Last year was an active period in cancer research investment. Over $47 billion was invested in healthcare in the first half of 2021 alone according to this Forbes report. That number was double the amount invested the year before.
What about biotech industry? In 2016, the biotech industry was worth around $369.62 billion; analysts predict that it will double by 2025. Surprisingly, unlike other industries coping with Covid-19, by technology is experiencing a new interest backed by hefty investments. According to this McKinsey report, biotechnology is outperforming the pharmaceutical industry as well as many technology companies: $3 billion were invested globally in biotech in January 2021. The biotech model has been disrupting pharma for decades – and it’s finally bearing real fruit.
Biotechnology and pharmaceutical companies are often intermixed but there is a small difference: biotech companies research and develop medicines through bioengineered living cells (like bacteria and enzymes) whereas pharmaceutical companies traditionally deal with chemicals, also known as small molecular entities and often have manufacturing as well as commercialization capabilities. Generally, pharmaceutical companies are global and massive as a result of significant M&A activity during their history. In contrast, biotech companies can be as small as a few people innovating on a rented co-working lab bench. All that it takes is ONE bright idea … and a fair bit of capital.
Biotech investments are highly risky. That’s not to say that other investments don’t pose any risk, but, given the high likelihood of failure and complexity of human biology, investors are infamously about biotechs. However, the massive success of Moderna and BioNTech (who teamed up with Pfizer) to solve one of the greatest biological challenges of our time with COVID vaccines, have softened some of that skepticism and fear.
By September 2021, just in a span of less than 12 months, $30 billion of venture capital funding was pumped into various biotechnology companies. The US Food and Drug Administration has been doing its part honoring its commitment to “keep up” and did so by approving a record-breaking 50+ new drugs in 2021. That eye-popping metric didn’t go unnoticed by investors.
Biotechnology is changing the way cancer is treated
Approximately 9.6 million people around the world die of cancer each year. On a global scale with a population approaching eight billion, that doesn’t seem like a lot until you’re the one diagnosed. Or until you watch your loved one suffer through the toxicity and horror of chemotherapy only to succumb to a metastasis event.
Biotechnology enables oncologists to treat cancer at the molecular level and with a highly individualistic approach. That’s called “personalized medicine” which is becoming increasingly accessible and affordable given advances in our understanding of genetics. Customized treatments can be formulated using artificial intelligence, immunotherapies, and by manipulating small molecules that can be used to target specific mutations in the cancer’s DNA. Not to mention biomarkers which enable high-specificity when it comes to identifying potential utility in patient cohorts and measuring treatment success. That’s one of the key reasons we partners with Imagion Biosystems.
Does cancer research drive investment in biotech companies? It certainly does. One of the world’s largest investment firms, Blackstone, is making strategic investments in a biotech company, Autolus Therapeutics, with up to $250 million to develop cell-based cancer treatment. They have already committed $50 million to work on an experimental leukemia therapy known as obe-cel.
Precautions to take before investing in biotech stocks
Fiscal prudence is necessary here. And the SEC mandates a clear articulation of the risks with forward-looking statements. Plus, ethics demand honest and transparent communication.
With pioneering research being done in the field of cancer and the pandemic, there is a renewed interest in the biotech sector. Not only in terms of new treatment modalities and medicines available to the patients, but also in terms of portfolio investments. It all depends on your appetite for risk and willingness to go the distance with a long-term investment plan: that’s the key to putting money into biotech stocks.
The dynamics of the biotech stocks aren’t much different from other businesses, but the returns may be slow to come. An average biomedical technology takes 10 years until it realizes any potential ROI.
Keep in mind that success is highly variable and depends on numerous factors related to the research and experiment complexity, experience of the team, and so on. And the correlation with funding cannot be understated. It may take years of experimenting, researching, testing, observing, and then more of the same, plus all the perturbations associated with snags in approvals and manufacturing that happen more frequently than not – despite excellent planning. again testing, getting approvals, and then mass manufacturing and introducing the innovation into the market. Only then the profits begin to come in; if at all.
But if they do, they can be phenomenal. Consider for example the recent Covid-19 vaccinations by Pfizer and Moderna. The vaccines were discovered, tested, manufactured and mass distributed in record time, bringing windfall profits to the companies, and consequently, to the investors.
Before investing, consider the factors below.
What is the company developing?
In the times of the coronavirus outbreak, the priority for almost every biotech company is the detection of the illness and the vaccination that is effective for diverse variants hitting various populations across the globe. At the time of writing, the latest Covid variant is NeoCov which may have a significant impact in the coming days. The virus is mutating with great speed and all major biotech companies are in overdrive to combat its spread no matter what variant.
Before investing, consider which companies are doing pioneering work in making the vaccine and then make your investment decision accordingly. Biotech companies doing heavy research in cancer also have good potential with all hands working towards a breakthrough.
Chances of being acquired by a big company
Investors capture the windfall when their portfolio company is acquired. Occasionally, biotechs with lots of potential are purchased to either enhance a research strategy or to be shelved in an effort to squelch competition.
Alternative indications can amplify the potential for increased revenues. Cancer treatments are typically developed with a particular type of cancer in mind. However, despite the identification of more than 100 types of cancer, many are susceptible to similar mechanisms of action when it comes to drug treatment. That means that a cancer drug designed for a single indication may later be expanded to include others, like other forms of cancer. For example, breast, prostrate, ovary, etc.
To sum up, do your research. Invest for the long-haul. Keep an eye on the field you’ve invested in and monitor the progress by reading the shareholder reports. The world has no shortage of great ideas – it’s a matter of funding the best bets. There’s money out there – and interest – which suggests that the future of cancer treatment looks bright.
If you’re interested in owning stocks in Global Cancer Technology – now’s your chance with our Reg CF offer of $2/share. Learn more here: https://netcapital.com/companies/gct
*NOTE: investing in biotechnology stocks is considered high-risk