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Biotech emerges as 'superhero' of global pandemic

Anjalee Khemlani
·Senior Reporter
·4-min read
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The global coronavirus pandemic is spurring a boom in health care investments, as companies large and small try to combat the infectious disease. Biotechs, in particular, have seen a boom in interest, as investors look to bet on what could be the next Moderna (MRNA).

Kedar Karkare, a health-care analyst at CB Insights, said 2020 was a record year for the sector.

"We had almost $42 billion invested into biopharmaceutical companies ... across 1,851 deals," Karkare said. That's a 46% increase over 2019, but the number of deals was only 4% more than in 2019, indicating that more capital was spent making these deals, Karkare said.

And the types of deals are changing too — with an increase in SPACs (special purpose acquisition companies).

"A lot of leading health care and biotech venture capital firms are participating in these SPAC deals. So, to some extent, the VCs that four or five years ago would not have participated in a late-stage or pre-IPO, or in the case of a the SPAC taking the company public, they're moving downstream a little bit," Karkare said.

Antoine Papiernik, managing partner at Sofinnova Partners, recently told Yahoo Finance the increased enthusiasm for the sector arose from the pandemic.

"Health care became so important to everyone, around the world, with no exception," Papiernik said.

With vaccine companies like Massachusetts-based Moderna, Germany-based BioNTech (BNTX) and Maryland-based Novavax (NVAX) now becoming household names, it's no wonder why.

"Everyone knows Moderna, everyone knows BioNTech ... that shows you that the opportunity is here on both sides of the Atlantic. Biotech is now the superhero of the pandemic, therefore investors small and large are incredibly interested," he said.

That includes creating an interest in a more globally competitive market, as BioNTech and CureVac (CVAC) have shown in Europe. It's why Papiernik sees opportunity on the continent.

"Europe is special because it's an untapped market compared to the U.S.," he said.

BRASILIA, BRAZIL - MARCH 29: Health professional prepares a vaccine against coronavirus (COVID-19) in front of the panel in honor of the fatal victims of the disease amidst the coronavirus pandemic in Centro de Saúde 07 on March 29, 2021 in Brasilia Ceilandia, Brazil. Volunteers made 5,800 lotus flower origami, a symbol of hope, to honor each of Covid's victims in the capital of Brazil. Brazil has over 12,573,000 confirmed positive cases of Coronavirus and has over 313,866 deaths. (Photo by Andressa Anholete / Getty Images)
Health professional prepares a vaccine against coronavirus (COVID-19) in front of the panel in honor of the fatal victims of the disease amidst the coronavirus pandemic in Centro de Saúde 07 on March 29, 2021. (Photo by Andressa Anholete / Getty Images)

Outside of vaccines, other startups have also seen success with the attention brought on by authorization of products by the U.S. Food and Drug Administration (FDA), including testing companies Ellume, Everlywell, and Cue among others.

Brad Loncar, CEO of Loncar Investments, says investors are eager to get into the space now. "Everyone who was in tech realizes they need to be in biotech now too," he told Yahoo Finance.

Papiernik said that besides the vaccine, there are many diseases that need medication from oncology to Parkinson's, Alzheimer's, orphan diseases, and diseases in children. And the success that the mRNA platform has seen during the pandemic has set the stage for the 10-year-old technology to be viewed more favorably for investment, and in likelihood of receiving regulatory approval in future treatment options.

But there are financial risks in bringing a product through the pharmaceutical pipeline, and better communication in the industry is key for new investors, say experts.

"I think you need to fault the biotech industry for the way it communicates," said Stephen Berenson, managing partner of Flagship Pioneering, who says the industry often relies on "jargon-laden" public statements.

Flagship was an early major stakeholder in Moderna, and Berenson has seen the change in interest in the markets.

But it comes with a learning curve, he said, as investors will "have to understand the science and development of science into the product."

That's especially true for earlier-stage companies, Berenson said, as the industry is in the midst of a biological renaissance.

"We think it's a special time where a confluence of actors are coming together to allow people in our industry to attack bigger problems faster and with a higher probability of success," he said.

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