Corresponding Author: Woro
Umayi Ananda
E-mail: [email protected] �
INTRODUCTION
Biotechnology is a foreign term, even though it has
been practiced for a long time and has been a part of everyday life until the
day it entered the stock capital market. According to Mender, biotechnology can
be interpreted as using biological systems that aim to produce products that
meet human needs (Maheswari, 2021). In other words, biotechnology is an activity to
increase the value of natural resources (Naradia, 2017). This technique enables the utilization of Genetic
Resources (SDGs) in ways that change our fundamental understanding of science
and encourage the development of new products and methods that contribute to
human well-being ranging from medicine to food security (Ancient et al., 2020).
Modern biotechnology uses many stages of the process
through approaches from genetic modification methods carried out by DNA
recombination (Nugroho & Rahayu,
2018). It can be said that the characteristics of
biotechnology are: First, its implementation refers to strict scientific
principles and goes through long qualifications; Second, Born from a long
process by experienced verified experts who can be held accountable; Third,
have achievements for long-term benefits and human needs today in general and
become global or national needs. Biotechnology activities in the pharmaceutical
field started several centuries ago (Wahyuni, 2022). The most well-known example is the discovery of
Aspirin derived from the Salix and Spirae plants by Edward Stone, known by the
Greeks and Romans as an analgesic and anti-inflammatory drug since the 17th
Century. However, scientific testing of the contents and efficacy of the above
plants were carried out long after the Roman era. So Aspirin was only patented
three centuries later. This knowledge is often used as initial information for
developing modern medicines by the pharmaceutical industry in today's biotechnology
business.
Furthermore, today the biotechnology industry is used
to develop and play an essential role in the discovery and development of drugs
which are the lifeblood for the continuity of the pharmaceutical industry in
the development of this biotechnology. One example is the American Cancer
Institute has collaborated with a pharmaceutical company to develop compounds
called cardenolides derived from a type of tree that grows in the tropical
forests of Malaysia and Indonesia. According to research, this compound is
efficacious in the treatment of HIV type 1 and several types of cancer. Until
now, this research is still being developed.
The development of the modern biotechnology
pharmaceutical industry has led to higher business value in the capital market (Tjandrawinata, 2016). Initially, the value is tied to the entity (entity)
of physical ownership of plant or animal varieties. However, since biology has
been increasingly integrated into technology, especially the branch of
genetics, the intrinsic value of living things, known as gene variability, has
begun to be recognized. Furthermore, the utilization by the pharmaceutical
industry has been so massive that it has entered into competition in the
capital market business. A study reported that 74 percent of the plants that
are raw materials for modern medicine are plants that are used in today's
biotechnology business.
Investment is one of the factors that drive economic
growth in a region, which is beneficial for improving the economy, creating
equity, reducing poverty, and increasing prosperity in an area and individuals
with the hope of being profitable, including in the case of the biotechnology
capital market (Astuti et al., 2017). The importance of investing in the biotechnology
stock market has increased massively. It is quite profitable at the time of the
Covid-19 pandemic. It needs to be continuously socialized, especially to the
younger and millennial generations, so that in the future, these young
generations can consider the capital market, in this case, the pharmaceutical
industry-based biotechnology.
Fundamental investment knowledge is crucial for
potential investors (Lating et al., 2023). This aims to prevent investors from irrational
investment practices, a culture of following along, fraud, and the risk of loss
(Marlin, 2020). Sufficient knowledge, experience, and business sense
are needed to analyze which securities to buy in investing in the capital
market. Adequate knowledge of how to invest correctly is needed to avoid losses
when investing, for example, in the capital market, including through stock
investment instruments, especially in the pharmaceutical industry, which is
engaged in the biotechnology business, which moves very massively and makes
money during the Covid-19 pandemic. Over the years, there has been a surge in
the capital market engaged in biotechnology, which has increased very rapidly (Agus Arman, 2022).
