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Stock Strategist Industry Reports

Coronavirus Has Limited Impact on Big Pharma and Big Biotech

Moats, valuations, and dividends look attractive in the market pullback.

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Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

We have lowered our Big Pharma and Big Biotech fair value estimates by almost 2% in aggregate, much less than the stocks have declined as a result of disruptions caused by the coronavirus outbreak. The high need for drugs should support continued demand and supply. Also, we expect new treatments and vaccines to reduce the long-term impact of the virus. We don’t expect changes to our economic moat ratings, as innovation should continue with only minor disruptions. Successful coronavirus treatments by the pharmaceutical industry should also remind the world about the social importance of the group (a key environmental, social, and governance factor for the industry), shielding it from the potential pressures of any new drug-pricing policy reforms. Our top undervalued picks in the industry include Bayer, BioMarin, Biogen, Merck, and Pfizer.

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Damien Conover does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.