How Biotech/Phamacy/Medical Companies Changed their Stock Market in Response to COVID-19

ABSTRACT

I was interested in how stock market of top companies would change in response to COVID-19. I thought that it is important to know what kind of companies would benefit during pandemic (although this would not nice). I thought that big corporates would benefit from pandemic, because they are better at overcoming obstacles. At first, I was first intrigued to find how tech companies would respond to pandemic, but after discussing with Professor, I learned that this result would be an expected result because technology companies would obviously benefit as we spend more times on computers during this time. So, after discussion, I focused on biotech/pharmacy and medical companies to investigate an interesting relationship happening in this area.

Keywords. What makes a company a good company in COVID-19, Types

The most pressing ethical question is to make sure that everything you do from a scientific standpoint is done for the ultimate good and positive issues for the people you are caring about.

Anthony Fauci

INTRODUCTION

It has been an year since COVID-19 outbreak started. From this, many of our usual routines have been changed. We learned that our daily lives without direct contact is possible, as seen from the school education at Korea University that did online classes and for my home school at Syracuse University that did both online classes and in-classes enduring infections of 800 in-class students during fall semester. In many parts of States, in-classes are necessary because of students who do not have the financial support to study online at home. It seems like we are in some kind of a fiction movie but this has been a real one. What is important, as my older brother, who has working at home for 10 months now as a software engineer in Ottawa said: “Too many scientist are searching for ways to end COVID-19. So it will end. But what is important is that throughout these times, that as we as we stay in quarantine and sit in our chair more than we did before, for months, and an year, that we do not lose our health during this time.” There are side effects of quarantine and staying at home orders. We are not used this. We used to walk to classes and this would automatically make us healthy.” During COVID-19, Social connection is interpreted in a different way as well. So without this human movement an direct contact, I was curious about which side of the world is doing well and which side is doing bad. Why would someone benefit during COVID-19? What are the compositions that make up a great industry, company, or leaders during pandemic?

Interestingly, I have not found a detailed research that particularly discusses about this relationship of companies during COVID-19. So I thought it would be intriguing to know what kind of conditions make a company great. My assumption is that the best leaders around the world would still do great despite of circumstances like COVID-19, because they have good skills and insights to overcome challenges better than leaders in smaller compaines. Although I wanted to first investigate more about the technology industry, the result seemed obvious that they would do well, since many of us are using more computers during COVID-19. After, discussing with Professor Shin, I was convinced that investigating Biotech, pharamacy, and medical companies is a fascinating topic, since these companies seem similar, but when when I reserached these, I realized how they were going into a different path during COVID-19. Also, this industry is particualrly one of the most important industry since it relates directly to the health of COVID-19 patients and all of us because of the vaccination.Their success will indirectly impact us, since COVID-19 will be ended by the enhancement of medical technologies and development in the areas of pharamcy, and biotech industry.

Observations:

What calculation did I use?

As I wanted to investigate about how each companies would be doing in areas of Biotechnology, Pharmacy, and Medical. I searched for the top 28 top companies in the world[1] for Biotechnology and Pharmacy and top 30 medical companies in the world. Then, I calculated the stock market change of each of companies for before COVID-19 and during COVID-19. I tried to calculate the stock market as accurate as possible. After doing many researches, I learned that Yahoo Finance App provides a stock market data for top companies. The data from the application provided High(highest stock price of the day), Low(lowest of the day), and Close(final price at the end of the day) values as seen in Figure 1. I thought these three are fair measurements to calculate stock price change in my research, since I am looking for general percentage change. So I picked values under “Close” since I thought this gives more consistency then “High” and “Low” values. And then, I thought about how I should divide the dates to compare. And concluded that it would be fair to make 2019 average stock price as before Covid-19 and then 2020 average stock price as during Covid-19. The reason is that even though pandemic was declared in March by WHO, there were many articles warning about the pandemic few months before March. So, I calculated Average stock price of 2020 for each days and divided by the average for 2019 for each days to find how much percentage changed for the average stock market before and during COVID-19 as seen in Figure 1

[1] Yahoo Finance

Figure 1

What are the Nodes and Links?

