BPIQ’s Smid-Cap Biopharma 2021 Investor Year in Review
- BPIQ
- Jan 7, 2022
- 6 min read
Updated: Jan 9, 2022
SUMMARY
2021 was a tough year for public small and mid-cap biotech
XBI down 20% (vs. IBB +~1% vs. Russell2000 +~14% vs. S&P500 +~27%)
Especially tough year for public small and mid-cap biopharma (BQIP companies)
Median smid-cap bipharma down 40% in 2021 (mean was down 22%)
Positive exceptions to smid-cap biopharma 2021 investment challenge
Acquired companies (17 companies) (+40% median)
Covid vaccines
DVAX (~215%) and OCGN (~149%) were highest performers
Despite tough year, still many 2021 smid-cap biopharma stand-out stocks
52 BPIQ smid-cap tickers had returns >50% in 2021
SAVA +541% (Alzheimer's), PRTA +311% (rare, neuro), PDSB +279% (Cancer immuno)
Smid-cap biopharma commercial companies held up pretty well considering pandemic
More challenging for launches after 7/1/19
Exception: BCRX (+86%)
Gene editing and CAR-T were the poorest performing BPIQ subgroups
Both median down ~50%, but exceptions
NTLA +117% (only positive return gene editing Co.)
LEGN +58% (only positive return CAR-T Co.)
Read the full version of this article with footnotes, in our full forum article HERE after becoming a paid subscriber (learn more here). Plus, you can read today's post about our 2021 performance of our Amp Funds see our Post here
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After an amazing 2020 return of over +48%, small and mid-cap biotech companies were hit hard in 2021 with XBI dropping over 20% for the year. This compared very unfavorably in 2021, to the highly positive overall U.S. stock market performance, with the S&P 500 up ~27% for example (see this article "How Every Asset Class, Currency, and S&P 500 Sector Performed in 2021" ). Small companies did not fair quite as well, with the Russell 2000 up 14% for 2021. Larger biotechnology companies faired better than smid-cap biotechs, with IBB up ~1% in 2021, compared to the more smid-cap weighted(^FN1) XBI's 20% loss.
An analysis of returns for our BPIQ database companies, which consists of virtually every smid-cap biopharma company, but no diagnostics companies, after eliminating any large-cap companies, sheds light on how poorly smid-cap biopharma performed in 2021, with a median return of NEGATIVE 40%! Thus, it would not be surprising to be down this much in a biopharma investment account, depending on whether you had any high flier (>+50% or especially >+100%) stocks. Of almost 600 smid-cap biopharma stocks in our analysis, only 23 were up more than 100%. When comparing the BPIQ.com database smid-cap biopharma to the return from XBI in 2021, the 2% difference in smid-cap bipoharma mean vs. XBI performance is likely because larger cap biotech and diagnostic biotech companies likely did significantly better than smid-cap biopharma companies in 2021 as overall subgroups. This is apparent from the mid and large-cap weighted IBB fund, which was up slightly in 2021. Furthermore, it should be noted that after a return of almost 50% in 2020, it should not come as a tremendous surprise that XBI was down over 20% last year. Especially, when considering that many biotech companies saw delays in clinical trials and commercial challenges, brought on by the pandemic.
We looked more closely at the performance of different categories of smid-cap biopharmas in 2021 to get a better understanding of the performance of this biotech subsegment. For this analysis, we looked at different categories (See footnote ^FN2, which includes a Google Sheet link) of companies in our BPIQ database to see which were hit hardest and to identify outliers. Table 1 shows the average and median change of these stocks for the 2021 calendar year. Included in Table 1 are the number of companies in each of these categories that had a higher/lower return than XBI as well as a higher/lower return than the average of all companies in the BPIQ.com database after removing any large caps. We did not include companies that went public during 2021.
Not surprisingly, one category of smid-cap biopharma companies that performed exceptionally well were those that were acquired in 2021. We identified seventeen smid-cap biopharma companies that were acquired in 2021. These companies had a median return of +40%. PAND had the highest return of ~300% and FLXN had the worst return of ~ -21%. In fact, FLXN was the only acquired company with a 2021 return lower than XBI (i.e. less than -20%). Footnote 3 includes the acquired smid-cap biopharma companies that we identified, ordered by 2021 return.
