Investing in the Time of Coronavirus: Is Now the Time to Buy Biotech Stock?

Major U.S. stock indexes recorded their worst single-day drop in history since 1987 on March 12. Xinhua/Xinhua via Getty

The financial world in the time of the coronavirus pandemic is tricky to make sense of. This week, stock markets around the world recorded their worst losses in years and led many investors to wonder: as the market heads toward its rock bottom and the need for Covid-19 vaccines and treatment hits an all-time high, is now a good time to scoop up biotech and pharmaceutical stocks, especially those with Covid-19 drugs in the works?

“We are seeing relative strength in the biotech and pharmaceutical sectors amidst the market volatility,” Aazan Habib, an analyst with Haywood Securities, told Observer.

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“The iShares Nasdaq Biotech ETF (IBB) is breaking out relative to the S&P 500 as investors flock to names that may benefit from developing a Covid-19 drug,” Habib explained. The ETF he mentioned includes a number of biotech companies that are currently developing Covid-19 vaccine and therapies, including Regeneron Pharmaceuticals, Forty Seven, Gilead Sciences, Iovance Biotherapeutics.

Other biotech companies with similar projects under development include Novavax, Moderna, Inovio, Compugen and Omeros.

However, most of these efforts are still in early stages and offer no guarantee that their experimental drugs will eventually pass clinical trials and obtain FDA approval.

“It’s a tough game to play. You either have to really know the science to pick the right stock or get lucky,” warned Marc Lichtenfeld, chief income strategist at The Oxford Club, an advisory group publishing the America’s longest-running financial newsletters.

“There are various biotechs claiming to be advancing a coronavirus vaccine that make similar claims with the medical crisis of the day,” Lichtenfeld told Observer. “When Ebola and Zika were making headlines, some of these companies suddenly had a vaccine development program for those conditions too. Those companies never produced a vaccine and won’t with coronavirus either.”

“Invest in a great biotech company because of its pipeline, management team and history,” Lichtenfeld advised, “not based on the opportunity to hit a home run on this one situation.”

Investing in the Time of Coronavirus: Is Now the Time to Buy Biotech Stock?