What is Biotech Investing?

- January 23rd, 2020

Interested in biotech investing? INN has broken down the industry in terms of what it is, where it’s been and where it is going.

To understand biotech investing, it is important to know that, in the cleanest form, biotechnology refers to the sector that uses 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, although they can have a bit more leeway as to what kind of business they wish to pursue.

Here, the Investing News Network provides an overview to help better answer the question: What is biotech investing?

Is the biotech market the perfect mesh between the technology and pharmaceutical market?

 
Read our FREE outlook report below!
 

The majority of biotech companies are engaged in the long-term research and development of new medicines and vaccinations. However, the biotech industry extends beyond this particular focus on healthcare.

Objectives such as increasing agricultural efficiency to feed the world’s hungry and developing biofuels to reduce the energy required for manufacturing show the diversity and rapid expansion of the industry.

This article continues below the Biotech Investing Table of Contents.


Biotech Investing Table of Contents

The articles listed below provide an overview of investing in biotech from Biotech Investing News.

Start Here: Biotech

Biotech Outlook


What is biotechnology?

Putting it simply, biotechnology is classified as technology founded on biology. According to Bio.org, biotechnology products are developed to fight debilitating and rare diseases while using clean energy and sustainable manufacturing processes.

Research from IBIS World indicates that the biotech market in the US has various areas of focus, including technologies related to human and animal health, natural resource recovery and agriculture.

The majority of companies that responded to a BIOTECanada survey classify themselves as health biotechnology companies; the second most common classification was research and development, followed by agricultural and veterinary biotechnology and medical device technology.

As it currently stands, there are hundreds of existing biotech products as well as ones in development for untreatable diseases, making the market a sound investment. Generally speaking, biotech products are geared towards eliminating infectious disease rates, treating life-threatening diseases and providing individuals with treatments to reduce health problems and side effects.

State of the public market

2019 was an interesting year for the biotechnology sector in terms of the initial public offerings (IPOs) that took place, as well as merger and acquisition (M&A) activity and niche therapeutic areas garnering attention.

2019 saw a high number of biotech IPOs emerge, with just under 50 at the time of this writing, according to Brad Loncar on LoncarBlog. However, that number is lower than the number of IPOs in 2018, when there were approximately 58 biotech-related IPOs.

A report from Vantage estimates that biotech IPOs in 2018 raised US$7.23 billion over the course of the year, largely thanks to Moderna’s (NASDAQ:MRNA) IPO in December, which raised US$604.3 million alone. This was, at the time, the largest biotech company to IPO.

Prior to this, Allogene Therapeutics (NASDAQ:ALLO) had the biggest public offering in over a decade, according to Fortune, at US$324 million.

According to the BioPharmCatalyst Biotech Stock Calendar, the surge of IPO activity is a surely a positive sign of the state of the market for biotech investors.

In terms of FDA approvals, last year the agency set records with 62 novel drug approvals. As of June 10, 2019, there have been 12 novel drugs approved for types of cancer, multiple sclerosis, sleep apnea, postpartum depression and gene therapy, to name a few.

Biotechnology ETFs are also making waves thanks to Pfizer’s (NYSE:PFE) blockbuster proposed acquisition of cancer therapy company Array BioPharma (NASDAQ:ARRY) for a staggering US$11 billion.

According to CNBC, investor interest is shifting to biotechnology ETFs such as the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) and the SPDR S&P Biotech ETF (ARCA:XBI) for large market capitalization exposure. Other biotech ETFs such as the ALPS Medical Breakthroughs ETF (ARCA:SBIO) are garnering interest due to holdings that are focused on cancer and immunotherapy treatments that are nearing the final clinical trial stages.

Is the biotech market the perfect mesh between the technology and pharmaceutical market?

 
Read our FREE outlook report below!
 

Market moving forward

Although big pharma is still the bigger player for income, biotech is close by with a market estimate of over US$100 billion by 2020 in the US alone, as per a report by BB Biotech. That means growth of 10 percent per year compared to just 4 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 states.

A US Department of Commerce report further explains that the line between biotech companies and the pharmaceutical sector is becoming less clear. Biotech often seeks novel drugs or therapies in areas of interest, so the research and resulting products bring the two industries closer and closer.

A Global Market Insights report states that the industry will soar past US$775 billion by 2024 due to increasing healthcare costs. However, the report states that developments and progress in a number of biotechnology segments should help ease the burden of these conditions.

Additionally, market participants who may invest in the biotech industry should be aware that innovations including the growth of human organs and meats as well as novel biotechnological products are expected to catapult business growth.

According to Technavio, chronic illnesses and diseases such as Alzheimer’s disease and cancer have led to a surge in demand for molecular diagnosis, cell therapy, immunotherapies and biotechnological products to make diagnoses.

Technavio’s report further states that biopharmaceuticals and immunotherapies coupled with technological advancements and lab operations could potentially become the healthcare industry’s core in the future, which could certainly continue to fuel interest in investing in biotech.

This is an updated version of an article first published on the Investing News Network in 2015.

Don’t forget to follow us @INN_LifeScience for real-time news updates!

Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.

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