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The Importance Of Biotech And Healthcare
Biotech and healthcare are massive parts of our economy. They are also vital to us whenever our bodies suffer from injuries, diseases, or other medical issues.
It is also a sector driven by innovation and precious IPs, where thriving for new and improved products is a matter of not just growth but survival.
In this article, we wanted to give an overview of the sector with a wide array of profiles, including:
- Blue chip companies are large dominant players that are not going anywhere.
- Specialized manufacturers of medical devices.
- Innovative startups developing revolutionary technologies.
Best 10 Healthcare Stocks
(Companies are ordered by market capitalization at the time of writing of this article)
Novo Nordisk is a leader in diabetes therapies, representing 79% of its current revenues.
It is also expanding quickly into the growing segment of obesity treatment with its newly launched Wegovy, an injectable weight-loss medicine.
While still just 9% of Novo Nordisk's total revenues, the obesity segment has grown astonishingly at 84% year-to-year.
The drug is showing strong medical results and has been regularly sold out, even with Novo Nordisk increasing production capacity several times.
While its diabetes business is likely stable for the next decade, innovative treatment could slowly endanger this market, especially for type-1 diabetes. So, the expansion in the obesity market is likely to represent the long-term prospect for growth for Novo Nordisk. We discussed this market in more detail in our article “Top Companies In Obesity Treatments.”
Stryker is a leader in medical devices, present in virtually every well-equipped hospital or clinic on Earth, treating up to 130 million patients annually.
The largest segments are traumatology, endoscopy, and instruments, but overall, the company lines of business are very diversified. Each segment includes many niche products for specific types of surgery or pathology, all under the Stryker brand umbrella and sharing the same commercial infrastructure.
Stryker is growing steadily, thanks to a mix of innovation, supported by a $1.45B R&D budget and serial acquisition of smaller medical device manufacturers.
With a strong presence in endoscopy, surgery, and orthopedics, Stryker is likely to benefit from the trend of the population aging.
Intuitive is the company that made the idea of robotic surgery a quickly expanding trend in hospitals all over the world.
Its 1,200 Da Vinci robots have performed a total of 12 million surgeries to date, of which 1.8 million in 2022. The installed base grew by 12% year-to-year, and the procedures grew by 26% year-to-year.
The company is now developing more robots for specific medical needs, like Ion, a bronchoscopy platform for minimally invasive lung biopsy. It is also seeking approval for its existing robots to be allowed for more surgery types and in more countries.
The base of experienced users and the reputation of the company among surgeons form a strong investing moat. Investors will want to properly assess the value of that moat, as Intuitive's stock has been both growing quickly and staying at very high valuation multiples.
(we covered the robotic surgery market in more detail in our article “Top 5 Robotic Surgery Stocks.”
Bayer is equal part an agriculture company and part a pharmaceutical company.
After its merger with Monsanto, it is one of the world's largest biotech and seed companies.
The pharmaceutical activity, under prescription and over-the-counter (OTC), is roughly half of the company’s revenues, with the other half made of the agricultural business. It covers a large spectrum of therapeutic areas, with a third of its sales in the cardiovascular segment.
Bayer’s focus on innovation is on
- Eye treatments, in partnership with Regeneron.
- Stem cell treatments for Parkinson’s disease and heart attacks.
- Gene therapies.
- Oncology (cancer treatments).
Bayer's valuation has been hammered down due to legal risk from its Monsanto acquisition and court cases on the potential of RoundUp to cause cancer.
Any investor in this company will want to judge for themselves if it is indeed one of the most undervalued biotech companies, if the litigation risk is too high, and if management's past mistakes cannot be easily forgiven.
The company behind the Covid mRNA vaccine sold by Pfizer is now using the money made during the pandemic to expand its offer widely.
It is now developing mRNA vaccines for shingles, tuberculosis, malaria, HIV, and the herpes virus. This makes it a leading company in the field of mRNA vaccines, with only its competitor Moderna (MRNA) developing more mRNA vaccines than BioNTech.
BioNTech is also exploring the potential of mRNA for cancer, with 12 different candidate products for cancer treatment in its pipeline. You can read more about the future of mRNA technology in our article “The Next Application for mRNA Technology: Cancer Therapies.”
Finally, it also has in its R&D pipeline some cell therapies and other non-mRNA potential cancer treatments.
