was a vaccine, booster or a COVID test, are down in year-over-year sales and share price, as well. (Regeneron is still doing pretty well, with sales growth of about 11% year over year. However, the share price is high.) The pandemic companies are all switching focus to chronic disease treatments and/or a flu vaccine. A lot of the treatments are in trials, with the goal of getting an FDA approval as quickly as possible.
 
Companies such as Gilead, Johnson and Johnson, and Inari Medical, that specialized in endemic treatments, are faring better. However, most of these companies are trading at expensive prices. Johnson and Johnson has a price-earnings ratio of 35, which is far too rich for sales growth in the single digits. Inari is still cash negative and early-stage. Its price to sales ratio is 7.5, which is extremely high. This is another reason to go easy on filling up our biotechnology slice, rather than just buying the entire amount immediately.
 
The Volatility of Biotechnology
Should biotechnology be one of your hot slices? Biotechnology is inherently a boom and bust industry. Companies will soar on an FDA approval, and sink or drown if their drug is found to cause terrible outcomes. Diversified biotechnology companies can survive. As just one example, in 2006, Merck’s Vioxx drug was costing the company billions in class action lawsuits. (Merck eventually settled the lawsuits for about $5 billion.) In May of 2006, Merck was successful in getting the FDA to approve Gardasil, an HPV vaccine for adolescents and teens. Merck began a very aggressive marketing and lobbying campaign, trying to make that vaccine mandatory and to convince parents to immunize their kids immediately. (The company has come under scrutiny for the campaign.)
 
Here again is where a fund can level out the risk. Smaller companies, such as Moderna was in 2019, tend to have the most exciting breakthroughs and upside potential. They carry much more risk, due to their more limited pipeline and government access. Large caps like Amgen stabilize the fund. The IBB ETF features almost all of the companies listed on our Biotechnology Stock Report Card, including some innovative small caps. (Email [email protected] if you’d like us to email the Biotechnology Stock Report Card to you.)
 
Pandemic Biotechs
So is there any hope that these pandemic biotechnology companies have other applications for their patents or FDA approvals in the pipeline?
 
Vir Biotechnology
Vir is working towards a world without infectious disease. Their board is impressive with directors who include Janet Napolitano, and executives from Biogen, Bayer, Harvard, Johnson and Johnson, Bristol-Myers Squibb, the Bill and Melinda Gates foundation, MIT, and Amgen, as well as some Venture Capital board seats. Vir has trials going for hepatitis, influenza, HIV, COVID-19, RSV and HPV lesions. With the exception of their COVID-19 treatment Sotrovimab, which was initially authorized on an emergency basis for high-risk patients of Covid-19, the other treatments are still in phase 2 or earlier.
 
The problem with Sotrovimab was that on April 5, 2022, the U.S. CDC determined that the drug would not be effective against the Omicron variant, and therefore rescinded its emergency authorization. Vir had yet another setback last month, when its trial for prevention of Influenza A didn’t pan out.
 
Despite the Sotrovimab and flu setbacks (which can happen in this volatile industry),Vir has had a very important and swift track record with its antibody treatments, with both Ebola and Covid. As with all biotechnology companies, an FDA approval on one of its drugs could send the stock to the moon, just as the FDA revoking the emergency authorization for Sotrovimab sank the stock. Vir Biotechnology had $1.9 billion in cash and cash equivalents as of June 30, 2023.
 
Moderna
Moderna is still producing COVID vaccines for new variants. However, the company is also pivoting to flu vaccines, RSV and therapies for cancer, melanoma and other illnesses. Many of these are in Phase 3 trials, with updates expected soon.
 
In the Q2 2023 earnings call on August 3, 2023, the Moderna executives projected that full year product sales would be in the range of $6-8 billion, which is about 60-70% lower than 2022 revenue. Fortunately, the most recent trial data is showing a “robust immune response” for the most widely circulating variants of the COVID virus. While this is unlikely to bring sales anywhere close to the 2022 revenue of $19.26 billion, it could help the company meet or exceed the upper bound of its forecast.
 
Investors will be focused on an update of its Influenza B flu vaccine, which is projected to happen between now and the end of September. The Phase 3 trials have begun.
 
Lessons Learned 
On May 18, 2021, we named Moderna the 2021 Company of the Year. At the time the company was trading at $150/share. In that blog, we stressed that biotechnology is a very volatile industry, and that whenever we invest in any individual company, it is very important to buy low and sell high. By September 10, 2021, Moderna was trading at $500 a share, for a return of over three times the investment. That was an excellent ROI for anybody following the Buy Low, Sell High system that is important to use for individual companies. We sent out an email alerting those on our mailing list of these gains.
 
On November 10, 2021. We warned on Twitter that Moderna was going to have some noteworthy challenges going forward. At that point, the share price was still showing a 57% return, at $235/share.
 

There are many traps that can trip investors up. If someone read the blog late and invested at a price that was higher than it was when we featured the company, then they might be missing the “buy low” part of the equation. (Always check the date of the blog, and the price at the time it was published. Price matters!) When a stock soars, if you don’t already have an exit strategy, then it’s easy to think that it will just keep going higher and higher. Then on Nov. 10th, even with great gains of 57%, because it is no longer the eyepopping return of September 10th, some investors ignored the warning and thought they would  just hang on for the next run (rather than looking at the drivers that will determine the share price, which we were warning about!).
 
What some people learn is that investing in individual companies requires more time and energy than they wish to spend, and that funds are a better match. Setting up your wealth plan with 10 diversified funds and rebalancing once a year works great, and requires very little time to do. (A lot of our volunteers do their rebalancing at a retreat.)
 
Daily Money Tips and Updates
It used to be that my daily money tips were best accessed on Twitter. Twitter has become a lot more glitchy recently. We are more active on Instagram these days, though we still update both channels, as well as LinkedIn and Facebook. Be sure to subscribe to our YouTube.com/NataliePace channel as well, where all of my free videoconferences and video coaching series are hosted.
 
 
Bottom Line
Biotechnology is a volatile sector. This industry was very popular with investors when the price was high, during the pandemic. Today, there isn’t as much interest, even though the price is trading at a discount of -28%. However, the flu, cancer, Hepatitis, HIV and other viral and immune-compromised diseases aren’t going away. When one or more of the biotechnology companies develops a winning treatment that is in high demand, investors pile in in droves. We want to be early investors, in order to capitalize on that headline and wave.
 
It’s important to have a rebalancing plan that isn’t riding on emotions, but is instead prompting us to do what we should do – to buy low and sell high. If you already have a hot slice of biotechnology, then our pie-chart strategy with regular rebalancing does that for us. If you’d like to add a slice of biotech, then consider using our Stock Layaway Plan.
 
 


If you want to dive right in, to start earning money while you sleep, while protecting the wealth you already have, join us at our Oct. 7-9, 2023 Financial Freedom Retreat. Email [email protected] to register. Learn more in the flyer (link below) and on the home page at NataliePace.com.

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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021.
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.