Posted: 15 August 2022
Patience pays off in the biotech world, but the June quarter was pretty fast-moving for a clutch of Australian companies as trials yielded results, patents and manufacturing deals were inked and the odd acquisition was harnessed.
Biotech companies develop diagnostics and drugs involved in human health, so there will always be lengthy processes to usher assets onto the market, including long-running, rigorous clinical trials and approvals from external regulators like the Food and Drug Administration (FDA).
The common wisdom is that speculative stocks perform badly in tough economic times, as market optimism dries up and investors retreat to safer ground – and for all the many vital services the healthcare sector brings to populations around the world, biotech stocks are still regarded as highly speculative.
Most investors are well aware of these constraints and the need for patience in this sector, and price them into their decisions. If you invest in biotech, you’re in it for the long haul.
What the market tells us
In pre-pandemic 2020, the global biotechnology market stood at US$627.63 billion and since then it has exploded, with TechSci Research projecting it to grow at about a compound annual growth rate of 8.57% over the next five years to 2026.
During the past year, biotech stocks, as represented by the iShares Biotechnology ETF (IBB), have posted a total return of -21.0%, below the Russell 1000’s total return of -14.3%.
Source: Commsec.
According to Simply Wall Street, investors are pessimistic about the healthcare industry, anticipating a slowing of long-term growth rates.
This is understandable given the prevailing economic headwinds and the inevitable slowdown following the pandemic years.
So does the hotly forecasted recession mean investors in biotech should be looking to shore up their investment capital? No. David Rodeck, writing in Forbes, thinks that the “relatively inelastic” global demand for healthcare means that the sector is not particularly price sensitive:
“Stable demand for services and technologies acts as a protective barrier for healthcare as a sector, and biopharmaceuticals, in particular.”
Indeed, cost savings from new AI-driven technologies and greater demand for medical solutions to a range of unmet needs of increasingly health-literate populations will no doubt continue to drive growth in the sector.
In the spotlight: ASX biotech stocks
What have some Australian medtechs been up to in the last few months? We look at some of the highlights for a handful of companies targeting indications as diverse as fibrosis, traumatic brain injury, heart disease, COVID-19 and dementia, to name just a few.
AdAlta
The June quarter was a busy one for AdAlta Ltd (ASX:1AD), with the medtech progressing its preclinical program for inhaled AD-214, its flagship asset. Manufacturing and toxicology campaigns for the asset were deferred to optimally align with partner preferences and the different needs of each potential indication.
Meanwhile, in Europe and India, patents were granted protecting the intellectual property underpinning AD-214.
The company continues to progress its partnered immuno-oncology programs.
On the corporate front, the company’s business development campaigns built momentum. Adalta reported an $8.66 million cash position as at June 30, with its cash runway extended via a modification to the AD-214 program.
AdAlta CEO and managing director Dr Tim Oldham said: “The final quarter of FY22 has featured steady progress for inhaled AD-214.
“The pivotal experiments testing the ability to deliver AD-214 to the distant airways of the lungs and its effectiveness against fibrosis in animal models are underway with results expected in the coming quarter.
“Completion of the inhaled pre-clinical program provides key information for the growing partnering interest across multiple indications.”
Read more here.
