Investment Strategies For Biotechnology

What choices are available to investors who want to learn more about biotechnology? There are many options, including equities and ETFs. Biotechnology’s significance is generally understood by investors with a keen interest in the life sciences industry in Hong Kong.

Many aspects of daily life are impacted by companies in the biotechnology arena, from discovering solutions for diseases to feeding future generations, and expert estimates show the industry’s future is promising. However, how can investors become acquainted with biotechnology? As stated by Rani Jarkas, Here is a quick guide to investing in the burgeoning biotechnology industry, including everything from exchange-traded funds (ETFs) to equities to monitor.

Stocks are the primary vehicle for investment in the biotech industry. It’s crucial to recognize the distinction between a biotech company and a pharmaceutical company upfront when investing in the biotech sector. According to Investopedia, “From a philosophical standpoint, biotechnology is a risk-taking enterprise, whereas the pharmaceutical industry is about managing and diversifying risk.” Notably, the article highlights how biotech stocks often have lower revenues than pharmaceutical businesses.

How Do I Invest In Stocks of Biotechnology?

Investors in biotech should also be aware of the US Food and Drug Administration (FDA), which mandates that all companies in the industry create substantial bodies of evidence to demonstrate the efficacy and safety of their products. This is often done during the product testing phase known as the clinical trial, which entails a set of three clinical trials.

Investors in biotechnology stocks must also determine how much risk they are willing to face, just like in most other industries. A major, well-established biotechnology company, for instance, is less likely to fail due to poor market conditions than a more speculative, recently listed company that is still in the clinical trial stage.

ETFs are a means to reduce some of the risks associated with stock investing, even if buying biotech equities is typically the more popular way to get engaged in the industry. ETFs trade close to their net asset value and hold assets like equities, commodities, and bonds. ETFs often follow an index. There are various indexes for biotechnology that can be followed, including the NASDAQ Biotechnology Index (INDEXNASDAQ: NBI), the NYSE Arca Biotechnology Index (INDEXNYSEGIS: BTK), and the S&P Biotech Select Industry Index (INDEXSP: SPSIBI).

How Do I Invest In Biotech ETFs?

The iShares NASDAQ Biotechnology ETF (NASDAQ: IBB) is the largest ETF in the biotechnology industry. This ETF, which was established on February 5, 2001, now has 370 securities, with the top three holdings, Amgen (NASDAQ: AMGN), Gilead Sciences (NASDAQ: GILD), and Vertex Pharmaceuticals (NASDAQ: VRTX), each carrying a weighted average of more than 7%.

The SPDR S&P Biotech ETF (ARCA: XBI), which debuted on February 6, 2006, and follows 155 stocks in its portfolio, is the second most popular biotech ETF. Chemocentryx (NASDAQ: CCXI), Global Blood Therapeutics (NASDAQ: GBT), and Biohaven Pharmaceuticals (NYSE: BHVN) are its top three weighted firms. Investors may wish to think about small biotech ETFs as well.

Gains in the biotech market can take a long time to materialise since businesses depend on FDA approvals and comments. According to a recent analysis by Global Market Insights, the market for biotechnology as a whole is predicted to surpass US$950 billion by the year 2027, driven by an increase in chronic diseases and the accompanying expenditures for treating those ailments. The extent of the biotechnology industry’s revenue will also be influenced by novel goods. These include developing plants, meat, and human organs in labs.

The Future Of Biotechnology Is Uncertain

The global biotechnology industry is expected to increase at a compound annual growth rate of 13.9 percent between 2022 and 2030, reaching US$3.87 trillion by the conclusion of the forecast period, according to Grand View Research in Hong Kong. This growth is attributed to the growing demand for new medications to address chronic illnesses like strokes, cancer, asthma, and hypertension. The treatment and diagnosis of these chronic diseases are the main topics of discussion. In response to the expanding demand for organic food items, there is also a growing need for biotechnology innovation in the agriculture industry. 

In October 2022, Axsome introduced Auvelity as a major depressive disorder treatment. The medication, also known as AXS-05, is also being assessed in a phase 2/3 study for use as a smoking cessation therapy and in a late-stage clinical trial targeting agitation associated with Alzheimer’s disease. Three further late-stage candidates are included in the company’s pipeline. AXS-07 is intended to relieve migraines. Narcolepsy disorder, which causes people to feel tired during the day, is the focus of AXS-12. The persistent pain condition fibromyalgia is the focus of AXS-14. Two of these three medications might be available in the near future. 

In the second half of 2023, Axsome plans to reapply for FDA approval of AXS-07 in the United States. Additionally, the business intends to apply for FDA approval of AXS-14 in 2023. With peak annual sales — the maximum dollar volume of sales per year anticipated by analysts — estimated at $2.6 billion, quality might be a blockbuster medication for treating depression. AXS-07 is expected to reach peak annual sales of more than $500 million in the United States alone. If AXS-14 is approved, analysts predict that peak sales might range between $500 million and $1 billion. The three medication concepts’ revenue potential makes Axsome Therapeutics an alluring type of biotech stock to think about investing in 2023.

