Whether it be the Philosopher’s Stone, the Fountain of Youth, or the Tree of Life, for millennia, people dreamed of eluding death and finding eternity.
And although the inevitable has yet to be conquered (as far as we know), today, our advancements in technology pave the way for a more prosperous future.
While a relatively new concept, biotechnology is booming and becoming a key component in the evolution of our species.
As demonstrated by its abilities during the Covid-19 pandemic, biotech played a crucial role in our ability to produce vaccinations at a record-breaking pace.
Under normal circumstances, the development of a regulatory-approved vaccine often lasts between 10 to 15 years (historyofvaccines.org).
But with focused efforts and undisputed backing from government entities, we (Pfizer) were able to create an effective vaccine (95% efficacy) in less than a year; by October 2021, healthcare workers delivered more than 7 billion Covid-19 vaccines globally.
And this is only one example.
At this moment, biotech includes genome mapping, precision medicine, DNA sequencing, gene editing, agricultural adaptations, bioplastic technology, and more.
With so many discoveries happening every day, the time to invest in these revolutionary companies is now!
But we won’t just pitch you any Biotech stock.
In this article, we breakdown:
- The Biotech Industry Outlook
- Pros and Cons of Biotechnology
- Plus, the Five Best Small-Cap Biotech Stocks in 2022
Continue reading to learn more!
The Biotech Industry at a Glance
Biotechnology is building a more efficient and sustainable future for us all.
And with remarkable technologies like artificial intelligence coming into play, and accelerating the process, the industry has no limits.
By 2030, the global biotechnology market size is expected to reach $3.880 trillion, with a CAGR of 13.9% over the forecast period. (Grand View Research)
As of 2021, a total of 192 biotech unicorns exist in the sector, with 28 new unicorns being created in the most recent calendar year; a unicorn is a privately held company with a valuation of over $1 billion. (Grand View Research)
The health application segment held the largest market share at 48.7% in 2021, while the fastest growing segment is bioinformatics, which is expected to grow at a CAGR of 21.5% from 2022 to 2030. (BioSpace)
Regionally, North America accounts for the largest market share at 44.5% in 2021, largely in part due to several factors like the presence of key players, extensive R&D, and high healthcare expenditure; the Asian Pacific is expected to grow the fastest at a CAGR of 16.9% from 2022 to 2030. (BioSpace)
As of 2021, the top five biotech crop-growing countries accounted for 174.5 million hectares of planted biotech crops. (SeedScientific)
Three Reasons to be Bullish on Biotech Stocks
Patents
Patents are a key competitive advantage for biotech companies because they guarantee protection against competitors entering the market, thus giving them a monopoly or duopoly over certain medicines.
In the biotech industry, patents may last up to 20 years, meaning that a business’s cash flows and profit margins are undisturbed for an extended period.
Capital Investment
The Covid-19 pandemic provided a major catalyst for the biotech industry with capital investment increasing from $27 billion in 2019 to over $67 billion in 2021; that is an increase of 148.15% in two years.
While the effects of Covid-19 are slowing, attention toward virus and disease prevention is still at an all-time high given how detrimental the pandemic was to our global economy.
Artificial Intelligence
With major advancements in artificial intelligence technology in recent years, businesses and households alike are benefiting from an exponential growth in scientific discoveries within the biotech sector.
For example, Google’s AI team DeepMind created a deep learning algorithm that can determine the 3D structure of a protein in seconds when it used to take many months or years (see AlphaFold).
Accomplishments like this are merely one example of how our world is evolving, leading to longer, healthier, and more sustainable lives for us all.
Three Reasons to be Bearish on Biotech Stocks
Research & Development
The biotech industry is a highly competitive, heavily regulated industry where businesses compete to secure patents to protect against the competition.
As such, companies require major upfront investments to be successful, costing hundreds of millions of dollars, because, without them, they are unable to offer premium products to the market.
If a business is yet to be profitable, one should be very cautious since it is likely that a drug they’re producing will take years to be approved and may not even be accepted by the governing regulatory agencies; the drug research & approval process can last up to 12 years with only 1 in 1000 compounds ever making it to human testing. (Drugs.com)
Privacy
As biotechnology advances, a major ethical concern is the privacy of patient data and how it will be used in broader markets.