Investors in BioNTech will count on the company managing to expand mRNA technology beyond the COVID-19 vaccine and into new applications.
CRISPR is a revolutionary technology that allows the editing of a cell's genes or even the whole organism with high precision. This could be used to solve countless genetic diseases that were until now incurable.
CRISPR Therapeutics was founded by CRISPR Cas9 co-discoverer and 2020’s Nobel Prize winner Emmanuel Charpentier. The company focuses on applying to human medicine the Cas9 system.
CRISPR Therapeutics is working in close collaboration with larger biotech Vertex to develop therapies for blood diseases and a potential cure for type-1 diabetes.
Another application of CRISPR Therapeutics' technology is cancer treatment. The idea is to use modified immune system cells to attack cancer cells.
CRISPR Therapeutics is developing a modified immune system cell that can be manufactured in advance and made to fit all patients. The company currently has 8 candidates in the pipeline, of which 2 already in clinical trials.
CRISPR Therapeutics is one of the startups closest to finishing clinical trials on CRISPR therapies. Investors will hope that the presence in the company of one of the discoverers of the CRISPR systems will prove a decisive advantage in the race to get CRISPR treatments approved.
You can read more about CRISPR stocks in our article “Top 5 CRISPR Companies To Invest In”.
The company is producing on-demand organisms for specific applications. It has diversified its applications widely with many research programs and partnerships:
- mRNA vaccine production and nucleic acid medicine
- Food proteins
- Biological fertilizer production in partnership with Bayer
- Programmable microbes for gut diseases
- Microplastics bioremediation
- Biosecurity and pathogens detection
- Recycling waste and contaminants
This makes it a unique business model, where Gingko focuses on developing a unique technology platform of “modified organisms on demand.” It can then contract or license to other companies.
Over the years, Ginkgo has developed a wide network of partners, from startups to large corporations, ranging from pharmaceutical and agricultural to industrial companies.
The company is not profitable yet, as it massively invests in R&D. Investors will bet on its capacity to innovate and become a keystone provider for the bioengineering sector.
The company specializes in DNA synthesis, leveraging miniaturization methods from the semiconductor industry, saving time and money for researchers. This can be used for cancer diagnostics, drug discovery, or detecting pathogens.
It is also working on creating DNA-based data storage that could be used to safeguard data independent from electronic systems. It has been a favorite of ARK ETFs, with 6.97% of the company owned by ARKK and 4.14 by ARKG. The new company is not yet profitable but aims to be by 2026.
(We previously covered Twist Biosciences in our article “Top 5 Synthetic Biology Public Companies”).
Armata is working on replacing chemical antibiotics with “living antibiotics” called bacteriophages. They are viruses that exclusively target bacteria and could evolve in tandem with the bacteria, removing the risk of them developing a resistance like antibiotic therapies.
The majority owns the company and is financially supported by biotech royalty company Innoviva.
Armata is currently focused on developing treatments for antibiotics-resistant pulmonary infections, with phase 2 of two different clinical trials expected to end in 2024.
Armata addresses a segment of healthcare, antibiotic resistance that has long been neglected but is of growing concern for the medical profession. Antibiotic resistance is killing no less than 1.27 million people yearly worldwide. So investors in this company will rely on Innoviva's backing and the growing demand for treatment against so-called “superbugs.”
You can read more about Innoviva and Armata in our articles “Innoviva: The New Model Of Royalty Biotech Companies” and “Creating Living Antibiotics: BiomX vs Armata.”
The company was founded in 2012. Among its founders is Serge Saxonov, the director of R&D of the personalized genome testing company 23andMe.
This company is working on creating an entirely new field of science called “Spatial Biology.”
Instead of looking at the “mix” of molecules in a sample, spatial biology can determine where in a tissue or a single cell a molecule of interest, like a specific sequence of RNA, is located, either in 2D or 3D.
This will tell researchers how cells interact with each other, how defense mechanisms activate, how a cell reacts to contact with a virus, and so much more.
You can read in more detail the unique advantages of spatial biology in this FAQ by Nanostring.
The company is still at an early stage, even with thousands of machines already running in research institutes, spending a lot on R&D.
Overall, 10x Genomics is likely to become really profitable only once spatial genomics gets commonly used in most research labs instead of being the most advanced technology available, as it is today. Another step of growth can be expected in the future when spatial genomics starts to be used for medical diagnostics.