Is It Too Late to Invest in Biotech?

It's increasingly difficult to invest in the biotech sector as there was a decent selection of low risk, relatively large companies around.

A higher level of competition means that the amount of time that smaller firms that dominate the space have in order to generate profit has become more limited, complicating things for investors.

A decade ago, large firms were creating drugs with massive potential, which was then followed by a second wave. Now, however, these companies have matured and have become the new establishment and begun to stagnate.

Keeping in mind the fact that it's mainly smaller companies that will provide interesting growth for investors, finding the companies that have new revolutions in the pipeline is a challenge for investors. In addition, the successful company may have as little as a year to enjoy the low competition environment that they had created.

One example of this is Vertex, that launched a Hepatitis C treatment that launched strongly but fell away sharply as Gilead launched a competing drug that improved upon it.

Patients have benefited from the breakneck pace of innovation in the sector driven by the ease of development of new products, however, investors have found it much more difficult to navigate the new environment.

Prioritisation of certain disease areas is one way that investors can keep on top of the sector as it's not possible to talk to every company in the sector. Diabetes for example, is one area of high competition that would produce short profit time frames for the companies involved. Therefore it's best to look at areas with low competition.

A focus on a particular tumour or disease stage will often insulate a company from excessive competition due to barriers to entry caused by the approval process.

Biotech should continue to grow well in the long term, however the sector is more complicated than ever for investors.

Your financial adviser can help to make sure you are sufficiently diversified and in the right investments that will help you to achieve your long term goals.

The value of investments and income from them may go down as well as up and you may not get back the original amount invested.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.

Past performance is not a reliable indicator of future performance.

Back