Biotech Bloodbath: Why Stocks Like Recursion, CRISPR, and Summit Plunged

The biotech sector has been on a rollercoaster ride in recent months, but the latest plunge in stocks like recursion Pharmaceuticals, crispr therapeutics, and summit therapeutics has left investors reeling. The sudden decline in these high-profile companies' stock prices can be attributed to a combination of specific events and broader market trends that have created a perfect storm of uncertainty and pessimism.



The most immediate trigger for the stock plunges was the resignation of an independent auditor at adma biologics on October 10, 2024. Despite the company maintaining its guidance for 2024 and 2025, the news sent shockwaves through the biotech sector, highlighting the sensitivity of these stocks to corporate governance issues and investor confidence. The resignation of an auditor, while not directly related to the companies in question, underscored the broader market's jittery state and its impact on biotech stocks.

Another significant factor was the appointment of Robert F. Kennedy Jr. to lead the Department of Health and Human Services by President-elect Donald Trump. Kennedy's well-known skepticism towards vaccines and his criticism of weight-loss drugs, coupled with Trump's statement that Kennedy would be allowed to "go wild on health care," created uncertainty and fear among investors. This led to a 4% collective tumble in the 729-company Medical-Biomed/Biotech industry group on November 15, 2024, following Trump's announcement on the social network X.

The broader market trends in the biotech sector have been equally bleak. Adam Feuerstein, in his newsletter, described the market sentiment as "lousy" and "relentless," with people seriously wondering if a sector turnaround is ever possible. The industry group has a Relative Strength Rating of 66, ranking in the top 34% of all industry groups in terms of 12-month performance, but it is still below its 50-day and 200-day moving averages. The pharma group ranks even lower at No. 123 out of 197 groups tracked by Investor's Business Daily. This broader market trend of pessimism and declining stock prices is reflected in the specific events affecting Recursion Pharmaceuticals, CRISPR Therapeutics, and Summit Therapeutics.



The recent stock plunges of these companies reflect a significant downturn in their current financial health and investor sentiment. These plunges were triggered by the announcement of Robert F. Kennedy Jr. being tapped to lead the Department of Health and Human Services by President-elect Donald Trump. Kennedy's well-known skepticism towards vaccines and his criticism of weight-loss drugs have raised concerns about potential regulatory changes that could negatively impact these companies' products and pipelines.

For instance, Pfizer, Moderna, and BioNTech, which have been at the forefront of vaccine development, including the COVID-19 vaccines, have seen their stocks slump due to fears that Kennedy's leadership might impose stricter regulations or reduce funding for vaccine research. This uncertainty has led to a 4% collective tumble in the 729-company Medical-Biomed/Biotech industry group on November 15, 2024, following Trump's announcement on the social network X.

The financial health of these companies is further complicated by the fact that biotech stocks are currently trading sideways, having taken a beating after the announcement. This is evident from the fact that the group ranks No. 72 out of 197 groups tracked by Investor's Business Daily, and the pharma group ranks No. 123. The industry group has a Relative Strength Rating of 66, indicating that it now ranks in the top 34% of all industry groups in terms of 12-month performance. However, this rating does not fully capture the current volatility and uncertainty faced by these companies.

In terms of pipeline progress, the uncertainty surrounding regulatory changes could slow down the development and approval of new drugs and vaccines. Companies like Pfizer and Moderna, which have been investing heavily in mRNA technology and other innovative treatments, might face delays or increased costs in bringing their products to market. This could impact their future growth prospects, as investors may become more cautious about investing in companies with uncertain regulatory environments.

To regain investor confidence, these companies might need to make strategic adjustments such as diversifying their product portfolios, investing in technologies that are less dependent on regulatory approvals, or exploring partnerships with other companies to share risks and costs. For example, Pfizer could focus on developing treatments for chronic diseases that have a more stable regulatory environment, while Moderna could explore collaborations with other biotech companies to accelerate the development of new vaccines and therapies.

Additionally, these companies could enhance their communication strategies to address investor concerns and provide more transparency about their pipeline progress and financial health. By doing so, they can build trust with investors and demonstrate their resilience in the face of regulatory uncertainty.

Ask Aime: What is the future outlook for biotech stocks after the recent plunge?