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Can Vir Biotechnology’s share price outperform the biotech theme?

Vir Biotechnology’s [VIR] share price surged more than 60% last Thursday as the biotech firm’s COVID vaccine showed promising results.

A Phase III trial showed that the vaccine Vir Biotechnology is developing with GlaxoSmithKline [GSK] reduced the risk of death or hospitalisation for high-risk patients by 85%.

The results were so good that the Independent Data Monitoring Committee (IDMC) recommended ending the trial early. This recommendation followed an interim analysis of data from 585 patients taking part in the trial, which demonstrated the effectiveness of the COVID-19 vaccine known as VIR-7831. The next steps are to ask the US and other regulators for emergency approval for the antibody-based treatment. 

“These exciting data with a single antibody against a conserved epitope bring us one step closer to delivering an effective new solution to patients around the globe,” said George Scangos, Vir CEO, in a statement.

“These exciting data with a single antibody against a conserved epitope bring us one step closer to delivering an effective new solution to patients around the globe” - George Scangos, Vir CEO

 

While Vir’s share price enjoyed a boost, GlaxoSmithKline’s fell slightly in what has been a tough year for the British pharmaceutical giant. Over the past 12 months, GSK’s share price has dropped 10.4% as sales of its therapeutic treatments have dipped due to stay at home orders (as of 17 March’s close). Still, if VIR-7831 can quickly get emergency approval, GSK’s share price might see some sustained upward momentum. Among the analysts tracking GSK’s share price on Yahoo Finance, the stock has a 1,644.5p price target. Vir has an $88.40 target.

 

Vir treatment pipeline

COVID-19 vaccines, no matter how important at the moment, are not the only thing investors should note. Vir Biotechnology’s pipeline of treatments includes an HIV drug being developed in partnership with the Bill and Melinda Gates Foundation. The biotech firm also has several Hepatitis B treatments in development, alongside influenza and HIV treatments.

In January, Vir’s share price soared over 70% following positive data from a phase I trial of hepatitis candidate VIR-3434. The trial found that an antibody used in the treatment might be more potent than expected.  As reported by Fierce Biotech, analysts at BofA Securities suggested the efficacy of the Phase I trial had provided “positive read-throughs” for the rest of Vir’s platform. 

70%

Vir Biotechnology's share price rise in January

 

Vir has also expanded in collaboration with GSK to develop an influenza treatment. As part of the agreement, GSK will make an upfront payment of $225m, with a further equity investment of $120m. There is also the potential for a $300m milestone payment, along with a $300m option to develop monoclonal antibody VIR-2382. According to a GSK statement, influenza causes 500,000 hospitalisations and 34,000 deaths each year in the US. Should the partnership pay off, GSK and Vir’s share prices could get a boost.

 

How is the wider biotech theme performing?

Over the past 12 months, the biotech investment theme has grown 58.96% according to our thematic ETF screener (as of 17 March’s close). Greater awareness of the sector due to the ongoing pandemic has been something of a shot in the arm for the industry.

In the last month, the investment theme has dropped 3.53%. Undoubtedly, there has been some profit taking with investors rotating out of growth stocks — the related healthcare innovation theme has seen a steeper drop of 7.58% (as of 17 March’s close). 

3.53%

Biotech theme's drop over the past month

 

The ETF that has fallen the furthest in the Biotech theme is the Ark Genomic Revolution ETF [ARKG], which is down 10.06% for the month (as of 17 March’s close). ALPS Medical Breakthroughs ETF [SBIO], SDPR S&P Biotech ETF [XBI] and iShares Nasdaq Biotechnology [IBB] have all seen falls of between 3.5% and 6.5% in the same period.

However, this could be an opportunity for long-term investors, with Vir and GSK’s average analyst price targets showing plenty of upside. 

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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