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A new investment trend - biotechnology companies

Sep 12, 2022

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Biotech companies in the world continue to grow. The sector - which unites companies active in the study, experimentation and development of technologies with various fields of application from health care to the environment, from industry to agriculture and animal husbandry already has quite a few companies that are attractive to investors. That is why investors are increasingly paying attention to the best biotech stocks of such companies.

This sector, strategic for the economic stability and competitiveness of each country where similar companies are represented, because it is in good condition, as shown by the main economic indicators, is constantly growing. But it still needs medium-term national strategies in favor of innovation and research, in order to fully to express their potential and thereby ensure competitiveness and growth for the country.

What is biotechnology?


Biotechnology - a set of methods of using living organisms or their components to obtain substances and / or develop products for specific purposes. In modern biotechnology, the processes of developing food products and medicines to fight diseases such as Covid-19 are taking place. Currently, this industry is positioning itself as a key sector in the fight against the pandemic.

Types of biotechnology:

  • Epidemiological: research on the development of vaccines against infectious diseases

  • Agricultural: Fertilizers, composts, pest-resistant vegetable crops, among other applications.

  • Biomedical engineering: the construction and design of medical instruments such as prostheses.

  • Genetics: Genetic modification of organisms.


Key trends in biotechnology


Rapid response to the development of vaccines against COVID-19 has become a defining factor for the future of biotech. Currently, there are several drugs in research and development that will allow the industry to grow in the coming years.

And now we have 5 trends that determine the future of biotechnology:

  • The trend towards faster development of medicines.

  • The COVID-19 pandemic has exposed infectious diseases.

  • This is a great period of innovation in cells and genes used as medicines.

  • China is the fastest moving country on the biotechnology innovation curve.

  • New advances in the use of the immune system to treat diseases.


What drives biotech companies to go public?


Biotech brands must expand immediately to capitalize on global demand for medical technology, medicines, and biosciences. As a result, biotech businesses may go public in order to acquire capital, conduct research and development, or enter new markets. Both objectives require employing the greatest personnel, and if corporations can be position-independent in this endeavor, biotech brands can discover excellent individuals in low-cost countries.

Biotech hotspots throughout the world include China, India, Belgium, and South Korea, thus while the United States has the most biotech enterprises shares of which investors can watch through, for example, the Gainy service. It should not be the sole source for the top candidates. If market growth is the aim of a biotech company's choice to go public, a registered employer can help enterprises wanting to hire a single individual, a small group of employees, or an entire team in another nation.

Why is the biotech sector attractive to investors?


Strong growth


Thanks to great medical advances, more and more diseases can be treated more effectively. In the US, the health care market is considered the largest in the world, with the number of approved new drugs increasing every year for many years. From a regulatory perspective, expedited approval procedures support the rapid development of these new therapeutic products. This especially applies to drugs for life-threatening diseases for which there is no treatment or inadequate therapy. The best biotech stocks and companies in this field can get "innovation bonuses" in price setting and are hardly concerned about the debate about drug price caps.

Resistance to cycles


With the aging of the global population, the global drug market is growing regardless of the international economy. On the one hand, the demand for medicine lies in the growing number of people suffering from "common diseases" such as diabetes, as prosperity increases. On the other hand, new therapeutic approaches for diseases that until now have been difficult to treat, such as cancer or Alzheimer's disease, offer the possibility of at least slowing the progression of the disease and thus curbing the long-term costs of hospital treatment. Investments in drug development grow regardless of business cycles. That is why the demand for medical care will not stabilize, even temporarily, but will continue to grow in the coming years, in line with demographic changes.

Highly innovative


More than half of the newly approved drugs come from the laboratories of biotech companies. These companies are at the forefront, especially in new technologies that serve as the basis for drugs against cancer, genetic or viral diseases. These therapeutic approaches include various forms of gene therapy and gene editing. Their goal is to eliminate the genetic triggers of diseases or to replace them with other biological molecules, resulting in a longer or even lifelong effect. One of the advantages of the mRNA-based compounds that Moderna and BioNTech are using for Covid-19 vaccines is the shorter development time between lab and patient. After the approval of the SARS-CoV-2 mRNA vaccine, billions in additional revenue is expected if products against seasonal influenza viruses or previously difficult-to-treat infectious diseases manage to be approved on the market in the coming years thanks to the same technology.

Profitably


Unlike companies in other high-growth markets such as e-commerce, e-mobility or renewable energy, biotech stocks are neither valued nor overvalued. In contrast, biotech stocks continue to trade at the lower end of their long-term average valuations. Companies just becoming profitable with their first approved products offer great income potential for investors as sales and profit growth rates are still unfolding in the early years. As a result, the initially high valuation of the shares of these newcomers falls rapidly.

Biotechs that are already generating product sales are about to dip into the profit zone, or have already done so. The situation is different for companies whose clinical projects have not yet proven their effectiveness. In this case, there is more upside price leverage in the event of success, but there is also the risk of massive downside in the event of clinical failures.