None of the other categories we analyzed appeared to perform significantly better in 2021 than BPIQ companies overall. Two potential exceptions to this were smid-cap Covid vaccine companies and commercial companies (See ^FN4 for the smid-caps we categorized as Covid vaccine companies). It is a bit surprising that smid-cap Covid vaccine companies appeared to do as well as they did in 2021, given the market dominance of a few large cap Covid vaccine players. However, 7 of 12 companies we categorize as Covid vaccine players did better than not only the median smid-cap biopharma BPIQ company, but better than XBI too. DVAX was the highest performing COVID vaccine smid-cap biopharma company, returning ~215% in 2021. OCGN was also a COVID vaccine company that returned over 100% in 2021 (~149%). These two companies outshined all the other smid-cap COVID vaccine companies in 2021 performance. However, 58% of the COVID vaccine companies did better than BPIQ.com companies as a whole and even, better than XBI.
Despite the poor performance of smid-cap biopharma companies, there were still many high flying performers. In fact, there were 52 BPIQ smid-cap biopharma companies whose share price increased by more than +50%. Unfortunately, there were 225 BPIQ smid-cap biopharma companies that moved more than -50% negatively in 2021, with SGTX being at the bottom of the pack, with a -94.25% return. As far as high fliers, SAVA was the best performer in the BPIQ.com database with a 2021 return of +540.76%. SAVA surged in the Alzheimer’s category and is one of only five of the 15 smid-cap biopharma companies that we identified in that category that had a positive return in 2021. For more comments regarding Covid therapeutics, blood therapeutics, cancer, and Alzheimer's companies, see footnote 5.
Commercial companies in our database did surprisingly well compared to other BPIQ companies considering launching and/or selling during a pandemic. However, our categorization has weaknesses, because many companies have some commercial assets and some in development, and the time a drug was approved is likely an important consideration. The star commercial company was DVAX with a +216% 2021 return. However this was likely mostly driven from its COVID vaccine efforts, as indicated above, although DVAX did see good revenue growth for it’s hepatitis B virus, which as approved in the U.S. in early 2018, with an approval in the EU in February 2021.
With respect to companies who had their first major product approval after July 1, 2019, the pandemic was particularly challenging as access to doctors was limited, as we heard repeatedly on investor calls. Companies such as ESPR, KPTI, and GTHX come to mind, for example. A bright light exception to this, was BCRX, who showed that it was possible to have a successful commercial launch right into the pandemic. They launched Orladeyo in 2020 and despite the COVID pandemic, have continued to deliver revenue growth every quarter, which resulted in a 2021 return to BCRX shareholders, of almost 86%. Some other bipharma companies with major product launches since July 1, 2019 whose stock did well in 2021 include AUPH, ITCI, and ANAP.
The poorest performing subgroups of our 2021 public smid-cap analysis were gene editing and CAR-T companies. We identified 7 smid-cap gene editing companies and 14 CAR-T companies (see footnote 6). Gene editing smid-caps had a median return in 2021 of -52% and CAR-T smid-caps had a median return in 2021 of -53%. Only 1 company that we categorized in these groups for each category had a positive return in 2021. NTLA (+117%) was the only smid-cap gene editing company with a positive return in 2021. LEGN (+58%) was the only CAR-T company that returned a positive return in 2021. See footnote 6 for more info about these categories.
With the major downturn in 2021, smid-cap biopharmas are unlikely to have such a negative year in 2022. It will be interesting to see how the year unfolds. Currently, as the pandemic is in high gear again, most companies who launched a new drug since 2019, will continue to face heavy headwinds. However, there are lots of exciting catalysts ahead, and likely the number of positive gainers will far exceed those in 2021.
See more about these funds in our full forum article HERE after becoming a paid subscriber (learn more here).
Table 1. BPIQ.com smid-cap companies (total and subgroups) and relative medians and average returns in 2021
This article is not investment, tax, or legal advice. Please do your own diligence and seek advice from professional advisors representing your interests.
Article history:
Initially posted: 1/7/2022
Updated 1/8/2022 and 1/9/2022
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