How to Invest in Life Science

A breakdown of everything to know about how to invest in life science — from biotech and pharmaceuticals to medical devices and genetics.

The overarching term “life science” refers to the study of living organisms and life processes. Given the sector’s broad reach, many investors aren’t sure exactly how to invest in life science.

To start, it’s important to understand that the industry encompasses the fields of biotechnology, pharmaceuticals, medical devices and genetics, to name just a few. Companies within each subsector are involved in researching and developing innovative products, advancing technology and striving towards drug or device commercialization by way of clinical trials and patent applications.

Read on for an overview of these four key life science sectors and how to invest in life science.

1. How to invest in life science: Biotechnology

Biotechnology is backed by innovation and is a sector that uses cellular and biomolecular methods to improve or create products in various industries.

Public biotech companies are mostly focused on the medical markets. The majority of biotech companies are engaged in the long-term research and development of new medicines and vaccinations.

As it stands, there are hundreds of existing biotech products, as well as many products under development for hitherto untreatable diseases. Generally speaking, biotech products are geared towards lowering infectious disease rates, treating patients with life-threatening diseases and providing individuals with treatments to reduce health problems and side effects.

2. How to invest in life science: Pharma

The pharmaceutical sector is perhaps the area most associated with the healthcare sector. That is because pharma companies are the backbone behind bringing new cures to the market and improving the treatments that are available for patients.

However, diseases aren’t easily targeted; there’s no specific cure for all types of cancer or a direct method for stopping the various ailments that affect humanity.

As such, companies in the pharmaceutical sector expand the potential of treatments and seek new ways to work with what is already in place. For example, a company might develop drugs for multiple indications or could look at addressing broader categories, such as pain.

3. How to invest in life science: Medical devices

In terms of medical devices, those interested in the long-term life science investing market should look to medical technology companies that are developing devices. These entities continue to play a prominent role in every level of healthcare.

The medical device market covers a wide range of health and medical tools used in the treatment, mitigation, diagnosis and prevention of diseases and physical conditions. As modern medicine is rapidly advancing, medical device development must keep up.

Some medical device examples are neurostimulation devices, surgical implants, ultrasound imaging devices, robotic medical technology and insulin pumps and insulin pens for diabetes. Similar to how pharmaceutical companies aim to help unmet needs, medical device companies are looking to do the same through their technologies.

4. How to invest in life science: Genetics

Finally, genetics is the study of genes, their variations and hereditary characteristics. As Live Science describes it, genetics involves looking at how traits are passed on through generations.

Breaking that definition down, there are several major branches that make up the genetics tree: classical genetics, molecular genetics and evolutionary genetics. Aside from that, there are various other subcategories within those branches.

When it comes to genetics investing, companies in this niche life science sector are mostly focused on four areas: DNA sequencing, genetic testing, gene therapy and genomics, which includes genome editing.

The life science investing opportunity

For those interested in the life science sector, there is no shortage of investment opportunities. From top biotech stocks and exchange-traded funds (ETFs), to Big Pharma companies, pharma ETFs, medical device companies and genetics stocks, there are many stepping stones into life science investing.

According to a report from Deloitte, transformation is “at the core” for companies across these verticals, and that will spur many of them to continue developing new innovative products through partnerships, acquisitions and, of course, technology.

While the life sciences industry may seem complex, its overarching future is promising and ripe with investment opportunities now and for years to come.

This is an updated version of an article originally published by the Investing News Network in 2013.

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

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

FAQ