Healthcare and Tech Stocks are Having a Bad Month and — Surprise — So is BioTech

Healthcare and technology stocks have spent January in retreat, falling while investors burrow down in risk-averse corners of the market through the chilly winter.

It’s therefore little surprise that the biotechnology sector, where all things medical and tech come together, is getting hit just as hard. But even vaccine makers that are poised to make billions in sales this year are having their worst runs ever.

Experiencing BioTechnical Difficulties Please Stand By

The reason sectors like tech and healthcare have lost momentum this month is part of a larger shift among investors who are getting ready for the Federal Reserve to raise interest rates. High-risk, high-reward companies are getting dumped in favor of safe havens like banks and energy stocks, and that’s made early 2022 as rough as a flu without a flu shot for Biotech firms, which have their own unique problems.

Companies in the sector have been bracing for a trifecta of regulatory winds blowing the wrong way: US legislators are considering patent rule changes and new drug-pricing reforms while the Justice Department’s antitrust division and the Federal Trade Commission have both called for tougher merger rules. The broader selloff, and concerns about the sector, have been felt by even the most lucrative companies:

• The Nasdaq Biotechnology Index has fallen more than 14% in January, the worst start to a year since 2016 when Hillary Clinton was leading presidential race polls and pledging to bring down drug prices — there are now 100 biotech companies that have cash stockpiles bigger than their market caps, according to analysts at Truist Financial.
• Beyond smaller companies that might not have any drugs on the market, vaccine makers that are poised to make billions this year are just as impacted: Moderna has had its worst drop ever this month and has been the S&P 500’s worst-performing stock, falling 37% — BioNTech is also down 37%, while new vaccine entrants Novavax and CureVac are down 49% and 42%.

Reversal of Fortune: The S&P Biotech ETF fell 50% in seven months in 2016 during the rout fueled by the 2016 campaign before turning white-hot. The ETF has had a similar-sized drop in the last twelve months, which means it may have bargain bin potential.