In the cleanest form, biotechnology is a sector that uses cellular and biomolecular methods to improve or create products in various industries.
In the cleanest form, biotechnology refers to the sector that through cellular and biomolecular methods to improve or create products in various industries. Public companies involved in biotech tend to stay close to the medical landscape, they can have a bit more freeway as to what kind of business they wish to pursue.
The majority of biotech companies are engaged in the long-term research and development of new medicines and vaccinations. However, the field extends beyond this particular focus on healthcare. Increasing agricultural efficiency in order to feed the world’s hungry to developing biofuels to reduce the energy required for manufacturing, showcase the industry’s diverse and rapidly expanding.
Here, the Investing News Network provides an overview to help better answer the question of “what is biotech investing?”
What is biotech investing? What to know before choosing a stock
The investing firm Oppenheimer revealed it’s focusing more on biotech—regardless of the volatility in the market—especially with companies which have therapies for multiple indications, rather than pinpointing one specifically.
“We look for things that have multiple ways to win once a proof of concept is worked out, so you have multiple shots at the apple,” said Rajeev Bhaman, Oppenheimer analyst told Reuters. Some investors are concerned over the Federal Reserve raising interest rates, possibly up to three times this year.
Leerink analyst Geoffry Porges believes the biotech industry is facing additional pressure of long wait times for regulatory approvals, such as the US Food and Drug Administration (FDA). As this trend carries from 2017, it could prove to be a new normal for the industry, giving an incentive for companies to be involved in more clinical trials.
What is biotech investing? Market moving forward
Though the pharmaceutical industry is still the bigger player for income, biotech is close by with a market estimate of over $100 billion by 2020 in the US alone, according to a report by BB Biotech. Which means a growth of 10 percent per year compared to just a four percent growth per year in the pharma industry.
“Among the various segments of the healthcare industry, the biotech sector is well positioned to sustain its dynamic growth during the years ahead thanks to its power of innovation. The biotech sector’s growing upside potential is also being fueled by its research priorities,” the report indicated.
A US Department of Commerce report further explained the less clear distinction between biotech companies and the pharmaceutical sector. Biotech often seeks novel drugs or therapies in areas of interest and so the research and resulting products bring the two industries closer and closer.
The report titled 2016 Top Markets Report Pharmaceuticals explained, “most major multinationals now incorporate both biologics and generics subsidiaries in their portfolios.”
“[T]he high manufacturing and regulatory costs involved in developing these drugs further clouds traditional distinctions between innovative and generic business models and investment cycles,” the report stated.
A proper way to gauge the market is through hyper-focused Exchange Traded Funds (ETF). For the most part, the ETFs have seen positive returns in 2017 despite the instability of health care services in the US.
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This is an updated version of an article first published on the Investing News Network in 2015.
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.