In the past four years there has been a growing interest in investment opportunities into biotechnology companies. Since 2011, many young biotech companies have reached $1 billion or higher valuation in market prices. So far this year has also been very successful for biotech’s. Almost half of the initial public offering (IPO) companies in the past couple of months have been development-stage biotech companies (http://ow.ly/uVy6Y).
There are a few reasons for investors growing interest in biotech companies. Drug testing is now commonplace and before going public many biotech companies have moved drugs into clinical studies, dramatically improving their risk profiles for investors. Newly developing biotech companies also benefit from a faster regulatory process. In addition, advanced technologies have enabled them to develop drugs for patients with specific genetic markers, leading to smaller and cheaper clinical studies, and faster approval from Food and Drug Administration (FDA). Many biotech companies have found their niche for targeting rare diseases and have been very successful in developing orphan drugs. For example, BioMarin has developed a drug Vimzim for treating Morquio A syndrome. Since there are no other treatment options for this rare disorder, Vimzim is expected to bring high revenues because of its high success rate for treating this rare disorder.
Many previously small scale biotech companies such as Gilead Sciences and Celgene have become very successful and now are worth more that some large pharmaceutical companies. Gilead, a developer of hepatitis C drug, is predicted to grow earnings more than 30% annually for the next few years. Celgene, company focused on development of cancer and immune-inflammatory-related drugs, is expected for long-term earnings to grow nearly 25% a year on average. These are very encouraging numbers considering much slower growth in other sectors.
By Ketrija Touw