It is a good year for investors to stay away from big biopharma. Darlings of the sector have received some comeuppance in 2018, while a surprise has emerged in the guise of Glaxosmithkline, which led all big cap groups with a healthy 16% gain in the first six months of 2018.
Big pharma, of course, is more prone than small biotech to movements on macro issues like trade and economic growth, so it is hard to pin the sector’s slump solely on corporate performance. Still, companies like Roche and Bristol-Myers Squibb have a lot of explaining to do as they have let rival Merck & Co steal the show in immunotherapy, a field that remains highly competitive.
Taxes, prices and trade
Broad indicators do not paint a picture of health for big cap biopharma. Both the Dow Jones and S&P sector-specific indices declined in the US, along with their European counterparts, largely mirroring the movements of the broader markets.
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The talk of a global trade war instigated by the US surely cannot be helping any multinational company like a big pharma group. Meanwhile the sector-specific risk of US government action to limit drug price increases still haunts investors, and rhetoric could intensify as the November mid-term elections approach.
These threats served as a counterweight to the most important news for big pharma in the early months of the year: massive reduction to future US tax liabilities.
With that as a backdrop, Glaxo’s 16% gain looks impressive. Taking full control of the former consumer health joint venture with Novartis seems to have perked up investors, along with a relaunched oncology strategy. An improving outlook for the shingles vaccine Shingrix and cancer asset GSK2857916, which aims to beat CAR-T at its own game, have also helped.
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