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IBBJ holdings continue to exhibit biotech growth in 2021

IBBJ holdings continue to exhibit biotech growth in 2021

2020 was a boon year for biotech, driven partly by the impact of COVID-19, and partly by investor interest in a sector which has historically had a level of segregation from the impact of rising unemployment and economic uncertainty. As 2021 wears on, it’s becoming clear that the explosion of growth that we saw in 2020 isn’t likely to continue at the same pace. And yet analysts as a whole aren’t showing much anxiety.

FDA approvals, significant clinical trials, and new partnerships and mergers are continuing apace, testifying to the ongoing strength of the sector and the potential for biotech ETFs.

The biotech market had a soft landing

The drop in the market has been relatively smooth and gradual. Biotech IPOs have barely slowed down: 78 biotech companies went public in 20201, more than any previous year, but 2021 has seen 49 IPOs already in the first 6 months. 14 of those occurred in June alone, and some analysts are hinting at another wave in July and September. What has changed, however, is the size of their offerings. 64% of 2020’s biotech IPOs raised more than $150 million, compared with 53% of those that launched in 2021. 2020’s highest-value IPOs raised an average of $211 million per IPO, while the average for 2021’s top tier is $180 million. Analysts like Michael Yee suggest that investors are losing their appetite for the risk of early, unproven biotech platforms, but those with proven achievements are still popular. Yee states that he isn’t worried about the market’s long-term health.2

2020 saw many biotech stocks jump significantly after going public, while companies that IPOed in 2021 generally tended to trade below their offering price. Again, analysts aren’t letting this keep them awake at night. The extraordinary soaring prices of 2020 caused new IPOs to perform unusually well, which had a knock-on effect of causing particularly high valuations for mezzanine rounds for pre-IPO companies. By the time those companies went public this year, the market had corrected itself, and those unrealistic valuations could no longer hold up.

Ben Fidler, senior editor for BioPharma Dive, speculates that “it’s reflective of a return to more typical, pre-2020 numbers for offerings,” quoting Charlie Kim, co-chair of the capital markets practice at Cooley, who said “It was a correction toward more where these deals normally price. You shouldn’t have every IPO upsizing.”3

Gene editing tech is surging ahead

2021 is proving particularly interesting for the sub-sector of gene editing technology, where today’s achievements have been in the works for over a decade. 2020 saw 13 companies using genetic medicine technologies go public, almost as many as IPOed in 2018 and 2019 combined, and another 13 have already launched a public offering in 20214.

One of the biggest players in this arena is Intellia, which recently announced the results of clinical trials delivering its experimental CRISPR gene editing medicine through IV infusion into the human body. The trial, which involved 6 participants, used the new treatment to reduce levels of the misshapen protein which causes transthyretin amyloidosis disease. Protein levels fell by up to 96%, proving the potential of the new medicine to treat rare diseases which have no effective treatments.5 Intellia CEO John Leonard hailed the results as groundbreaking. “When we think about what gene editing can bring, it’s not just convenience,” said Leonard. “This is about improving prospects.6

Intellia isn’t the only company advancing the use of gene editing tech. Beam Therapeutics recently announced a 5-year research partnership with Apellis Pharmaceuticals to develop new gene-editing-based treatments for complement-driven diseases. Complement-driven diseases occur when the immune system becomes overstimulated and attacks healthy tissue within the body. The Beam and Apellis project aims to use gene editing to halt the “complement cascade” and control the inflammation and disease it causes. There are 6 programs in the works, targeting the complement system protein C3 or sites in the eye, liver, and brain. The partnership combines Beam’s expertise in gene editing technologies with Apellis’ specialist knowledge about complement-driven diseases.7

New approvals are fueling market growth

One of the main propellants for biotech stock performance is the reception of FDA approval for a new medication or treatment. 2020 was a record year for FDA approvals, despite – or more likely because of – COVID-19, with 53 novel therapeutics getting the nod8. 2021 looks set to match or maybe even exceed that record, with 27 approvals by the end of June9.

Apellis’ added to the good news about its partnership with Beam with the announcement that its medication Empaveli had won FDA approval to treat paroxysmal nocturnal hemoglobinuria, or PNH, a rare, fatal blood disease10. The Empaveli approval helped push Apellis’ stock up more than 20% in May, and its partnership with Beam drove it up another 10.06% in a single day in June11.

Another biotech stock which benefited from the FDA approval effect is Reata Pharmaceuticals, which focuses on developing treatments for a number of serious or life-threatening diseases. Reata’s stock showed lackluster performance for most of the past year, but it rose more than 35% in May after the FDA’s Division of Neurology Products asked the company to submit a request for a pre-New Drug Application meeting for its drug Omaveloxone, which was developed to treat Freidreich’s ataxia. Approval has typically been granted immediately upon receipt of such a request, and there’s no existing cure for Friedreich’s ataxia, so this is a highly positive step for Reata.12

Other new FDA approvals in the last few months include Aducanumab, developed by Biogen and Eisai, which has been widely welcomed as the first drug for Alzheimer’s disease13; and Lumakras, made by Amgen, the first medicine that targets the KRAS gene responsible for many lung, colon, and pancreatic cancers14.

Alongside news of approvals, the eyes of investors and biotech innovators are on a number of important clinical trials which are due to finish soon. If they succeed, they could spell immense growth not just for the companies running them, but for other enterprises involved in similar treatments. For example, UniQure is expected to release the results of its current trials for its gene therapy AMT-130 in the near future, which aims to alter genes in order to reduce the levels of a toxic protein that is implicated in Huntington’s disease. Trials for two similar treatments from other companies failed recently, so if UniQure succeeds it will vindicate the method.

