Several new modalities illustrate the profound impact biologics are having on the industry.
For instance, mRNA vaccines have revolutionised our approach to infectious diseases, as seen with the rapid development of Covid-19 vaccines by Moderna and BioNTech.
Gene therapies have made significant strides in treating previously incurable genetic disorders while Monoclonal antibodies are playing a pivotal role in treatments in oncology, providing targeted therapy for various cancers with substantial success rates.
These examples underscore the dynamic and rapidly evolving nature of biologics, highlighting the sector’s potential for groundbreaking therapies and substantial investment opportunities.
We look beyond short-term market moves and see significant long-term investment potential among the companies that are involved in the making of biologic drugs.
2) Sector rebounding as headwinds abate
While the shift towards biologic drug production has been in play for a decade, the sector was hit by a spate of headwinds in 2023.
Higher interest rates led to a drying up of biotech funding, recession in China led to a collapse in demand there, IRA regulation changes in the US led to a pause in big pharma spending, and the post-Covid spending ‘hangover’ was still evident.
All of these headwinds are now ameliorating:
- Biotech funding was back to record levels in H1 2024.
- China is providing stimulus for the sector. It forms a core of the latest 5-year plan and a national strategic priority.
- Covid headwinds have now fully faded away.
- Big pharma is spending again as the impacts of IRA are now clearer.
- The Biosecure Act is a clear positive for Western players in the value chain as well.
With clarity on these issues emerging, the challenges are subsiding and the sector is rebounding.
3) A ‘Cambrian explosion’ in drug R&D
Over the past decade advances in computing power, technology and our understanding of biology have combined to open up entirely new realms for drug research.
This has led to a ‘Cambrian explosion’ in early-stage drug discovery and the increased use of biologics to treat a variety of medical illnesses and conditions.
Unlike conventional or ‘small-molecule’ drugs, biologics can target very specific parts of the body, like certain cells or proteins. This means they can be very precise in how they treat diseases.
This precision of course requires more advanced tools and equipment – providing the companies that offer access to them with a healthy revenue pipeline.
4) Positive societal outcomes
The Life Sciences sector aligns well with the UN’s Sustainable Development Goals.
In fact, an investment into CDMOs and equipment manufacturers plays a crucial role in reducing drug discovery and delivery costs, aligning with UN Sustainable Development Goal 3: Good Health and Well-being.
While the Covid-19 pandemic and other crises have impeded progress in tackling treatable illnesses like tuberculosis and malaria, diagnostic companies are using their tools to tackle these public health challenges directly which aids the UN’s goal of promoting ‘healthy lives for all’.
Biologics have already had a huge impact on treatment for cancer, inflammatory and immunological disorders as well as infectious diseases. Research in the sector continues to advance understanding of all these areas as well as others such as gene therapy.
As the global population expands and ages, healthcare systems will be increasingly under pressure. We see biologics as a vital tool to address this challenge.
