Biotechnology came into the spotlight in 2020 as many companies raced to test and register vaccines for COVID-19, however, the potential and growth of this industry extends far beyond the pandemic. Biotechnology is transforming the way we treat and manage a range of health concerns and diseases and can be a highly lucrative space.
What is biotechnology?
Biotechnology specifically refers to technologies that use biological processes, capturing companies that focus on research, development, manufacturing and/or marketing of products based on biological and genetic information. The different types of biotechnology include biological drugs, vaccines, immunotherapy, gene therapy, orphan drugs and genetic engineering.
While Australian companies like CSL Ltd (ASX: CSL) are no slouches when it comes to innovative biotech, the US is typically viewed as the global centre. The dominance of the US market is partly due to the world-renowned US Food and Drug Administration (FDA) approval process and to the size of its customer base. As a result, many companies base themselves in the US for easier access to the process and more efficient ability to distribute and market to US consumers.
Most investors are now well aware of the global companies who have been successful in developing vaccines and treatments for COVID-19 but may be less familiar with some of the other innovators in the field.
Here are five you should know about:
1) Exelixis (NASDAQ: EXEL)
Exelixis are focused on oncology therapeutics with three approved treatments covering kidney and liver cancer, thyroid cancer and melanoma. In January 2021, they also received FDA approval for a combined treatment using one of their existing medications and a newer product as a first-line treatment for the most common form of kidney cancer.
2) Regeneron (Nasdaq: REGN)
Regeneron have eight FDA approved medications across cancer, asthma, pain management and infectious diseases. A particular success has been Eylea, which is a treatment for a range of eye diseases, including age-related macular degeneration. Regeneron has an extensive pipeline in research, development and testing. Approximately seven treatments are currently in phase 3 testing. It also has a patented DNA sequencing technology known as VelociSuite® Technologies which is one of the largest human sequencing efforts in the world.
3) Sage Therapeutics (NASDAQ: SAGE)
Sage Therapeutics specialises in therapies for brain disorders and currently has depression, neurology and neuropsychiatry franchise programs. It offers the first and only approved post-partum depression (PPD) product known as Zulresso® and is also in phase testing for treatments covering PPD, major depressive disorder, treatment resistant depression, Parkinson's Disease, Alzheimer’s Disease, Dementia and Huntington’s Disease. Further to this, Sage has formed a global collaboration with Biogen (NASDAQ: BIIB) related to two of its treatments in phase testing.
4) Gilead Sciences Inc (NASDAQ: GILD)
Gilead covers three primary disease areas, including viral diseases, inflammatory diseases and oncology. It has 16 FDA approved medicines for HIV, oncology and hepatitis C. Gilead recently acquired Immunomedics in October 2020 which has an approved treatment for metastatic triple-negative breast cancer. Gilead has a range of products in research, development and testing, one of which is anticipated to extend the existing successful HIV treatment program and another, Filgotinib, anticipated to be a breakthrough treatment for rheumatoid arthritis.
5) Vertex Pharmaceuticals (NASDAQ: VRTX)
Vertex is primarily known for its cystic fibrosis medications and currently has four FDA approved treatments for this disease. The most recent of these, Trikafta, could assist up to 90% of patients with improved lung function. It has also acquired other biotechnology companies to expand its expertise and now has a pipeline of products in research, development and testing covering diseases and concerns such as diabetes, sickle cell disease and beta thalassemia.
Ways to invest in biotechnology
Australian investors are typically well-exposed to the concentrated Australian biotechnology market including CSL but may consider the US for exposure to a more diverse and far larger biotechnology market.
Investors could consider direct shares though it is worth being aware of the high failure rates of drug testing and long periods of development (i.e. long periods where there may be no or a limited return on investment). This can mean it can take a long time to see returns (if at all).
Alternatively, managed investments can assist with diversification and the risks inherent in the biotechnology industry by spreading the investment over a larger number of companies. ETFS S&P Biotech ETF (ASX Code: CURE) offers broad and focused exposure to US biotechnology. All the US companies referenced in this article are included in this ETF.