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While the Coronavirus pandemic has adversely impaired the sales and growth forecasts of most of the Industries in the United Kingdom, the Healthcare industry of the country has been delivering a mixed set of numbers. While most large listed companies, which have a large exposure to the Chinese market, have said that their revenues will be impacted by the lockdown like conditions in that country, several other companies are doing well. These companies are either providing testing kits for coronavirus identification and diagnosis or are producing a few specialized medicines that have so far proved effective against the virus.
Below we take a look at the major pharmaceutical and healthcare stocks belonging to the FTSE 100 index, FTSE 250 index and also the performance of the FTSE AIM All-Share Healthcare index to see how the sector has performed during the past one month.
Healthcare and Pharmaceutical majors on the FTSE 100 Index.
The FTSE 100 index dons three global Pharmaceutical majors, AstraZeneca Plc, GlaxoSmithKline Plc and Hikma Pharmaceuticals Plc. AstraZeneca Plc is the only major healthcare company on the index which has issued a revenue warning on account of the outbreak. The company has a 35 per cent revenue exposure to China, the country which has been contributing significantly towards the growth of the company in recent years. The company expects its performance to be lower this year than the previous year and growth in revenues to be in and around ten per cent. GlaxoSmithKline Plc, on the other hand, has issued a revenue warning of between 1 and 4 per cent on account coronavirus as well as some of its patent protections expiring this year, while Hikma Pharmaceuticals Plc has not issued any such profit warning and expects its revenues to grow about 5 per cent during 2020.
Source- Thomson Reuters, One-month price returns chart, FTSE100, GSK, AZN and HIK
During the past month, the FTSE 100 index has performed poorly on the London Stock Exchange compared to the performance of the above three companies. From 18th February 2020 to 18th March 2020 till the time of writing of this report the FTSE 100 index had provided a return of -31.9 per cent, GlaxoSmithKline Plc stock has given a return of -15.09 per cent, AstraZeneca Plc stock has given a return of -14.44 per cent while the Hikma Pharmaceuticals Plc stock has given a return of 11.22 per cent.
Healthcare and Pharmaceutical companies on the FTSE 250 Index.
The FTSE 250 index comprises of three companies that are in the field of Pharmaceuticals, medical devices and associated healthcare services: ConvaTec Group Plc, Mediclinic International Plc and UDG Healthcare Plc. Among the three, ConvaTec Group Plc produces medical devices and develops associated technologies. The company recently has stated that its total revenue exposure to the Chinese market is less than 1 per cent and hence does not to expect a significant impact on its revenues in the forthcoming year. Mediclinic International Plc owns several private hospitals in Namibia, South Africa, United Arab Emirates and Switzerland. The company does not have any business interests in China and is not expected to be impacted by the coronavirus outbreak. The management of the company has not issued any warning or guidance in this regard. UDG Healthcare Plc provides support services to the healthcare industry; it provides clinical, commercial, packaging and communication services to the industry. This company also has not issued any guidance with regard to the impact of the coronavirus pandemic on its revenues.
Source- Thomson Reuters, One-month price returns chart, FTSE100, CTEC, MDC and UDG
During the past one month, the stock of UDG Healthcare Plc has performed the worst among the above three companies giving a price return of -41.18 per cent during the period between 18th February 2020 and 18th March 2020 till the time of writing of this report. The FTSE 250 index during this period has provided a return of -39.75 per cent, ConvaTec Group Plc stock has given a return of -31.47 per cent, and Mediclinic International Plc stock has given a return of -25.99 per cent.
Performance of the FTSE AIM All-Share Healthcare index.
The FTSE AIM All-Share Healthcare index comprises of several small companies who are into proprietary research into novel pharmaceutical formulations. While most of them do not have any exposure on their businesses on account of the Coronavirus breakout, some of these companies have specified that the research could be effectively be used for detection, diagnosis, prevention and treatment of the Coronavirus infection. The FTSE AIM All-Share Healthcare index comprises of 76 such companies which have provided a mixed performance during the past one-month period.
Source â Thomson Reuters, Performance of FTSE AIM All-Share Healthcare index
During the past month, the index has given a negative return of -28.66 per cent.
The opinions of the companies given above were given prior to the spread of the virus to Europe and much of the western world. Most of the large companies like AstraZeneca Plc, GlaxoSmithKline Plc and Hikma Pharmaceuticals Plc are expected to sustain revenue deficits for the full year as markets other than China are also experiencing lockdowns for indefinite periods.
The products like face masks, hand sanitizers and other products that are used in the treatment of infected patients are currently in high demand, and a shortage of these commodities is also being witnessed in many of the worst affected countries like Italy and Germany. The current lockdown situation could also escalate into another major healthcare situation as many of the patients who suffer from other ailments and require frequent medical attention will not be able to get them which could lead to complications in these cases.
The World Bank has during the past fortnight announced a $10 billion fund to help countries fight the pandemic. It is highly likely that the money will be spent on the production of medicines for the treatment and prevention of this disease. Huge quantities of diagnostic and other equipment will also be required along with non-medical accessories like hand sanitizers and disinfectants. All these will bring fortunes to medical accessory supplying companies in the short run. However, given the massive business disruptions being witnessed in most countries, these little gains may not have the desired impact of keeping the books of these companies in the black.
At this time, the most important objective that needs to be accomplished is the early containment of the pandemic. A lockdown like situation for a period beyond a couple of months could have disastrous consequences for the entire country.
