The role of biopharmaceuticals and drug revenues

Biotechnological tools have become increasingly important in drug research and development with a growing proportion of global drug revenues now derived from bio pharmaceuticals.

Published by Harvest ETFs

Biotechnology drugs differ from pharmaceutical drugs in that they use micro-organisms, such as those found in bacteria, or biological substances, like enzymes, to do the work.

Biotechnological tools have become increasingly important in drug research and development with about 1/3rd of global drug revenues now derived from biopharmaceuticals.  

Common uses for biologic drugs are in cancer treatments, metabolic disorders, inflammation & immune disorders and disorders of the musculoskeletal system. According to one recent study, the share of global drugs in preclinical testing that rely on biotechnology is more than 25%. This is helping the pharmaceutical industry develop new products, new processes and services.

A report by market research firm Global Market Insights finds that the global biotechnology market was worth more than US $330 billion in 2015 and is expected more than double by 2024 with a compound growth rate of 9.9 percent.

There is a growing demand for things like DNA sequencing and recombinant technology. The latter process joins DNA molecules from two different species and inserts it into a host organism to create new DNA. Other growth areas include tissue engineering and treatments of chronic diseases.

North America holds the dominant position in terms of medical biotech revenue, sitting at US $137.4 billion annually. This is due to increased R&D spending by industry leaders, many of whom are based in the U.S. They are spending more as the healthcare industry seeks cheaper and more effective ways to deliver care.

Regeneron is a leading global company in this field. Its area of expertise includes helping patients with eye diseases, allergic and inflammatory diseases, cancer, heart and metabolic diseases and infectious diseases and rare diseases. The New York-based company had 2018 revenues of US $6.7 billion. It was founded more than 30 years ago by physician-scientists. It has applied for 9,351 patents and has been issued with 4,945 patents issued over the last 10 years. It expects to spend as much as $2 billion on R&D in 2019.

Sanofi S.A., a French pharmaceutical company based in Paris owns over 20% of Regeneron and collaborates with them on several treatments.

Both companies are part of the Harvest Healthcare Leaders Income ETF (TSX:HHL, HHL.U). As of Feb. 28, 2019, the ETF held 20 stocks with an average market capitalization of $160 billion. The fund has 24.0% of its holdings in biotechnology companies, a steadily growing area of investment opportunity. – AM

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