Biotech Outlook 2022: When Will the Bear Market End?

Biotech outlook 2022: Bear market has lasting effects on sector

Experts have given biotech bear market status after 2021 produced a poor set of stock results across the board.

“While several bigger groups are being rewarded for Covid-19 and other clinical successes, earlier-stage and higher-risk biotechs are, for now, out of favour,” a 2022 market report from Evaluate Vantage indicates.

One of the reasons for the general biotech downturn may be related to the shine seen for COVID-19 businesses.

“Anything that’s Covid-related has done well, or at least held up,” Brad Loncar, CEO of Loncar Investments, told ETF Trends. But that may very well be the problem for biotech, as he told Bloomberg recently.

“(Vaccine stocks are) in the news every single day and people who aren’t biotech experts tend to invest in what they hear,” Loncar explained to the news outlet.

According to Bloomberg, RBC Capital Markets analyst Brian Abrahams said 2022 could show a return to form for biotech as he believes “the pendulum has swung too far” out of favor for the market.

Biotech outlook 2022: Role of M&A for biotech stocks in 2022

Merger and acquisition (M&A) activity in the biotech industry is as present as lab coats in the drug-making environment. When it comes to 2022, there are varying projections about the number of deals and their sizes.

The appetite for M&A may be driven by the downturn in biotech stocks in 2021, making it more likely for newcomers and younger companies to look for bigger-name deals.

In general, experts are calling for M&A to pick up in 2022. A report from BioPharma Dive indicates that SVB Leerink analyst Geoffrey Porges expects to see a "significantly higher" number of biotech IPOs in 2022.

For their part, the Evaluate Vantage researchers said big sums of money are available to the top biotech names.

“What companies intend to spend these windfalls on will be another big preoccupation in 2022,” they explain in their report. “Depressed valuations in the wake of a difficult few months on the stock market are another likely trigger for these transactions.”

Biotech outlook 2022: Investor takeaway

Biotech stocks faced a difficult period in 2021, and expert analysis shows the bottom may not be in yet.

New opportunities will arrive in 2022, but one predominant issue appears to be the lack of attention for the space despite the wide interest for the life science market thanks to COVID-19 vaccine work.

Investors will be watching the long-term progress of biotech stocks, keeping a keen eye on sentiment as companies attempt to emerge from the current bear market.