What COVID-19 means for Healthcare Markets
Who Benefits from an Economy Dependent on a Public Health Crisis and More
The COVID-19 coronavirus was labelled a ‘pandemic’ on March 11th, 2020 due to its widespread impact and severity on a global level. Depending on how fast the virus is contained, it is estimated to have severe dent in the global economy, with the sharpest economic contraction in the United States since the Great Recession. As of end March, 3.3 million Americans have already filed for initial unemployment insurance claims due to job losses, tourism and travel related industries taking the biggest hit. This is the highest number of unemployment claims ever since first recorded in 1967.
What about Healthcare Firms?
For the first time in decades, the economy appears to be completely dependent on a public health crisis. Pharmaceutical, biotechnology and healthcare insurance companies are globally increasing recruitment to combat COVID-19 at the earliest. According to LinkedIn’s Workforce Report, Healthcare companies were hiring at 35% higher than at January’s pace. The article states:
As labor experts have long noted, health care is the one field that’s always hiring, no matter how the rest of the economy is faring.
Hospitals are taking extreme measures to staff up: New York called back retired nurses; doctors are reducing elective surgeries, and even med school students can choose to graduate early to join the frontlines.
Now hiring: health care | LinkedIn
The U.S. health care industry is ramping up hiring to battle the coronavirus, according to LinkedIn data.
According to Glassdoor data, the number of virus-related job postings within government, biotech and pharmaceuticals, health care and the nonprofit industry tripled in the U.S. from approximately 100 to 300. The top five roles according to the data were registered nurses, communications associates, social workers, project managers and technicians as recorded by Glassdoor.
CVS Health is hiring 50,000 in response to pandemic. Albertsons estimates to hire 30,000 new employees across 34 states to support retail as with CVS Health. On the other hand, medical device companies like GE Healthcare are on a hiring spree for manufacturing employees to make up for the short supply of medical ventilators, critical to diagnosing and treating COVID-19 patients.
Healthcare Market Performance Indicator
- S&P 500® Index: Standard and Poor’s is one of the leading indicators and best single gauge of large-cap U.S. equities, covering approximately 80% of available market capitalization
- S&P 500® Health Care Index: This index comprises those companies included in the S&P 500 that are classified as members of the GICS® health care sector
S&P 500 Index
The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies…
It would be of interest to look into a Month to Date as well as a Three Year Annual Return comparison of the S&P Healthcare index with respect to the performance of other U.S industries in the market.
From the graphs above, we observe a higher Health Care Index for the month of March as well as a Three Year Annual Return as compared to the S&P 500 index. The S&P 500 Health Care Index observes a 7.59 %▲ three year annual return as compared to the S&P Index of 500 6.00 %▲ three year annual return. This is interesting especially since historically healthcare markets are slower to fluctuate and take a longer time for positive returns.
Healthcare markets have seen a slowdown since the 1990s due to increasing high-deductible insurance plans and efforts to control of Medicaid costs. Amongst this slowdown, several pharmaceutical and biotechnology companies have risen with accelerating medical technologies, which is exactly what is in current motion to combat the COVID-19 pandemic.
Pharmaceutical and Biotechnology Companies during COVID-19
Several pharmaceutical and biotechnology companies across the world have tied up with the public sector to address the outbreak of coronavirus. With most of the world on lockdown, here are a few companies working to find a cure according to BIO — the world’s largest trade association representing biotechnology companies.
- Genentech: Initiates Phase III Clinical Trial Of Actemra In Hospitalized Patients With Severe COVID-19 Pneumonia
- Arcturus: Developing a COVID-19 candidate vaccine using STARR™ Technology
- Gilead: Initiated two Phase 3 clinical studies to evaluate the safety and efficacy of remdesivir.
- GeoVax: Using its GV-MVA-VLP vaccine platform to develop a vaccine for COVID-19.
Containing an outbreak such as the coronavirus requires an all-hands-on-deck effort. Larger pharmaceutical companies such as Johnson and Johnson, AbbVie and Gilead, as well as smaller biotechs like Inovio, Moderna, and Novavax, are working closely with U.S. government agencies to identify and develop medical treatments to counter this deadly virus.
