The second-quarter earnings season has kickstarted but only a handful of biotech companies have reported so far. The current outlook is encouraging, driven by new drug approvals and positive pipeline updates in the first half. Increasing R&D spending on lucrative areas of obesity and rare diseases, among others, is a positive as well.
Companies in this volatile biotech industry continue to be in the spotlight as pharma/biotech goliaths are looking to bolster their product portfolios and pipelines through collaborations and buyouts amid generic competition for legacy drugs. Given the continuous need for innovative medical treatments, irrespective of the state of the economy, an investment in the biotech industry can be worth it, notwithstanding the inherent volatility and uncertain macroeconomic environment.
Biotech companies like Moderna, Inc. MRNA, Sarepta Therapeutics, Inc. SRPT, Halozyme Therapeutics, Inc. HALO, Krystal Biotech, Inc. KRYS and Axsome Therapeutics, Inc. AXSM are poised to outperform the volatile sector.
Industry Description
The Zacks Biomedical and Genetics industry includes biopharmaceutical and biotechnology companies that develop high-profile drugs using path-breaking technology. These biologically processed drugs, which address virology, neuroscience, metabolism and rare diseases, are manufactured using live organisms.
As technology becomes paramount to improving global health, the main goal of biotech companies is to use innovative technology to create breakthrough treatments in a quick time. Quite a few companies in this space are developing vaccines using modern technology. Given the dynamic and evolving nature of technology, the sector is perceived to be riskier than the large-cap pharma or drug industry.
4 Trends Shaping the Future of the Biotech Industry
Innovation, Execution Hold the Key: As only a few companies in this industry have approved drugs in their portfolio, the focus is primarily on the performance of high-profile drugs and pipeline development. Most companies spend millions and billions to create a drug with path-breaking technology, which results in significant research and development expenditure. Sometimes, modern treatments might come with side effects, which surface with time and the uptake might fail to meet the expectations. Hence, it takes several years before a biotech company turns profitable.
Additionally, successful commercialization is the key to higher drug uptake, as smaller biotechs generally lack the funds and expertise to reach the targeted population. This, in turn, prompts collaboration deals with either pharma or biotech bigwigs, wherein sales are shared or royalties are received.