Investment in the capital market is the placement of
several funds at this time to obtain several profits in the future with the
hope that several funds or other sources of funds are used for wealth growth
through the distribution of results, which can be in the form of interest,
royalties, and dividends with the hope to obtain additional or profit from
these funds in the future (Tumewu, 2019). Investment can be interpreted as a commitment to
invest a certain amount of funds at this time to obtain future profits in a
longer-term Investment can have three aspects as follows (Ady, 2016): First, the aspect of money (invested) and
(expected), to judge (wealth) to come. So to assess the (feasibility) of
investment is also used the concept of money is used; Second, the time aspect
(present and future) therefore, the time aspect is also used to assess
investment: Third, the benefit aspect. From this benefit aspect, the investment
feasibility assessment must also examine the benefits and costs incurred using
the benefit principle or cost-benefit ratio.
There are two types of investment as follows: First,
Direct Investment. This investment is in the form of a direct purchase of a
company's financial assets. Direct investment can be made in the money market
in the form of assets that have a negligible default risk, short maturities with
high liquid rates, such as Treasury bills (T-bills), capital markets, in the
form of securities fixed-income securities and stocks (equity income),
derivative markets, in the form of options and futures contracts (Hayati, 2016); Second, Indirect Investment is the purchase of
shares from investment companies that have portfolios of financial assets from
other companies (Mahmudah &
Suwitho, 2016). An investment company is a company that provides
financial services by selling its shares to the public and using the funds obtained
to invest in its portfolio (Sri Handini &
Erwin Dyah Astawinetu, 2020).
The investment process
consists of five stages, namely as follows: First, the Determination of
investment objectives. The goals of
investors are different from one another, depending on the decisions made;
Second, the Determination of investment policy. This stage is the stage of
determining policies to meet predetermined investment objectives; Third, the
Selection of portfolio strategy. Two strategies are chosen, namely active portfolio
strategy and passive portfolio strategy. Active portfolio strategy uses
available information and forecasting techniques for better portfolio
combinations. Passive portfolio strategy includes investment activities in
portfolios that are in line with market index performance; Fourth, asset
selection. This stage evaluates each security to be included in the portfolio;
the Fifth measurement and evaluation of portfolio performance. This stage includes portfolio performance and
comparison of the measurement results with performance. So based on the above
background, the purpose of this study is to find out and analyze empirical
studies on the event study model in the biotech stock market.
METHODS
The research method
used in problem-solving includes analytical methods. The image caption is
placed as part of the image title (figure caption) and not as part of the
image. The methods used in completing the research are written in this section.
The
research approach is a way of thinking adopted by researchers about how
research designs are made and how the research will be carried out. This
research is quantitative in the form of hypothesis testing the relationship
between variables. For survey purposes, the number of samples taken was around
100 respondents, namely the younger generation. Sampling is purposive sampling.
The research criteria were: youth aged between 15-35 years, often using
smartphones in their activities, knowing about the capital market, and knowing
a little about the Biotechnology capital market. The type of research data is
quantitative data, which can be measured or calculated directly, namely in the
form of information or explanations expressed in the form of numbers or
numbers. Furthermore, data sources include primary data, namely data from the
first source or primary source, as well as secondary data collected by
researchers as support from the first source and in the form of documents and
articles. Data collection techniques in this study used a quantitative approach
which was then supported by qualitative research. The quantitative approach is
carried out by surveying the younger generation.
RESULTS AND DISCUSSION
Empirical
Study on Event Study Model on Biotech Stock Market
Biotechnology company stocks received great
attention from investors in the first year of the pandemic. However, as access
to vaccines becomes easier, interest in these stocks begins to wane. As
reported by Bloomberg on Monday (14/2/2022), the inflow of funds to the capital
market in this sector managed to penetrate nearly US$ 5 billion per month in
early 2020. Based on Bloomberg Intelligence, that figure is shrinking to an
average of US$ 800 million per month. This depreciation was driven by the
decreasing tension among market players related to the spread of the
Coronavirus, which was offset by strengthening expectations about handling the
pandemic.
