Lu Rahman looks at the role of the biotech sector in the development of new therapeutics and why this industry is a vital element in drug discovery
For reasons we would clearly have preferred not to happen, the global spotlight has – understandably – been on the biotech sector since early 2020. Throughout the pandemic, through the economic uncertainty and upheaval, this has been the sector that has endured and ultimately, come good as that much-desired vaccine has thankfully edged closer.
While BioNTech, the European biotech company has featured heavily in recent weeks for its COVID-19 vaccine collaboration with Pfizer, US biotech specialist Moderna, also announced in December that the FDA had authorised the emergency use of mRNA-1273, its vaccine against COVID-19 in individuals 18 years of age or older. The company, which was founded in 2010, has been pioneering a new class of medicines made from mRNA and has been building an mRNA technology platform, with the infrastructure to accelerate drug discovery and early development. Its pipeline includes development candidates for mRNA-based vaccines and therapies spanning a range of therapeutic areas.
Since its beginnings in the 1970s, the biotech sector has grown considerably offering innovation and opportunity. The market has become increasingly attractive to investors. This is hardly surprising when we look at the last year and how crucial this market has become to the health and wellbeing of the entire globe. As other industries have been hit hard by the pandemic, this sector has not just held steady but shown its pivotal role in tackling COVID-19.
According to Global Newswire, the global biotech market is expected to grow from $447.92 billion (£328 billion) in 2019 and to reach $833.34 billion (£609 billion) by 2027, growing at a CAGR of 7.02% during the forecast period 2020-2027. It cites “the growing prevalence of chronic disorders” for the increase in need for drug discovery, “which in turn has resulted in the market growth of the biotechnology market.”
Looking at the US sector in particular, Ibis World’s figures put the US biotech industry at a value of $105.3 billion (£77 billion) in 2021 with a growth rate of 3.7%.
In their article, Biotech sector remains resilient amid pandemic, Julian Stanier and Sunjay Malhotra, Pinsent Masons, highlight the attention this market receives: “When news is released by a biotech company with regards to data, or successful progress with clinical trials, it is invariably received positively and is accompanied by an exponential jump in the share price of those companies.”
They note: “While the share price of companies in the retail, hospitality, aviation and related industries has faltered due to the impact of COVID-19, those of biopharma companies, and in particular biotechs, who tend to be more specialised in particular therapy areas or technologies than big pharma, have been buoyant.”
In the US, the biotech sector has shown particular strength. Focussed primarily on the east and west coasts, the market benefits from highly skilled researchers and world-leading experts boosted by solid infrastructure, technology providers and perhaps most importantly, a strong desire to innovate. Of course, the landscape is not always perfect – while biotech companies seeking novel therapeutics and are undertaking extensive clinical research, significant investment is required to get a drug to market and given that around 90% of new drugs fail to achieve approval, the risks are evident for investors. Of course, for the remaining 10% of drugs that do make it to market, the rewards are plain to see. Some suggest that for the risk to be reduced, investors should look at biotechs that have already reached the Phase II stage.
Disease area is also a consideration. Hitting on a drug that makes it through the approval process is one thing. While opportunities are plentiful in cancer treatment, for example, the range of therapeutics already in existence creates competition and creates questions around proving improved efficacy when it comes to the approval process. One area that can offer opportunity is the orphan drug market – therapeutics for diseases that affect less than 200,000 people. This can be a lucrative route to pursue, boosted by the FDA’s The Orphan Drug Act which offers financial incentives to those drugs and biologics designated as orphan drugs.1
Writing for Investopedia, Nathan Reiff selects the fastest growing biotech stocks2. These are BioDelivery Sciences International which designs and manufactures vaccines, drug products, and pharmaceuticals; BioMarin Pharmaceutical, a developer of therapeutic enzyme products used in treatments for serious burns and certain lysosomal storage diseases, and Vertex Pharmaceuticals which specialises in drugs for the treatment of cancer, autoimmune disease, neurological disorders, cystic fibrosis, and inflammatory bowel disease. As a whole they offer a range of therapeutics in a variety of areas.
Innovation and expertise are at the heart of the biotech sector in both the US and on a global level. Its importance in the development of new drugs is evident as we head into 2021. And of course, with that comes opportunity for both biotech businesses and investors alike.
Volume 22, Issue 1 – Winter 2020/2021
References
1 https://www.fda.gov/industry/orphan-products-development-events/drug-development-very-rare-diseases
2 https://www.investopedia.com/investing/biotech-stocks/
