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Biotechnology stocks: Popular biotechnology companies to invest in
Discover how to invest in the biotechnology industry, plus some popular stock considerations with their latest share price.
Companies which produce medicines have always been newsworthy, but since the Covid pandemic begun in 2020 the rush to produce vaccines has been headline news.
Not to be confused with pharmaceutical stocks, whose drugs generally have a chemical basis, the medicines made by biotechnology (biotech) companies are derived from living organisms.
One such company leading the way on the Covid front has been Moderna. At the same time, stories like the Pfizer and BioNTech partnership helped highlight the biotech industry’s significant impact in advancing healthcare. Private and public biotech funding, including global venture capital investments, deals, and IPOs, reached all-time highs in 2020.
However, for every success story, there are multiple failures. Biotech stocks have the potential for significant investment gains if a product is deemed effective and safe. However, they also come with risks that some products under development may never make it to market.
UK biotechnology stocks
UK-based biotech companies raised $900m in 2021 from international investors, underlining the country’s status as a biotech powerhouse. Despite a brief downturn at the start of 2020, the average growth in UK biotechs’ share price was 32%, surpassing European biotechs (22%) and US biotechs (2%), and only trailing China’s 99%.
Here are some of the companies leading the way.
Based in Oxfordshire, Immunocore is a late-stage biotech company which researches and develops biological drugs using a novel class of T cell receptor (TCR) bispecific immunotherapies designed to treat a broad range of diseases, including cancer, infectious and autoimmune disease. Despite being based in the UK, the company opted to raise $100m through a listing on New York’s Nasdaq exchange.
Altrincham-based Compass Pathways is developing psychedelic treatments against clinical depression based on psilocybin, the main ingredient found in magic mushrooms. In 2021, the company completed a phase IIb study that showed a single dose of its treatment is effective in patients with treatment-resistant depression. Compass also launched a phase II trial testing the effects of this treatment in patients with post-traumatic stress disorder. While based in the UK, Compass Pathways is listed on the Nasdaq stock exchange.
PureTech Health is a clinical-stage biotherapeutics company dedicated to discovering, developing and commercialising highly differentiated medicines for devastating diseases, including inflammatory, fibrotic and immunological conditions, intractable cancers, lymphatic and gastrointestinal diseases and neurological and neuropsychological disorders, among others. Founded in 2005 by US entrepreneur Daphne Zohar, while based in the US in 2005 the company was the subject of an initial public offering on the London Stock Exchange (LSE). PureTech is listed on the LSE and is a constituent of the FTSE 250 Index.
Investing in global biotech stocks from the UK
There are biotech companies all over the world, so you don’t have to stick with stocks closer to home if you don’t want to. Investing in some global stocks means that you can diversify your portfolio, but you can also encounter foreign exchange fees and fluctuations.
Gilead Sciences is a US biopharmaceutical company that focuses on producing antiviral solutions for illnesses that are often overlooked by other healthcare companies. This includes treatment for HIV, liver disease and other inflammatory diseases that are similar to influenza. Gilead is listed on the Nasdaq Stock Exchange and is a component of the Nasdaq 100, S&P 100 and S&P 500 indices.
Novavax is an American biotech company that develops vaccines to counter serious infectious diseases. It is currently developing a Covid-19 vaccine candidate that it calls NVX-CoV2373. Its vaccine candidate uses a single protein molecule, known as a protein subunit, to spur an immune response against the novel coronavirus. In early 2021 it reported positive results from a late-stage study of the experimental vaccine that was conducted in the UK. Novavax is listed on the Nasdaq and is a component of the Russell 2000 Index.
Based in Germany, BioNTech (short for Biopharmaceutical New Technologies) develops and manufactures active immunotherapies for patient-specific approaches to the treatment of diseases. In 2020 it partnered with Pfizer for testing and logistics, developed the RNA vaccine BNT162b2 for preventing Covid-19 infections. On 2 December, 2020, this was the first mRNA vaccine ever authorised, after authorisation was granted by the UK government for BNT162b2 vaccinations within the UK. Days later the vaccine also received an emergency approval in the US, Canada and Switzerland. BioNTech is listed on the Nasdaq.
Why invest in biotechnology stocks?
Ailsa Craig, manager the International Biotechnology Trust – a fund of global biotech companies – says investing in biotech is a way to support a highly innovative sector that is addressing high unmet medical needs.
“The pace of innovation is increasing, as is demand for biotech’s products, and this leads to a dynamic, growth sector that offers investors the potential opportunity for good returns while simultaneously creating a positive social impact,” she says.
How to invest in biotechnology stocks
- Choose stocks to invest in. You can check out some biotechnology stocks above and find out more about them.
- Choose an investment platform. You’ll need one that lets you invest in the stock exchange that your chosen stocks are listed on.
- Sign up and fund your account. You might need to wait for your account to be verified and for your funds to hit the account before you can begin.
- Find your chosen stock. You can search its name or ticker.
- Review and buy. It’s as easy as that!
The risks of biotechnology stocks
Along with the chance to make significant gains comes the potential for large losses. Some companies in the biotech sector are relatively small, with no more than two or three products. As a result, news releases concerning clinical trials and approval from the Food and Drug Administration (FDA) are deciding factors in the direction of the company’s stock. Biotech companies can live and die by these announcements.
Additionally, given the complexity of biotechnology, investors often experience challenges in determining a product’s effectiveness and chances of success. It can also be challenging to research a company’s products for those without a medical or science background.
For those willing to do their homework, investing in biotech companies can reap huge rewards. However, the volatile nature of biotech stocks is a double-edged sword, meaning these stocks can produce enormous gains but also significant losses if a drug fails to perform or come to market.
There are four major steps biotech companies have to follow to develop new drugs; drug discovery, preclinical testing, clinical testing and regulatory approval. Investors should also pay close attention to which phase each of a biotech company’s drug candidates is in. Drugs in later phases are more likely to succeed, making investing in that company less risky.
Frequently asked questions
No. Biotechnology and pharmaceutical companies both produce medicines, but the medicines made by biotechnology companies are derived from living organisms while those made by pharmaceutical companies generally have a chemical basis.
Yes. The volatile nature of biotech stocks means that while they can produce enormous gains, they can also be subject to significant losses if a drug fails to perform or come to market.
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