The COVID-19 pandemic has had a tremendous impact on the healthcare sector. A significant number of investors showed interest in the companies working to develop the COVID-19 vaccines. In March 2020, when most of the stocks and industries collapsed, healthcare stock prices across the globe saw a boom due to the imposition of lockdown in several economies. In the current scenario, when many nations are struggling with the second wave of the pandemic, investors expect a similar trend in 2021. The long-term growth in the healthcare stock prices has potentially got investors eyeballs.  

The pandemic has transformed the entire structure of the healthcare market. While some industries have flipped to the winning end, some have struggled and still are.  In quite a similar trend, industries like gaming, online retail and reselling, healthcare, and pharma have outperformed— and a few others like travel, hospitality, transportation, and aviation have seen a downfall.

According to Michal Marszal, senior equity analyst, the biopharmaceutical space has emerged victorious when discussing stock performance in the healthcare sector. The urgency for the vaccine has created massive demand in the industry.  Consequently, the healthcare stocks have been performing pretty well, unlike in a lot of other industries. 

Healthcare Sector Contribution to the US GDP

The post-pandemic situation has seen a surge in healthcare stock prices across the world. Earlier, this industry was an underperforming sector. But according to a recent report, the healthcare sector contributed around 18% to the total GDP of the US in 2020. When financial experts sit to analyze the growth trend in the healthcare industry, innovations in the biotech sector and biopharma have emerged as the major contributors to this growth. Let us have a closer look and identify the primary reasons for this growing trend in the healthcare industry.

Innovations in Biotech

With masses of people diagnosed with COVID-19 every day, the demand for healthcare facilities and vaccines has risen tremendously. Earlier, it took years for healthcare experts to develop vaccines & find a cure for an alien disease. But today, it’s altogether different— with advanced technologies & super-modern tools, things are more accessible. With an unexpected outbreak of the pandemic, the hope of vaccine development was the first thing governments across the globe were pacifying people with. 

Some vaccine manufactures stepped up and entered the clinical trials in just a few months. This accelerated timeline was possible only because of the advancement in genetic sequencing over the past years. These innovations and developments in the biotech industry have allowed the overall healthcare stocks to outperform and have provided the investors with better returns.

Biopharma: The Hero of the Healthcare Sector

The intensified efforts to address the pandemic have also improved the public perception of the biopharma industry. From an industry that nobody looked for, it has become a leading contributor to healthcare stock prices. The industry earlier was also questioned due to the rising costs of medicines. In April, Harris Poll found that 40% of Americans reported a positive view of the industry compared to the period before the pandemic. 

Many innovative small-cap biopharma firms have partnered with the giants in the post-pandemic market to develop the COVID-19 vaccine. The cutting-edge technology of small caps combined with the manufacturing and distributing powers of the leading biopharma companies is indeed doing wonders for the healthcare stocks. The German firm BioNTech works with Chinese pharmaceutical company Fosun Pharma and US pharma company Pfizer to develop an mRNA-based vaccine.

The Era of Remote Medication

With almost all OPDs shut down due to the pandemic, the healthcare workers, apart from the ones treating critical issues, have now shifted their focus to remote medication. The healthcare sector has seen a drop in the demand for elective procedures, surgeries, and some forms of routine care.  Covid-19 expenses and lost revenues resulted in an estimated loss of around $203 billion between March to June. On the other hand, the use of telemedicine and treatment through virtual platforms has skyrocketed. Several reforms and the development of apps have made it easier for patients to access remote medicine. The Digital Care Act passed towards the end of 2019 has empowered video consultation and distance medication. Since the pandemic outbreak, telehealth use in the US has surged; now, around 76% of the US hospitals connect with their patients through video consultation. During the last year, the US also saw a massive 4,345% growth in virtual consultations for non-urgent cases between March 2, 2020, and April 14, 2020. Not only this, the rise in the demand for teleconsultation and remote medicine has also led to growth in the IT and technology sector.

Result of Covid-19 Vaccine Trials and Use on the Healthcare Stocks

This section will analyze the impact of Covid-19 vaccine trials and their use on healthcare stock prices. The result of successful vaccine trials has contributed to the healthcare stock prices surging. Individual companies throughout this phase have seen swift swings. Leading biotech company from Massachusetts, Moderna saw its healthcare stock prices rise by 30% after the announcement of successful trials; however, the healthcare stock prices fell in the subsequent weeks.

Similarly, last year in May 2020, California-based Gilead Sciences saw an upward surge in their healthcare stock prices after the company announced that its antiviral drug Remdesivir would help treat Covid-19. “A lot of major players in the United States in managed care, such as CVS or UnitedHealth, are actively exploring adding these types of services to the menu of offerings to their clients,” said Marszal.

Healthcare investors should always be aware of the changes in regulations, governing insurance coverage, drug pricing, and other critical business factors to earn maximum from healthcare stocks.