South Korea Also Ready to Give Fourth Dose of
Covid-19 Vaccine The Nasdaq Biotechnology Index, the most critical measure of
the sector, shows a decline of up to 25 percent since its peak of 52 last week
on August 9. SPDR S&P Biotech, or XBI, an over-the-counter exchange-traded
fund (ETF) used to track industry performance, has plunged 44 percent over the
past year. With risks hanging in, biotech stocks suddenly looked less
attractive, less promising, and far more daunting, especially with projected
interest rate hikes. Indonesia Only Has Third Dose, and This Country Starts
Fourth Dose of Vaccine Injections "The market last year was quite crazy,
to be honest, because it was too hot. We saw several companies being able to
raise funds on projects where we looked at them and said this made no
sense," Chief said Ipsen SA Executive Officer David Loew. Biogen Inc.
Chairman Stelios Papadopoulos said the current decline in the shares of several
biotechnology companies was due to too high valuations at the start of the
pandemic. "The problem is that scientific experience is overpriced with a
very significant amount of risk."
Furthermore, Biotechnology is "the use
of living organisms or the use of their products to improve human health and
the environment" (Wardani et
al., 2017). The global biotechnology market is expected to be worth
$2.44 trillion by 2028, implying a compound annual growth rate (CAGR) of over
15.5% between 2021 and 2028. The VanEck Biotech ETF (NASDAQ: BBH) invests in
healthcare companies that develop and market drugs, especially those related to
genetic analysis and diagnostic equipment.
So, Introducing two exchange-traded funds
(ETFs) focused on biotechnology companies. To put this discussion in context,
readers may be interested to know that Dow Jones Biotechnology made a 19.1%
gain in the last 12 months. Likewise, the Dow Jones US Pharmaceuticals Index
rose by close to 21%. Two trades in the stock market have always dominated the
VanEck Biotech ETF and the Global X Genomics & Biotechnology ETF.
First, the VanEck Biotech ETF, which has 25 holdings, tracks the
MVIS US Listed Biotech 25 Index. The top 10 companies make up about 62% of net
assets of $564.6 million, making it a large fund. About 85% of companies are from the US,
followed by Ireland and Germany. Notable holdings include the following:
Amgen (NASDAQ: AMGN), Moderna, IQVIA Holdings (NYSE: IQV), GileadSciences (NASDAQ: GILD), ICON (NASDAQ: ICLR) and VertexPharmaceuticals (NASDAQ: VRTX).
The fund made gains of 21.7% last year and 13.2% this year.
Potential investors looking for a fund that concentrates on some of the most
important biotech names could consider investing around $190.
a.
Current
Price: $194.04
b.
52 Week
Range: $157.17 � $222.22
c.
Dividend
Yield: 0.32%
d.
Expense
Ratio: 0.35% per year
Figure 1. VanEck Biotech Weekly Chart
Second, the Global X Genomics & Biotechnology (NASDAQ: GNOM) ETF exposes businesses likely to be at the forefront of advances
in genomic science applications, including genome sequencing, gene editing,
genetic medicine, and biotechnology. The fund was first listed in April 2019.
Among the top companies on the list are the following: BioMarin
Pharmaceutical l (NASDAQ: BMRN), GenscriptBiotech (HK: 1548), ArrowElectronis (NYSE: ARW), Qiagen (NYSE: QGEN), SareptaTherapeutics (NASDAQ: SRPT) and Pacific Biosciences (NASDAQ: PACB) from California.
Global X Genomics & Biotechnology is down about 9.5% in 2021
but made a 5.1% gain in the last 12 months. After hitting a record high of
$28.45 in February, companies in the fund are under pressure, and the ETF has
lost more than 24% of its value. Long-term buy-and-hold investors Global X
Genomics & Biotechnology, which has 41 holdings, tracks gains in the
Solactive Genomics Index. The leading ten shares comprise approximately 42% of
net assets of $264.3 million. The fund may consider buying around this level.
