The field of biotechnology has been very popular with investors since the early 2000s. However, it was during the outbreak of coronavirus infection in the world that the biotechnological sector received a truly second wind. Huge investments began to be briskly invested in healthcare in general and biopharmaceuticals in particular. According to Kedar Karkare, an expert at CB Insights, a private company with a business analytics platform, last year was a record year for the healthcare sector. At least $42 billion was invested in biopharmaceutical companies in 2020, which is 46% more than in 2019. It is noteworthy that the number of transactions was only 4% higher. This means that huge funds were spent on last year's deals.
The specificity of biotech companies is the use of living organisms, such as bacteria or enzymes, as well as protein macromolecules in the production of medicines, including vaccines. Biotechnology includes genetic engineering (research and modification of genes of plants and other living organisms, including humans), cloning, bionics (collection of data on bioprocesses in the body and their further digitization for more detailed analysis) with its study of the human nervous system and animals, cryonics (that is, freezing the body to preserve cells) and, of course, pharmacology. And every year there are more and more companies that have this kind of breakthrough technologies, many of them go to IPO.
According to Brad Loncar, CEO of Loncar Investments, in the light of recent global events, the desire of investors to enter this area is increasing many times over. And even those who previously believed only in technology and invested in them as much as possible, today focus their attention on biotechnological innovations.
Therefore, it is not surprising that pharmaceutical companies producing vaccines such as Moderna, BioNTech, or Novavax are at their peak of popularity today. In addition to the field of vaccine production, startups specializing in the development of tests to detect the virus are also seen as highly sought after and successful. These are Ellume, Everlywell, Cue Biopharma, and many others. Kedar Karkare rightfully called biotechnology the real superheroes of our time, which is why investors of large and smaller caliber are very interested in them.
It is worth recognizing that it is the US pharmaceutical companies that still occupy a leading position in the world, although the European market also has quite high growth prospects.
Despite the obvious attractiveness of the field of biopharmaceuticals, it is still necessary to understand that when investing in such an industry, huge risks are not excluded. Investments in biotechnology are widely recognized as the most volatile share in an investor's portfolio. Indeed, before the developed drug is released into mass production, it must undergo preclinical tests, that is, testing in test tubes or on animals (for example, mice). This is followed by the phase of clinical trials, that is, testing on humans. If the trials of the developed drug show significant side effects, potential risks outweighing its benefits, or their ineffectiveness/inefficiency in the fight against the disease is revealed, then the decrease in the capitalization of this company will be 50%. But if the drug still successfully passed all the phases of testing and was eventually approved, and later launched into mass production, then investing in it will bring the investor hundreds of percent of the profit.