Since I wanted to investigate the companies, the companies were the nodes. I wanted to know how relations would affect the companies, so after discussing with Professor, I learned that the best way to do this is to link each companies if they share the same type.

So, to provide an example, If I am investigating three companies, Daewoo Construction, Samsung Construction, Posco Construction, I would consider each company as a node. Then, since their type is a construction, the companies would be linked togther for sharing same type of industry as seen in figure 3. Once I had these nodes and links, I would then input properties including how much stock price percentage changed from 2019 to 2020 for each of the nodes.

Limitations of the research

The drawbacks from the research that since I am investigating the top companies in the world, their stock market will automatically go up. Big companies will cope with challenges like COVID-19 better than smaller companies. Although COVID-19 was an unforeseen event, I assumed that top companies in the world would still do well during the COVID-19 period. After discussing with professor, I realized that if I can manage to investigate not just one industry but show a variety of industries that are responding to the COVID-19, then this will help to understand the context of my research in relation to the many industries around the world. This can prove that not all top industries are positively impacted.

Next, it is important to note that stock market is a big area and is a result of many factors happening around world which could impacted by politics, economics, and other fields. So I can investigate and make an argument, but I cannot make it a fact that COVID-19 causes stock markets of big companies to change positively or negatively.

Also, this research does not consider the companies that are overvalued and undervalued in stock. For example, companies in States tend to be undervalued, and this is different for different countries. For companies in Korea, according to media, the stocks are overvalued. So, this could affect the stockholder’s choice to whether buy or sell the stock and affect the outcome of the research.

Research Result: Four Industries: Automobile, IT Industry, Financial/Bank Industry, Biotech/Pharmacy Industry

Industries and their Specific Name and Types

Four Industries: Automobile, IT Industry, Financial/Bank Industry, Biotech/Pharmacy Industry

Industries and their Stockmarket Change in response to COVID-19

Investigation of Stock market Companies.

Biotech/Pharamacy vs Medical Companies displayed using gradience

BioTech/Pharamacy vs Medical companies using 3 colors

Figure 4

After looking at the data, I observed that medical companies are not doing well compared to biotech companies. The explanation is that bio-tech companies and pharmacy are doing well because of COVID-19 and the development of vaccines. [1]Also, the size of the node from figure 4 is based on the degree. So, based on this data, I noticed that if companies have big size of nodes, they tend to do well during COVID-19. Examples of this includes Danasher Coporation, Cardinal Health that does both biotech and medical related products. Also, the reason why some medical companies would not do well during COVID-19 performing negative blue nodes or negative percentages in figure 4 could be because many hospitals reported that they would deny the purchase of medical equipment’s, mainly because they need to save spaces for COVID-19 patients and delay other important surgeries around the world. [2]And then, I also found that in Korea, this is an important discussion going as well. So if big hospitals are occupied by COVID-19 patients, what kind of impacts can this have to the top medical companies?

[1] “How has corona virus affected Europe’s biotech stocks?” https://www.labiotech.eu/medical/biotech-stock-coronavirus/

[2] “Illinois hospitals delay elective surgeries, add beds as COVID-19 cases climb https://www.chicagotribune.com/coronavirus/ct-coronavirus-hospital-beds-elective-surgeries-glenbrook-20201112-qpd6rgmxkzhorhw2zbnjd7nvl4-story.html

When I first saw Medtronic medical company, I calculated that compared to 2019, in 2020 their stock market decreased by 9 percent. So, I explored about why such a well-known company like Medtronic would have a decrease of 9 percent, and found articles that said generally, medical businesses are suffering because of COVID-19. In fact, I read from many articles that said major hospitals need to make spaces for a large number of COVID-19 patients, delaying other major surgeries unrelated to COVID-19, such as cancer, bone surgery that are critical to many non-COVID-19 patients. In fact, articles in figure 5 even said that major medical business are getting their deals delayed by the hospitals, since these hospitals do not have the capacity to focus on things other than COVID-19. This really made sense to me and I did not question the logic at first. [1]