Seres Therapeutics is also due to report shortly from its phase 2b study into its new microbiome drug SER-287 for mild-to-moderate ulcerative colitis. Microbiomes are a new type of treatment for cancers and inflammatory diseases that change the way the body interacts with bacteria, fungi, and viruses, rather than using immunosuppressives. If the study is a success, it could encourage a wave of microbiome treatments from other companies too.15

COVID-19 hasn’t stopped driving biotech expansion

The COVID-19 effect hasn’t gone away. The consultancy group Price Waterhouse Cooper noted earlier in the year that the pandemic’s forced acceleration of digitalization and modernization of business models would drive many new partnerships and mergers between pharma and tech companies, and as mentioned above, we’re seeing that happen16.

Additionally, there are still companies working on the next generation of COVID-19 vaccines and therapeutics. For example, Inovio Pharmaceuticals has expanded its partnership with Advaccine Biopharmaceuticals to run phase 3 clinical trials for its COVID-19 vaccine, which is intended for areas like Latin America which are currently underserved by existing vaccines. Although the company has yet to make a profit and trials so far haven’t been conclusive, the announcement pushed up Inovio stock.17

The biotech sector’s continued growth indicators

As the year progresses, it’s becoming increasingly clear both that the astonishing growth of 2020 isn’t going to continue at the same rate, and that the biotech sector is nonetheless not likely to shrivel up and disappear. In the words of Kim, the markets “have tightened and corrected,18” but it would be a mistake to think that it’s anything sinister. There seems no reason to second-guess Global Market Insight’s prediction from May 2021, that the biotech market would continue to grow at a compound annual growth rate (CAGR) of over 9.4% between 2021 and 2027, to reach over $950 billion19.

The number of partnerships, approvals, trials, and innovations arising out of midcap biotech companies shows that the pipeline of development is strong, making a biotech ETF continue to be potentially appealing to investors who want to dip their toes into a burgeoning sector while spreading their exposure to risk.

1“THE BIOTECH IPO BOOM” February 2021 https://www.bdo.com/insights/industries/life-sciences/the-biotech-ipo-boom

2 “Deals surge, returns slip: takeaways from a record half for biotech IPOs” June 30, 2021  https://www.biopharmadive.com/news/biotech-ipo-performance-q1-q2-2021/602628/

3  “Deals surge, returns slip: takeaways from a record half for biotech IPOs” June 30, 2021  https://www.biopharmadive.com/news/biotech-ipo-performance-q1-q2-2021/602628/

4 “Deals surge, returns slip: takeaways from a record half for biotech IPOs” June 30, 2021 https://www.biopharmadive.com/news/biotech-ipo-performance-q1-q2-2021/602628/

5 “CRISPR-Cas9 In Vivo Gene Editing for Transthyretin Amyloidosis” June 26, 2021 https://www.nejm.org/doi/full/10.1056/NEJMoa2107454?query=featured_home

6 “Intellia, with first results, delivers a ‘landmark’ for CRISPR gene editing” June 26, 2021 https://www.biopharmadive.com/news/intellia-crispr-gene-editing-study-ttr-amyloidosis/602292/

7 “Apellis and Beam Therapeutics Enter Exclusive Research Collaboration to Apply Base Editing to Discover Novel Therapies for Complement-Driven Diseases” June 30, 2021 https://investors.apellis.com/news-releases/news-release-details/apellis-and-beam-therapeutics-enter-exclusive-research

8 “2020 FDA drug approvals” January 5, 2021  https://www.nature.com/articles/d41573-021-00002-0

9 Novel Drug Approvals for 2021, as of July 1, 2021 https://www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/novel-drug-approvals-2021

10 “Apellis Announces U.S. Food and Drug Administration (FDA) Approval of EMPAVELI™ (pegcetacoplan) for Adults with Paroxysmal Nocturnal Hemoglobinuria (PNH)” May 14, 2021 https://investors.apellis.com/news-releases/news-release-details/apellis-announces-us-food-and-drug-administration-fda-approval

11 “4 Top Biotech Stocks To Watch In June 2021” May 29, 2021 https://www.nasdaq.com/articles/4-top-biotech-stocks-to-watch-in-june-2021-2021-05-29

12 “4 Top Biotech Stocks To Watch In June 2021” May 29, 2021 https://www.nasdaq.com/articles/4-top-biotech-stocks-to-watch-in-june-2021-2021-05-29

13 “FDA Grants Accelerated Approval for Alzheimer’s Drug” June 7, 2021 https://www.fda.gov/news-events/press-announcements/fda-grants-accelerated-approval-alzheimers-drug

14 “FDA Approves First Targeted Therapy for Lung Cancer Mutation Previously Considered Resistant to Drug Therapy” May 28, 2021 https://www.fda.gov/news-events/press-announcements/fda-approves-first-targeted-therapy-lung-cancer-mutation-previously-considered-resistant-drug

15 “8 key clinical trials to watch for the rest of 2021” June 21, 2021 https://www.biopharmadive.com/news/biotech-clinical-trials-watch-q3-q4-2021/601896/

16 Global M&A Industry Trends in Health Industries https://www.pwc.com/gx/en/services/deals/trends/health-industries.html

17 “Is Inovio Stock A Buy After Inking A New Deal For Its Covid Vaccine?” July 1, 2021 https://www.investors.com/news/technology/ino-stock-buy-now/

18 “”Deals surge, returns slip: takeaways from a record half for biotech IPOs” June 30, 2021 https://www.biopharmadive.com/news/biotech-ipo-performance-q1-q2-2021/602628/

19 “Biotechnology Market Size” May 2021 https://www.gminsights.com/industry-analysis/biotechnology-market