Picture: Pharming Securities

European biotechs: Such a long wait

European biotechs have been longly undervalued. In the wake of the COVID-19 pandemic, some of them took off. They will have to prove their value in a post-COVID era. However, Europe is there.

We long hoped with Actelion and Serono in the 2000’s. So certainly, in 2020, thanks to the COVID-19 pandemic, the valuation of many biotech, both in U.S. and Europe, has increased sharply (the NBI index is at a 5-year high and the 4,500-point mark has been broken this year) but we waited so long that we have to take the time to enjoy and savour. Finally, Europe has four biotech companies with a market capitalisation over $15bn (BioNTech, CureVac, GenMab and ArgenX) able to play in the big league with US companies. It is not surprising to see collaborations involving three of these companies (GenMab with CureVac and BioNTech). These four biotechs have all had a great year 2020 and many people believe that this will continue in 2021. Of course, the hardest starts for the two German companies because it will have to last beyond the COVID-19 crisis. Key features of these names: they all have a management of high quality, products marketed or potentially close to approval/launch, partnerships with Big Pharmas and above all, enough cash to continue to grow and fuel a legitimate ambition.

The presence of “locomotives” is absolutely essential with the emergence of China (BeiGene and Zai Lab’s capitalisations are still much higher than those of this big four), investment opportunities have never been greater in the sector and easy access to capital is not going to last forever. It is, therefore, crucial to convince investors that the “science-management” couple is of high quality because it is often the certainty of a good operational execution. This, in any case, confirms, for those who still doubted it, that Europe can be at the forefront of innovation in many areas (mRNA, monoclonal antibodies, bi-specifics, gene therapy, vaccines). And above all, in their wake, there are many biotechs that could also change dimension in the coming quarters if all goes well. These include those waiting for an FDA approval: Idorsia, Oncopeptides, Orphazyme, Zealand Pharma, Ascendis Pharma.

So yes, investors know that everything is cyclical and that history has shown, how today’s stars can very quickly turn into tomorrow’s losers (just look at the performance of Galapagos or DBV to be convinced). In 2020 the NBI gained almost 26.3% closing at 4759.14 points and we are not immune to a bubble targeting some names in the midcap segment. Nevertheless, in a very complicated context, we might as well be optimistic and say that this is it, we finally have our European Amgen or Genentech.

This text was originally published in the European Biotechnology Magazine Spring Edition 2021.