For example, will entities like an employer or insurance agency be granted access to health records for a more accurate assessment of their employees or candidates?
Misuses
Since the industry is at the forefront of technological advancement, there are few international laws in place to prevent private or public corporations from developing harmful products.
While the ethics of the biotech industry are still in their infancy, this may lead to businesses abusing their position and misusing the technology for ulterior motives.
A polarizing example of this is the Chinese scientist, He Jiankui, who created the first-ever “gene-edited” baby using CRISPR technology. (BBC)
The Five Best Small-Cap Biotech Stocks to add to Your Watchlist
Vir Biotechnology (Nasdaq: VIR)
- Market Cap: $2.503 billion USD
- Price: $18.87 USD
- YTD Change: -54.93%
- CEO: Dr. George A. Scangos Ph.D.
Overview: Vir Biotechnology is a commercial-stage immunology company looking to combat and rid the world of infectious diseases. By combining advanced insights and cutting-edge technology, they treat and prevent serious infectious diseases with recent and remarkable advances in immunology.
Vir’s Edge: Vir has a diverse pipeline of revenue-generating drugs ranging from Covid treatments to a Hepatitis B cure. With proven products like Xevudy, and its Covid-19 treatment, Vir has a long cash runway and is expected to endure any short-term market turmoil; in 2021 Vir generated over $1.077 billion in Net Income.
iTeos Therapeutics (Nasdaq: ITOS)
- Market Cap: $0.702 billion USD
- Price: $19.74 USD
- YTD Change: -57.60%
- CEO: Dr. Michel Detheux Ph.D.
Overview: iTeos Therapeutics is a clinical-stage biopharmaceutical company pioneering the development of next-generation immunotherapies for people living with cancer.
iTeos’ Edge: The Company leverages its strategic alliances with Ludwig Cancer Research and Pfizer to develop expertise in tumor immunology, which has led to their clinical programs being ranked as best-in-class or first-in-class candidates.
Alector (Nasdaq: ALEC)
- Market Cap: $0.790 billion USD
- Price: $9.57 USD
- YTD Change: -53.70%
- CEO: Dr. Arnon Rosenthal Ph.D.
Overview: Alector is developing unique immuno-neurological therapies to improve and strengthen brain function, thus changing the course of brain diseases like dementia, Alzheimer’s, and Parkinson’s.
Alector’s Edge: Alector has a substantial IP portfolio including 20 issued patents, and over 450 patent applications, which gives them exclusive commercial rights across multiple pipelines.
AbCellera Biologics (Nasdaq: ABCL)
- Market Cap: $2.834 billion USD
- Price: $9.94 USD
- YTD Change: -30.45%
- CEO: Dr. Carl L.G. Hansen Ph.D.
Overview: AbCellera Biologics is a full-stack, artificial intelligence-powered antibody discovery platform helping drug developers search, decode, and analyze natural immune systems to find antibodies that are then used to develop drugs. The company has backing and investments from renowned billionaires like Bill Gates and Peter Thiel.
AbCellera’s Edge: AbCellera uses real-world data extraction and lets its vast computer models and AI systems find optimized molecules for drug development thus saving time and money for its partners. This advantage has led to many lucrative partnerships with companies like Moderna, Pfizer, the Bill & Melinda Gates Foundation, and more!
REGENXBIO (Nasdaq: RGNX)
- Market Cap: $1.061 billion USD
- Price: $24.55 USD
- YTD Change: -24.95%
- CEO: Kenneth T. Mills
Overview: REGENXBIO is a leading clinical-stage biotech company seeking to improve lives through gene therapy by providing genes to cells with genetic defects. The Company’s product candidates are designed to create long-lasting effects that significantly alter the course of diseases.
REGENXBIO’s Edge: The Company’s powerful licensing model ensures that it locks in long-term cash flows without disruption, leading to a sustainable growth strategy. For example, its deal AveXis/Novartis will generate over $100 million in revenues in the coming years; REGENXBIO has 20+ licensing deals similar to this.
Disclosure/Disclaimer:
We are not brokers, investment or financial advisers, and you should not rely on the information herein as investment advice. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Please do your own research before investing, including reading the companies’ public filings, press releases, and risk disclosures. Information contained in this profile was provided by the company, extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your own research.
Copyright © 2022 Edge Investments, All rights reserved.