Essentially, biopharmaceutical companies across the world are working on diagnostics, vaccines and therapeutics to fight against the spread of COVID-19. Several companies have already formulated partnerships with the US and Chinese Government, the Coalition for Epidemic Preparedness Innovations (CEPI), and other biopharmaceutical companies to work on expediting the clinical trial process.
Biotech Companies Respond to Coronavirus (COVID-19)
George Scangos, Ph.D., President and Chief Executive Officer of Vir Biotechnology, has been selected to lead the…
Pharmaceutical companies did however see an initial dip with the rest of the economy due to lockdowns in several countries affecting the supply chain. According to the Economic Times, the Indian lockdown in response to COVID-19 resulted in restriction on export of several antibiotics, hormones and vitamins. There appears to be a strain on the global supply chain for pharmaceutical companies, especially smaller ones with limited supply sources. Additionally, a recent FDA statement states that there appears to be a lack of information on raw materials which can impact the biopharmaceutical economy as a whole.
13% of brand and generic active pharmaceutical ingredient (API) manufacturers are based in China, but that doesn’t indicate how much volume is coming from those plants or what types of materials they are producing, which makes it difficult to predict the impact from localized shutdowns in China or other countries
The novel coronavirus may have increased the need for healthcare companies, however exports and import slowdowns and its dependence on manufacturing industries has also had a negative effect on Biotechnology and Pharmaceutical companies.
Impact on Healthcare Stocks
Several Healthcare companies observed a surge in stock prices dependent on federal actions taken in the past month in response to the pandemic.
- CVS Health saw huge surge in stock prices after the Trump Administration’s stimulus package. CVS’ Aetna Health Insurance would be affected with higher medical costs if a large number of its members require hospitalization due to COVID-19. It currently has a P/E ratio of 11.69
- Teladoc’s stock was observed to rise with an increased utilization of tele-health services with more stringent social distancing norms. The Trump administration waived laws that restrict tele-health services across the country to accommodate practicing medicine across state lines.
- Roche shares increased incredibly after news that the U.S. FDA issued authorization for its COVID-19 test on an emergency basis. It currently has a strong P/E ratio of 18.89
The price-earnings ratio, also known as P/E ratio, P/E, or PER, is the ratio of a company's share (stock) price to the…
Healthcare stocks will however remain volatile in the near future depending on the course of COVID-19 cases as well as federal actions taken in response to the pandemic.
Additionally, the U.S. and Canadian government have released orders to permit or expedite visas for healthcare professionals in order to assist with COVID-19 patients. The U.S. Department of State is also looking to hire international medical staff to help with the increasing number of cases on a daily basis.
Future of COVID-19
According to McKinsey’s Implications for Business, there are three ways the corona crisis may play out in the near future:
- A quick recovery
- a global slowdown
- a pandemic-driven recession
COVID-19: Implications for business
March 25, 2020-We have updated our briefing materials today. Please click here to download our latest information on…
It is possible to infer that various parts of the world are already near one of these three stages if at their peak. It is essential that the Government pushes towards Case 1 i.e. a quick recovery through national lockdowns, social distancing measures and so on while the healthcare industry and more specifically pharmaceutical companies have the time to develop and test an appropriate vaccine for the public. The vaccine is currently in Stage 1 as seen in the image, and are yet to go through over 12 months of clinical trials, regulations and mass production to the public.
There is still a high uncertainty on how the economy will react, and is highly dependent on federal policies and public health measures.
Overall, the Coronavirus Crisis has caused the entire world to be at a standstill, yet while all are meters away from each other, the healthcare industry continues to grind. Epidemiologists and other healthcare sectors are at an enormous pressure to solve a world pandemic, and while they are profiting from the vortex, are responsible for shutting the tornado around them.
For official U.S. updates on the pandemic, visit cdc.gov. or visit the World Health Organization (WHO) Website.