This fund brings a genomic dimension to
healthcare investment. Genomics is "the study of an organism's genome or
its DNA and how that information is applied". This niche market is
expected to grow from nearly $28 billion in 2021 to nearly $95 billion in 2028,
translating to a CAGR of nearly 19.5%. Health
professionals highlight the importance of genome sequencing in developing an
effective global response to the Coronavirus.
a.
Current
Price: $20.95
b.
52-Week
Range: $19.34 � $28.45
c. Expense Ratio: 0.50% per year
Figure 2. Global X Genomics & Biotechnology Weekly Chart.
Even though it was hot at the start of the
pandemic, for biotechnology investors in the long term, the current trend of
fund inflows actually shows that this sector is still far from being destroyed.
"A year ago, [biotechnology] companies were valued as interesting ideas.
When the market corrects like that, I think we will appreciate them as a
business again," said Loncar Investments Chief Executive Officer Brad
Loncar. That means invested funds won't leave the sector, said Piper Sandler analyst
Chris Raymond, who analyzes biotech cash flow. However, investors who stay put will pay
more attention to which companies they want to support. Some shy away from
companies that still need a long time to translate data into drug products. At
a time of rising interest rates and rising inflation, investors are preferring
the assets of large companies that prove less risky than betting during boom
times, according to Brian Coleman, head of global capital markets at Locust
Walk, an investment bank and advisor in the science sector. By 2021, healthcare
venture companies raised US$28.3 billion in funding, compared with
US$3.7 billion in 2011, according to Silicon Valley Bank.
Several healthcare and biotech stocks have recently been in the
spotlight. In early October, Merck (NYSE: MRK)�covering early November�provided
a positive update on molnupiravir, a potential antiviral drug being developed
with Ridgeback Therapeutics that has shown outstanding results in the treatment
of COVID-19. Then came
similar news from Pfizer (NYSE: PFE) regarding Paxlovid, its antiviral drug
candidate.
Several investors have made big money this
year from shares of companies developing coronavirus vaccines. Some of these
stocks have risen by hundreds of points in a relatively short period. This was
before any Covid-19 vaccines won emergency use authorization or regulatory
approval. Across the pharmaceutical and medical industries, senior executives
and board members are making millions after announcing positive developments in
the fight against Covid-19. The following are the Covid-19 vaccine stocks that
have the potential to make their shareholder wealthy, as reported by the Motley
Fool:
Moderna's first, Moderna (NASDAQ: MRNA),
looks close to hitting the market with its Covid-19 mRNA-1273 vaccine. The
biotechnology company reported excellent efficacy results for a trial vaccine
in the past few weeks. Assuming no bumps are in the road, Moderna could win
emergency use authorization for mRNA-1273 by December. The cash inflow is
likely to soon flow into Moderna's coffers. The biotechnology company has
secured supply agreements for more than 330 million doses. Although the
financial details of its supply deals have yet to be announced, the combined
Price for these agreements may be as high as $6 billion and much higher.
Indeed, the market capitalization of biotechnology reflects the many potential
Covid-19 vaccines. However, mRNA-1273's success could bode well for the rest of
Moderna's network, allowing investors who buy shares now to become millionaires
over time. The company has a dozen mRNA programs in the pipeline right now. CEO
Stephane Bancel hopes to use the cash he expects from the mRNA-1273 supply deal
to expand his pipeline of up to 50 mRNA programs in clinical trials.
Second, Novavax Although Moderna ranks as
one of the clear leaders in the coronavirus vaccine race, this biotech stock
has yet to deliver its most significant gains this year. That honor goes to
Novavax (NASDAQ: NVAX), where the stock has rocketed more than 3,000% this year.
Novavax is currently undergoing late-stage clinical studies for the Covid-19
vaccine candidate NVX-CoV2373. The company plans to begin late-stage US
experimental vaccine studies in late November. If all goes well, these vaccine
companies have agreements with Australia, Canada, and the UK to supply 176
million doses of NVX-CoV2373.