So I investigated more into the medical industry because I was intrigued to know why would some medical companies still have an increase in their stock market when articles suggested surgeries will be delayed because of COVID-19? And I was thinking if I explore more into Medical companies, then I would be search for something new, something maybe never done before. I realized that my original assumption was a tip of an iceberg, because my data that is coming up proves that Medtronic is not a good example that represents the many medical companies. As I mentioned before, looking at the image, it is convincing that generally, medical companies are not doing well compared to Biotech/Pharmacy companies. But, the number of nodes I researched for medical companies are around 20, while Biotech/Pharmacy nodes are 40 to 50. So I tried to zoom into the medical companies. First, I expanded the research to 50 medical companies that are listed as top in the world. Next, I used the same idea of link as previous works, but expanded so that instead of type of industry, the types of specificity in medical companies are linked. I will be more descriptive for this part soon.

[1] “Corona virus is forcing hospitals to cancel Surgeries” by Karen Weise, NY Times https://www.nytimes.com/2020/03/14/us/coronavirus-covid-surgeries-canceled.html

Figure 5: https://www.chicagotribune.com/coronavirus/ct-coronavirus-hospital-beds-elective-surgeries-glenbrook-20201112-qpd6rgmxkzhorhw2zbnjd7nvl4-story.html

“Corona virus is forcing hospitals to cancel Surgeries” by Karen Weise, NY Times https://www.nytimes.com/2020/03/14/us/coronavirus-covid-surgeries-canceled.html

Figure 7

Figure 6: I searched for their website about the products they sell for each medical companies. However, there were times when the website was not specific about the detailed products. So then I would google them to see what comes out as well, and google also categorized the products in detail as well.

For example, based on figure 8 for Abbott Laboratories, since it has type “Respiratory” which is also shared with Draegewerk AG node’s type “ventilator”, these two nodes are linked. Next, for relationship between Abbot laboratories and Allergan, I linked the similar types and since these two nodes share 4 links, the lineweight is 1.4 (which is used to make the graph below).

So, from the list of 50 medical companies, I tried to investigate about what specific types of medical supplies that each company make. I know that this will bring an insight going deep into the relationship of medical companies. To gather information, I looked at each of the websites, and wrote down each of the specific products that they make for the 50 companies. Then, from these lists of products, I tried to categorize them into 18 different types, as seen in Figure 2. I think there could be more variation of types, or a more expertized way of categorizing the types. In my opinion, I think did well in terms of categorizing them in figure 2, but I also think there could be guidance from medical experts as well. So, this shows relationships of common types through links, and also the different thickness of lineweights that indicates the extent of commonality of the types for the companies.

From this research, I wanted to research not just the top 50 but even more, specifically to the Korean companies. I explored Korean companies as well, but after presenting this in my class, I thought about it again, and I concluded that it is hard to make an argument of Korean companies, because of the number of nodes are simply too low. There is not an official data application that allows me to research top 100 companies in Korea using Yahoo application. So it is harder to have access to the stock price of top listed companies. I was thinking that since I researched top 50, then this condition is different if I were to research about top 100 companies in Korea, because then the companies are not based on the revenue rank of the world.

Figure 8: Details of how I linked each of the nodes based on types.

Top 50 medical companies and stock market for digital version

Figure 9: Based on eigenvector centrality

OBSERVATION

The result contradicts the assumption and explanation of my previous data from figure. In fact, data indicates that companies that deal with hospitals, and medical surgery products are doing really well in terms of during COVID-19. From the original data from figure , the medical companies seemed not to be doing well. However, actually they are doing well according to figure 9.

