Post #98: Bigger and better biotech

2020 has been the year when we have all used with unfortunate regularity terms such as antibodies, asymptomatic, placebo, vaccine and more. Although the tragic cost of COVID-19 continues to be counted, the virus has at least succeeded in shining a huge spotlight on the biotech industry. With growing investor and public interest in the sector, we were lucky enough to hear the views of four experts within the field (three of whom had Doctorates) at a webinar yesterday.

Similar to how the pandemic has accelerated digital adoption in areas such as online retail and payment, one of yesterday’s speakers (Dr Barbara Domayne-Hayman, an entrepreneur who began her career at Astra Zeneca) described how recent collaboration across the biotech industry had “done in ten months what normally takes ten years.” Interestingly, while big pharma (not just Astra, but also, say, Pfizer) have scaled up vaccination projects, much of the grassroots innovation with regard to understanding and solving COVID-19 occurred at an academic and/or biotech level. The legacy of such a partnership approach should be enduring when it comes to finding cures for other viruses, per the consensus among the speakers.

When the panellists were asked about what would be ‘the next big thing’ for the industry, two clear themes emerged: the digitalisation of the healthcare industry and innovation with regard to dementia.With regard to the former, it was described as “an unstoppable movement” (by Dr Andy Richards CBE, a biotech entrepreneur and investor). Look out for developments across a broad spectrum which encompasses healthcare monitoring, rehabilitation and telemedicine. Turning to dementia and diseases more broadly affecting the brain, this will matter increasingly, particularly as populations age. Separately, we were pleased to note that Novo Nordisk announced yesterday that one of its drugs had entered phase three trials for Alzheimer’s disease.

One final consideration, or perhaps the $64,000 question, is what should investors look for if they want involvement in the sector. Spoiler alert: there is no single answer, but the panellists asserted that quality management was key – we concur. With biotech specifically, it is integral to understand exactly what problems companies are trying to solve and whether they are even worth solving in the first place (in terms of cost-benefit). Our approach to the sector also involves trying to think laterally, looking to businesses involved in the value chain, particularly in terms of life sciences tools and equipment.

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Novo Nordisk. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.​​​​​​​

Alex Gunz, Fund Manager