Goldman Sachs analysts often are wrong when it comes to healthcare companies. For example, Medtronic has recently struggled to deliver on key projects, declining its stock performance. Goldman analysts foresaw the problems but underestimated their impact. The outcome was uncertain, and we just got this one wrong,” the GS analysts wrote.
When recommending biotech startups, Goldman Sachs said, “life Sciences is currently the largest sector within the healthcare industry and has continued to expand rapidly, with heightened demand for therapeutics driven by aging demographics and the rising prevalence of the chronic disease. But the only aspect of biotech that Goldman Sach’s cares about are “the ability to make a lot of money.”
Maybe Goldman Sachs should look in the mirror. Goldman Sachs (GS) CEO David Solomon addressed negative headlines surrounding the bank’s culture during a second-ever investor day. Various media reports of mass partner exits, coupled with recent Wall Street chatter that the bank has lost its way after the failure of its consumer banking project Marcus, have all contributed to the unfavorable sentiment. And this comes after the company laid off some 3,200 workers’ positions, or a little over 6% of its headcount, in January after a challenging 2022.
Goldman saw a rough end to 2022, with profits down a whopping 69% in Q4 amid a severe decline in deal-making revenues, pressured by a weakening economic backdrop.
According to a report, “Goldman saw a rough end to 2022 with profits down a whopping 69% in Q4 amid a serious decline in deal-making revenues, pressured by a weakening economic backdrop.”
When GS changes the ratings on biotech firms, it can substantially impact the company’s ability to continue investing in new drugs that can help patients. Biotechs represent some of the most difficult to gauge investment opportunities on the Street. This is because shares can make big moves in either direction, given a single catalyst, making these stocks more volatile. But when a biotech firm reports positive results in clinical trials and GS downgrades the stock something is terribly wrong.
STAT News said of biotechnology, “in the same way, the 20th century belonged to physics, the 21st is biological. But while physics in the 20th century brought airplanes, personal computers, and posters of Albert Einstein, it also meant the atom bomb and a complete transformation of the social order. Now, we’re approaching a moment when changes in what we understand about biology are every bit as exhilarating and terrifying.”
Small biotech companies are developing new drugs to treat health conditions big pharma won’t invest in because they aren’t billion-dollar markets. They are, for a lot of patients, hope for the future.
It’s a shame that “analysts” have so much influence over small biotechs. Rather than look at numbers, perhaps they should look at patients their drugs treat and what physicians say about these new drugs.