Healthcare names have dominated the AIM market since the coronavirus pandemic broke out.
Companies such as Novacyt SA (LON:NCYT), Synairgen PLC (LON:SNG) and Genedrive PLC (LON:GDR) have been the three top performers in the year to date, with share prices rocketing 2,455%, 852% and 610% respectively.
Experts say that COVID-19 has sparked change in a sector long gone under the radar.
Traditionally, small UK players have been struggling with low cash levels, hindering both their programmes and the chance to do promotional activity to raise more funds.
The British regulatory pathway is much slower compared to the relatively speedy US bureaucracy, while an underfunded NHS is keeping demand for new technologies very low.
For biotech projects especially, investors have looked at UK companies as having less potential for success compared to US rivals with much more cash to splurge.
“Coronavirus has made us take a fresh look at the sector… The competitive landscape seems to have changed,” said Emma Ulker, an analyst at Proactive.
“It has highlighted the value of the sector and I’m really impressed by the way some of the companies have adapted very quickly to produce or to adapt their products towards finding a solution or a diagnostic.”
Graham Doyle, an analyst at Liberum, adds the pandemic has been especially favourable for the diagnostics sectors.
“The question is how much of the performance is on the fundamentals of the business and how much is based on trading flows and a degree of retail flows,” Doyle wonders.
In the therapies space, most companies have been re-purposing existing projects to tackle the pandemic.
Synairgen switched its chronic obstructive pulmonary disease (COPD) candidate SNG001 to coronavirus treatment, while Tiziana Life Sciences PLC (LON:TILS) has filed a patent to use a combination of nanoparticle-Actinomycin D, an existing treatment for infectious diseases, and its antibody anti-IL-6R.
Elsewhere, e-Therapeutics PLC (LON:ETX) has re-jigged an existing platform to test approved and known drugs, both alone and as combinations, for Covid-19 treatment.
With share prices rocketing in the past few months, many names have exploited the momentum in share price to raise new cash at a lower dilution.
Chance to refinance
In fact, healthcare has been outperforming all sectors in the AIM markets in terms of further issues, raising £390mln in the four months to April.
It was followed by retail and leisure with £381mln and tech with £148mln.
Proceeds have been used for both Covid-19 projects and their underlying programmes, such as Faron Pharmaceuticals Oy (LON:FARN) (NASDAQFIRSTNORTH:FARON).
The Finnish biotech raised £12mln by placing shares in both its listings, with the cash used to expand the current trial of its Clevegen precision immunotherapy candidate, as well as the REMAP-CAP trial of Traumakine in coronavirus cases.
Overall, future performance depends on results and data, but many companies have been able to turn the pandemic to their favour.
Others have experienced disruption, but analysts say most business models remain intact since demand for most products is related to physical needs.
“The healthcare space in general should outperform as there’s going to continue to be pressure on other sectors such as retail, leisure, industrials, whereas in healthcare the underlying demand is broadly unchanged,” Doyle concluded.
“There might be some volatility around that, but fundamental demand will not go away, and the nature of the supply chain is such that you can get some disruption but generally it has been dealt with.”