In the last few years, investing in biotechnology is an attractive alternative to obtain better returns. This condition increased after the effects of the sanitary contingency and with a high demand of sustainable technological services products and services in agriculture, health, genetics, among others.
To face this situation, areas such as business, science and finance join forces to develop solutions in epidemiology, agriculture, biomedical engineering and genetics.
In the analysis of Inter-American Development Bank (IDB), investors and scientists collaborate to detonate this sector, proof of them is the development of vaccines and antiviral medications. With this, the production process and industry innovation to contribute to the large-scale manufacture of inputs raise the interest in investing in biotechnology.
With this scenario, the industry has maintained a good flow of investments particularly venture capital. According to a report by Ernest & Young in the last 4 years 4,000 million dollars have been invested in venture capital funds in Europe.
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What is biotechnology?
Biotechnology is the set of techniques for the use of living organisms or their components to produce substances and develop products for specific purposes; for example, transgenic foods, defines the National Council of Science and Technology (CONACYT by its acronym in Spanish).
In modern biotechnology are processes to develop food and drugs to beat diseases such as COVID-19. Currently, this industry has positioned itself as a key sector in the fight against the pandemic.
Durante el 2021, las empresas de biotecnología con respaldo del venture capital recaudaron 29.3 mil millones de dólares, una cantidad récord de capital, según datos de PitchBook.
Types of biotechnology
- Epidemiological: research for vaccine developments to infectious diseases.
- Agricultural: fertilizers, composts, pest-resistant vegetable crops, among other applications.
- Biomedical engineering:construction and design of medical tools such as prosthetics.
- Genetics: genetic modification of organisms.
Biotechnology trends
The rapid response of vaccine developments against COVID-19 has been a determinative factor to the biotechnology future. Today there exist different drugs in the research and development phase that will allow the industry growth in the coming years.
Laura Nelson, Equity Investment Analyst of Capital Group, lists 5 trends that determine the future of biotechnology:
- Trend towards faster drug development.
- The COVID-19 pandemic has put the focus in infectious diseases.
- This is a great period of innovation in cells and genes, used as medicines.
- China is the fastest moving country along the biotechnology innovation curve.
- New advances in the use of the immune system for the treatment of diseases.
Why is it important to invest in biotechnology?
El interés por el capital privado en este sector ha aumentado a la par que la demanda por productos y servicios de esta industria en los últimos años. De acuerdo con el World Pharmaceuticals, Biotechnology and Life Sciences Index (MSCI), investments in this sector reached a return of 19.5% during 2021.
Durante la pandemia, las empresas en biotecnología lograron una valoración de 2 mil millones de dólares lo que representa un crecimiento de 4 veces en comparación con el 2017. Y se crearon 28 nuevos unicornios biotecnológicos para acumular un total de 192, según datos de la plataforma global Dealroom.
Biotech venture capital funds have registered double-digit returns in the last 3 years, a consequence of the demand of services and products to health care, according to data from Morningstar.
Another example of investment in the market is NASDAQ which raised more than US $5.8 billion dollars before the pandemic. With its NASDAQ Biotechnology Index fund invests in instruments that have been stimulating the development of this industry for almost a decade.
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Venture capital in biotechnology industry
The opportunity that the COVID-19 pandemic meant for the growth of the biotechnology industry worldwide, has allowed venture capital funds to focus on this sector contributing its growth and development.
In addition, it becomes obvious the need to focus efforts on research and technological innovation for health.
On the other hand, according to the Dealroomplatform, global venture capital investment in biotechnology raised a total of US $41 billion dollars during 2021, a growth of 1.1% against 2020.
Best funds to invest in biotechnology
The growth of the industry in the last years, have become one of the principal options to investors. Here are the 4 best funds to invest in biotechnologies according to Morningstar:
- Candriam Equities L Biotechnology
- Pictet Biotech
- Polar Capital Biotechnology Fund
- Bellevue Funds (Lux) BB Adamant Biotech
The biotechnology industry is an investment alternative promising in the long-term considering the demand for services and products for healthcare will be constant.
In WORTEV CAPITAL we focus on early stage company investment through our venture capital fund. Hand in hand with a startup accelerator that supports the operation of these companies.
Thus, companies obtain advice that allows them to optimize key areas and improve their results in the short term.
