Technology is not just transforming the way we work and live, it is also saving lives and changing how we treat diseases. The biotechnology industry may be appealing from a social and moral perspective, but it is also trending for future growth.
What is biotechnology?
Biotechnology is a sub-industry of the healthcare sector and 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.
This industry has hit the headlines during the COVID-19 pandemic, with companies like Moderna and Gilead part of the race to find effective vaccines and treatments.
Why consider investing in global biotechnology?
A growth industry backed by demand from an increasing population (and the trend of an aging population)
a. Biotechnology is predicted to be valued at more than US$729bn by 2025, compared to US$295bn today.
b. The industry will benefit from increased spending in healthcare. The US, for example, is expected to average 5.4% annual increases in national health spending through to 2028.
Diversification in your portfolio
a. Biotechnology in the US is valued at approximately 14.2x the Australian industry.
b. Biotechnology can be lucrative but is also high risk, so spreading internationally across a number of companies can assist in managing these risks.
The chance to invest in something ‘bigger’, incorporating social themes into your portfolio
a. The opportunity to be a backer for more efficient future health treatments, a social good with the potential to generate growth.
How to invest in biotechnology?
You could consider direct shares or managed options. Direct shares may be a riskier option due to the high failure rates of drug testing and long periods of development. Managed options such as ETFS S&P Biotech ETF (ASX code: CURE) may offer broader exposure across a number of companies.
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