Additionally, Novavax received US$1.6 billion in funding from
Operation Warp Speed in an agreement that includes supplying 100 million doses
to the US. In addition to the promising coronavirus vaccine, Novavax has an
influenza candidate, NanoFlu, which the Food and Drug Administration will
likely approve. Biotechnology announced excellent results earlier this year
from a late-stage study of NanoFlu.
Third, Vaxart (NASDAQ: VXRT) has not gotten far into clinical
trials of its COVID-19 vaccine candidate, VXA-CoV2-1. However, the stock has
won more than most, soaring nearly 1,900% this year. Biotechnology is currently
evaluating VXA-CoV2-1 in phase clinical studies. Vaxart completed enrollment in
the study earlier this month and could report preliminary results in the coming
weeks. Could it be too late for Vaxart to achieve VXA-CoV2-1 success? Not
necessarily. There is something unique about VXA-CoV2-1 that can be a modifier
because it is a single-dose tablet. All the leading coronavirus vaccine
candidates are injections, most requiring two doses several weeks apart. If
VXA-CoV2-1 proves safe and effective, Vaxart could have great opportunities
with oral vaccines targeting other viral diseases. With its market
capitalization of just under US$750 million, investors still have the potential
to make much money with the stock if all goes well in Vaxart's clinical
studies.
Fourth, Johnson & Johnson (NYSE: JNJ) announced it would
separate its consumer healthcare division and concentrate primarily on
pharmaceuticals and medical devices. Moreover, on November 19, the CDC
recommended a COVID-19 vaccine booster for all adults in the US. The
announcement put shares of BioNTech (NASDAQ: BNTX), Moderna (NASDAQ: MRNA),
JNJ, and Pfizer on investors' radars.
Figure 3. Thinking
Framework Picture
Source:
Theory Review, 2019.
Variable Operational
Definitions
Table 1. Variable Operational Definitions and Research Variable Indicators
|
Variable
|
Understanding
|
|
Financial Literacy
|
the ability to read, interpret and analyze,
manage money, communicate about personal financial conditions that affect
material well-being, calculate, develop independent judgments, and take the resulting
actions of those processes to thrive in our complex financial world
|
|
Personal Interests
|
A person's interest in making decisions regarding financial
products
|
|
Environment
|
The Environment for Individuals to
Invest in the Biotechnology Capital Market
|
|
Interest in Investing in Biotechnology Capital Market
|
Individuals tend to invest in the Biotechnology capital market.
|
Data analysis technique
���������� The
Regression Model is based on a functional or causal relationship between the
independent and dependent variables (Oscar &
Sumirah, 2019). Multiple linear regression analysis was
tested using SPSS version 23. The multiple linear regression analysis models
used to test the hypothesis are as follows:
Y = a +
β1X1�+ β2X2�+ β3X3�+ ε t
Information:
a�������� : Constant value
β1,2,3���� : Residual regression coefficient direction numbers
Y�������� : Interest in investing in
the Biotechnology Stock Market
X1������� : Financial literacy
X2������� : Personal interests
X3
������ : Environment
Shows that:
1.
There is an influence of Financial Literacy, Personal Interest, and
Environment on interest in investing in
the Biotechnology stock market.
2.
There is an influence of Financial Literacy on the interest in investing in the Biotechnology Capital Market.
3.
There is an influence of Personal Interest on interest in investing in the Biotechnology Capital Market.
4.
There is an influence of the Environment on the interest in investing in the Biotechnology Capital Market.
CONCLUSION
Biotechnology plays a crucial role in the
development of drugs and has a positive impact on the economy and capital
market. Investing in biotechnology stocks can bring substantial profits but
requires sufficient knowledge and wise investment practices to avoid losses.
Educating the younger generation on investing in the capital market,
particularly in the biotechnology industry, can lead to sustainable economic
growth and prosperity. It is essential to understand the factors that influence
interest in investing and to invest wisely to avoid risks and fraud. As the
biotechnology industry continues to grow rapidly, investing in it can be
profitable, especially during the Covid-19 pandemic.
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