Small market cap companies more dependent on COVID-19 pipeline drug: GlobalData

The effects of the COVID-19 pandemic on the market capitalisation (market cap) of companies are mitigated by having a COVID-19 drug in their pipeline, with the smaller cap companies being the worst-affected group. Perhaps, this trend is caused by the way the market caps of smaller companies are hinged on the expected success and demand of their pipeline, says GlobalData.

Small-cap and mid-cap bio/pharma companies with a COVID-19 drug saw an average 20 per cent increase in market capitalisation while those without a COVID-19 drug in their pipeline saw a decrease during the first quarter (Q1) market cap. The small-cap bio/pharma companies without a COVID-19 drug were the worst-affected group with the largest decrease in market cap for Q1, on average declining by 19.4 per cent.

Mega and large-cap bio/pharma companies without a COVID-19 drug saw a larger percentage decrease in market cap compared to those with a COVID-19 drug. Mega and large-cap bio/pharma companies without a COVID-19 drug saw an average 11 per cent decrease in Q1 market cap compared to an average of 7.2 per cent for those with a COVID-19 drug in their pipeline.

Johanna Swanson, Product Manager at GlobalData, comments, “The pharma industry impact illustrates the extent to which the global stock market was impacted by the pandemic. However, the industry was not as significantly impacted as other industries such as crude oil benchmarks, which decreased by more than 50 per cent in the same time period, according to GlobalData Oil & Gas.”

Overall, the top 20 bio/pharma companies had a 7.9 per cent decrease in market cap over Q1 2020, in contrast to the 9 per cent increase in market cap over 2019. Bayer showed the biggest percentage decrease of the top 10 bio/pharma companies, registering more than 25 per cent quarter-on-quarter decline, worth $22.8 billion. GlaxoSmithKline, Amgen, Pfizer, Bristol-Myers Squibb, and Merck & Co each recorded more than a 15 per cent drop.

Regeneron Pharmaceuticals and Gilead Sciences were the only companies that registered more than 10 per cent growth in their market cap, and both have COVID-19 drugs in their pipeline.