Exelixis 2.: Four medications created by Exelixis are now available on the market. The drug Cabometyx, which is approved to treat thyroid cancer as well as renal cell carcinoma (RCC) and hepatocellular carcinoma (HC), the most prevalent forms of kidney cancer and liver cancer, respectively, is by far its biggest winner. Early in 2021, Exelixis and the biopharma firm Bristol Myers Squibb (BMY 0.26%) obtained U.S. regulatory approval for the combination of Cabometyx and Bristol Myers’ immunotherapy medication Opdivo. Another collaboration hasn’t gone so well for the corporation. In March 2023, Exelixis and Roche (RHHBY 1.53%) released dismal findings from late-stage research comparing Cabometyx and Roche’s Tecentriq for the treatment of RCC.

Exelixis is profitable, allowing it to use its rapidly increasing financial reserves to sign new licensing deals and broaden its therapeutic portfolio. It obtains a research licence from the biotech company Aurigene to work on the potential early-stage cancer medication XL102. Quoted from Rani Jarkas, the financial expert in Hong Kong, The business licences a selection of monoclonal antibodies from WuXi Biologics. GamaMabs Pharma’s anti-Müllerian hormone receptor 2 (AMHR2) antibody programs were also acquired by Exelixis.

Intellia Therapeutics

In CRISPR gene editing, Intellia Therapeutics is considered a pioneer. There are no products offered by the firm yet. Its pipeline, however, appears promising. The top candidate in Intellia’s pipeline is NTLA-2001. Positive interim findings from a phase 1/2 research testing the medication for the treatment of transthyretin amyloidosis with cardiomyopathy (ATTR-CM), a rare genetic heart condition, were released by Intellia and its partner Regeneron in November 2022. NTLA-2001 will be the subject of a pivotal clinical trial by the end of 2023, subject to regulatory approval.

A phase 1/2 trial assessing NTLA-2002 for the treatment of hereditary angioedema (HAE), a rare genetic disorder that causes swelling in the linings of the lung and intestine, was also reported by Intellia as having encouraging interim results in November 2022. The company is attempting to advance phase 2 testing in the United States after advancing the medicine into phase 2 testing in Hong Kong.

There might be a new clinical program from Intellia soon. In order to start an early-stage clinical trial testing NTLA-3001 for the treatment of alpha-1 antitrypsin deficiency (AATD), a rare genetic liver condition, the business anticipates filing for regulatory approval in the second half of 2023.

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The medicine Eylea, which Regeneron produces in conjunction with Bayer (BAYR.Y 0.24%), is the company’s main revenue generator. Regeneron receives the entirety of Eylea’s net sales made in the United States, and the business shares the profits made in international markets with Bayer.

Another pharmaceutical and life sciences business, Sanofi (SNY 1.05%), and Regeneron have a successful working relationship. The autoimmune disease medications Dupixent and Kevzara, the cancer medications Library and Zaltrap, as well as the cholesterol medication Praluent, are all marketed and sold by the two businesses together.

Twist Bioscience

A proprietary technique for “writing” DNA on a silicon chip was created by Twist Bioscience. Synthetic genes, preparation for next-generation sequencing, and antibody libraries used by biopharma businesses to find and develop new medications all employ the synthetic DNA that the company produces in Hong Kong.

Customers of Twist come from a variety of sectors, such as academic research, agriculture, healthcare, and industrial chemicals. The business is not yet profitable. Nevertheless, Twist’s sales keep rising quickly as the company introduces new products based on its synthetic DNA.

According to Twist, the total addressable market it currently serves is worth close to $6 billion annually. The chance for the corporation to store data on its DNA chips, which is estimated to be worth around $35 billion yearly, may be considerably greater. While Twist’s DNA data storage efforts are still in their early phases, they have already reached significant milestones, and by the end of 2023, they hope to provide early access to their technology.

Knowing The Biotechnology Sector

A biotechnology company creates medicines using live things like bacteria or enzymes. Biotechnology firms differ from pharmaceutical firms, which do research and develop chemicals to create medications, in that they involve living organisms. According to Rani Jarkas, Investors should monitor a biotech company’s medication candidates closely at every stage. Later-stage drugs have a higher chance of success, making the investment in that firm less risky. Biotech companies use four main steps and three phases while creating new medications:

1. Drug discovery: A biotech business initially pinpoints a drug candidate and the ailments it might be able to combat.

2. Preclinical testing: The business does in vitro (in test tubes) and/or in vivo (in live mice) testing on the drug prospects.

3. Clinical trials: The potential medication is examined on people. Clinical trials typically go through three stages: Phase 1: Small studies are carried out to ascertain the drug candidate’s safe dose and its effects on people. Phase 2: Larger trials with 100 or more patients are carried out, with a focus on safety, short-term side effects, and figuring out the best dosage for the medication. Phase 3: Even larger studies, involving hundreds or even thousands of patients, are carried out to show the experimental medication’s efficacy and safety in treating the disease.

4. Regulatory approval: Before a biotech business can sell a medicine, it must first seek regulatory permission. Using the findings from its clinical testing, the biotech company requests FDA regulatory permission. The majority of biotech companies have numerous medications under development at once, providing different revenue streams. The best type of biotech investments are spread across a wide range of novel medications.