Life Science Investing: How to Get Started

- October 7th, 2019

A breakdown of everything you need to know about life science investing — from biotech and pharmaceuticals to medical devices and genetics.

By definition, the overarching term of life science is the study of living organisms and life processes. 

Additionally, the term revolves around the fields of biotechnology, pharmaceuticals, medical devices and genetics, to name a few. Companies within each subsector put in their efforts into research and development of innovative products, advancements of technology and striving towards drug or device commercialization by way of clinical trials and patent applications, among others. 

Breaking those categories down even further, biotechnology is backed by innovation and is a sector that uses cellular and biomolecular methods to improve or create products in various industries.

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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. The majority of biotech companies are engaged in the long-term research and development of new medicines and vaccinations.

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

The pharmaceutical sector is perhaps the area most broadly associated with the healthcare sector. That is because pharma companies are the backbones behind bringing new cures to the market and improving treatments 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 treatment 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.

In terms of medical devices, those interested in the long-term life science investing market should be interested in medical technology companies developing devices, as they continue to play a prominent role in every level of healthcare.

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

Learn how to invest in life science and medical stocks

Read your free starter guide to investing in life science

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 an unmet need, medical device companies are looking to do the same through their technologies.

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. From there, 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.

All told, for those interested in the life sciences sector, there are no shortages of investment opportunities. From top biotech stocks and exchange-traded funds (ETFs), to the Big Pharma companiespharma ETFs, medical device companies and genetics stocks, these are just some of the stepping stones into life science investing. 

According to a report from Deloitte, transformation is “at the core” for companies across these verticals, which will force 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, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

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