When I meant by hospital, they provide so many medical equipment related to hospitals and surgeries, that it was clear to categorize them as either “Hospital Related” or “Surgery Related”. So, from figure 9 I depicted some of the interesting companies that had node sizes relatively large (high eigen vector centrality) an also the stock market went up as well and the interesting companies I found were…

Danasher Coporation (Diagnostic / Cardiovascular)
Dragerwerk AG (Diagnostic / Hospital Care / Surgical Care / Respiratory)
Abbott laboratories(Vaccine / Women's Health / Respiratory / Influenza Vaccine / Cardiovascular / Diabetes / Diagnostic)
Caridnal Health (Cardiovascular/ Surgical Care / Hospital Care / Vaccine / Aesthetics / Diagnostic / Women's Health)
Terumo corporation (Infusion Pump Systems, Terumo Blood and cell tech, Interventional Therapy, Hospital Care, Vascular, Cardiac)
Shandong (Hospital Care/ Surgical Care)

Figure 9 has the node size based on eigenvector. Based on this data, companies sharing these characteristics tend to have a good stock market during COVID-19. Also, these tend to have high eigen vector values too as the node sizes are large. Specifically, Dragerwerk AG and Shangdong Weirgao Grou, or Cardinal health are hospital related. The data show that hospital and surgery related are actually doing well during COVID-19. Also, I find that Johnson and Johonson and Koninklijke Philips N.V. have high eigen vector or large size of nodes and doing well in terms of stock, and they both share surgical care production together.

Also, the data explained that if companies are doing respiratory related production, most of the companies had their stock went up by…

Becton Dickinson: 0-10 percent
Draegerwerk AG & Co KGaAAG: 50-100 percent
ResMed: 20-50 percent
Fisher & Paykel HealthCare: 50-100 percent
Except for General electric and Medtronic that had negative stock market.

Companies related to Diabetes and Pulse Oximetry were doing well as well.

Masmo Corporation: 50-100 percent
Tandem Diabetes Care: 20-50 percent
Insulet Corporation: 50-100 percent
Abbot: 10-20 percent
But then Medtronic also negative stock market.

And interesting node that does not seem to relate to COVID-19 is this company as it focuses on dentistry and 3D printing

Align Technology 3D printing: 20-50 percent increase

Conclusion

If there are more COVID-19 patients, hospitals may delay major surgeries which could lead negative impacts to the industries. However, my data shows that medical companies that have general production of hospital products and surgery related products are doing well even in COVID-19 time. An explanation that may account to this is that as we are going into December, the delayed patients from March 2020 to Summer are now all coming back to the hospital to reschedule the surgeries. Another explanation could be that as there are more COVID-19 patients, this means that there are more patients with critical conditions and that hospitals need to buy more hospital and surgical related products to be ready for the increasing number of hospitalized patients. Lastly, there could have been a government funding to these top companies to produce more medical equipment, since these medical products are responsible for saving lives of hospitalized patients from COVID-19.

Also, looking at figure 9, there seems to be that if the nodes (eigen vector centrality) is large, then the companies tend to have their stock market go up. This means that if companies are not narrow in its type but share variety of types, then they are more likely to do well during the changes caused by the pandemic especially when there are many global uncertainties. This is very similar to the findings in desertion as localism: army Unit solidarity and Group Norms in the U.S. Civil War written by Peter Bearman, since we learned that heterogeneous qualities of a group made the North to have less number of desertion rats during the war compared to the South that had localized and homophily values shared. This research shows there is an extent to the stock market industry. Before researching into Stock market, it seemed like a deep ocean driven by many factors. But,

my data shows that these top companies are in fact affected by products that relate to COVID-19 like respiratory and also hospital and surgery related aspects.

In my opinion, these top 50 medical companies seem to be doing well while the top industry leaders whine about the obstacles of COVID-19. Perhaps, if government is going to fund more companies, then they do not need to fund the top medical companies anymore. Government could distribute the funding not to the top companies that have good plans to overcome the COVID-19. These medical companies will provide enough medical supplies that helps their revenue grow. In fact, government should fund the people who are getting really poor, or need basic food or necessary things for living because of pandemic. COVID-19 seems to affect the poor people negatively more and rich companies in a positive way.