The Most Important Sector In The World
This has been no less of an extraordinary period for the life sciences industry than it has been for each of us personally. The pandemic has created huge problems, including clinical trial delays, limited access to hospitals or clinicians and disruption to supply lines. Despite the challenges, the industry is emerging from the crisis with an enhanced reputation. It is now one of the most favoured sectors with investors, as evidenced by record funding levels and relative outperformance compared to other sectors.
With health foremost in everyone’s mind, the industry response has been more than impressive. In fact, it has been amazing. There are now more than 400 coronavirus vaccines in development and well over 1,000 therapeutics. The speed of the response has been just as remarkable as the scale of response. The first vaccine candidates were identified within hours of publication of the virus DNA and compounds were manufactured, tested and shipped for pre-clinical testing within a fortnight.
An unprecedented level of cooperation on vaccines has also emerged. There is even a willingness to invest heavily in manufacturing capacity ahead of knowledge of the safety or effectiveness of the vaccine candidates. Several companies have also undertaken to supply vaccines on a not-for-profit basis. To cap it all, an industry consortium has recently announced the establishment of a $1bn fund, The AMR Fund, to invest in anti-microbial resistance research, a huge and growing threat to mankind.
Of course, the access problems and the cancellation of elective procedures are causing issues. Many companies have had to cut costs, curtail or out-license programmes and raise funds in order to survive. Many larger quoted companies have cut their forecasts. However, as we saw in our own investee companies, where there are challenges there are also opportunities. As described elsewhere in this newsletter, our portfolio company, PQ ByPass, responded rapidly to the changed circumstances and instituted a virtual support programme for clinicians which enabled it to continue recruiting in its ongoing clinical trial rather than shut it down when access to hospitals became physically impossible.
Another portfolio company, Quanta, faced with the immediate closure of its home dialysis product roll-out, saw the opportunity to supply dialysis equipment to hospital ICUs for Covid patients and switched focus to that market beating its sales projections for the period.
This health emergency reinforces the attractiveness of the sector to investors. Even before Covid-19, technological breakthroughs in the fields of gene therapy, gene editing and targeted therapeutics were throwing open doors to new investment opportunities. The pandemic is adding to that, creating massive unmet needs for our industry to tackle. Investors are responding with record levels of funds flowing into healthcare this year. Are we witnessing a golden coming-of-age for biotech or just a temporary herd defensive instinct? Time will tell, but right now it’s looking like the smart money is on the former.