Amid Steep Declines in Stocks, Investors Seek Winners in Health Care
February 28 2020 - 3:59PM
Dow Jones News
By Sebastian Pellejero
Shares of many health-care companies have posted steep declines
during this week's market rout. That has some investors looking for
the bright spots.
Declines among health insurers, who could face
higher-than-predicted medical costs, have been steep: UnitedHealth
Group Inc. has fallen 17% for the week and Cigna Corp. has dropped
17%. Hospital operator HCA Healthcare Inc. has fallen 16%.
The S&P 500 health-care sector is down 12% this week,
slightly less than the 13% decline in the broad stock index. As
governments world-wide continue to prepare for the public health
fallout, investors said they are seeking companies that might find
business helping to treat the epidemic.
Regeneron Pharmaceuticals Inc., which has joined with the
Department of Health and Human Services to develop antibody
treatments for the coronavirus, has gained 6% this week. It is one
of the few companies in the S&P 500 on track for a weekly
gain.
The company also is benefiting from a competitor's stumble.
Novartis this week launched a review of Beovu, a treatment for an
eye disorder known as wet age-related macular degeneration, after a
physicians' group raised concerns about side effects. Regeneron has
a competing product, Eylea.
Regeneron shares jumped, but are also up 27% over the past
month, around the time the coronavirus epidemic started spreading.
It traded at about $336 on Jan. 30.
The company is looking at existing compounds it could adapt for
vaccines for this specific strain of coronavirus, spokeswoman Hala
Mizra said, and is also developing new compounds specifically for
it. While stressing that the process is in its early days, the
adapted vaccines could possibly be ready for testing in a few
months, she said.
Another is telemedicine provider Teladoc Health Inc., up 7% this
week. On Thursday, the company reported it added 14 million new
members last year, in part due to a severe flu season that has sent
15,319 Americans to the hospital from October to Feb. 22, according
to the Centers for Disease Control and Prevention.
Paying members can access Teladoc's virtual health care service,
which lets them contact a variety of medical professionals through
their mobile devices. If the coronavirus shows any similarity to
the flu, "you can imagine that telemedicine might be a patient's
first step," says Deutsche Bank health care analyst George
Hill.
Biotech companies have suffered less than the market as a whole,
with the Nasdaq Biotechnology index dropping 9.8% this week.
Investors in biotech stocks are often attracted by the potential
for outsize gains following research breakthroughs. But the shares
can also be subject to steep declines, because those companies
often have no income-generating products and biotech drugs in
development have no guarantee of receiving government approval.
Shares of Meridian Bioscience Inc. rose sharply in late January
after the company said some diagnostic companies and laboratories
in China had been using its product in work related to the
coronavirus. Meridian shares have risen about 3.5% this week.
With new coronavirus cases popping up from Pakistan to
California, governments world-wide are taking further precautions.
The continuing correction in the stock market is a buying
opportunity in health-care, says David Kotok, chairman and chief
investment officer at Cumberland Advisors, calling the coronavirus
"a serious flu epidemic of a different type."
"What we're seeing is a development that becomes everyday more
easily forecasted. There is a rollout world-wide of preventative
medical structures, and that is happening every day," said Mr.
Kotok. "I wouldn't buy the airlines, but I would buy the U.S.
health care sector. We own it."
Write to Sebastian Pellejero at Sebastian.Pellejero@wsj.com
(END) Dow Jones Newswires
February 28, 2020 15:44 ET (20:44 GMT)
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