Beaten Down Biotech Sector Could See Renewed Interest


The Biotech Boom

It’s well known that California is home to Silicon Valley, but few people realize that the region is also home to “Biotech Bay,” a hotbed community of biotechnology, pharmaceutical, bioinformatics, and medical device companies spanning Northern California. Nearly half of the top 20 U.S. biotech companies have headquarters in Biotech Bay, and dozens more (established organizations and biotech startups alike) are clustered in major hubs throughout the state of California.

The rapid expansion within the biotechnology industry is spurred by many of the same reasons the technology industry continues to grow at staggering rates. As scientific breakthroughs continue to occur at an increasing pace, the demand for—and ability to create—new biotech increases exponentially.

Consider the fact that the latest Apple Watch can take a medically accurate EKG reading of its user. This astonishing capability points to the symbiotic relationship between Silicon Valley and Biotech Bay. California has long been an industrial hub for innovation and technology, and thanks to its desirable climate, dynamic culture, corporations that attract and retain top talent, and port cities with easy access to manufacturing giants across the Pacific Ocean, it’s easy to see why biotechnology continues to enjoy rapid growth in California.

The Future of Biotechnology

Many of the biotech companies in California have become household names, even if people don’t immediately realize it. For instance, Amgen is headquartered near Azusa Pacific University’s campus outside of Los Angeles and has created several drugs successfully used for chemotherapy and treating autoimmune diseases like rheumatoid arthritis. Additionally, AbbVie has a campus in Biotech Bay, where it invented (and currently produces) Imbruvica, a drug used to treat B-cell cancers like lymphoma and leukemia.

AbbVie, the sixth-largest biotech company in the world, generated $28.2 billion in revenue last year. This puts another aspect of the biotech industry into perspective; between R&D, subsidies, patents, and insurance funding, these companies generate massive amounts of revenue while also reinvesting into ancillary industries across the communities they operate in.

Amgen, Bristol-Myers, Merck, Gilead Sciences, and countless other multibillion-dollar biotech companies call California home. As these organizations continue to expand and innovate, the number of professional opportunities that can be found within the Golden State is sure to rise as well.

The Winners: Too Late To Invest In, But Good To Study

XOMA Corporation posted a 779% gain in 2017. The company secured several licensing agreements for its unique therapeutic antibodies that sent its shares soaring in the latter part of the year. Shareholders on board in January saw their shares double in eight months then explode to nearly eight-fold gains on announcements made in August.

Dynavax Technologies Corporation nearly doubled in the first two months of the year. But patient investors were in for even greater gains. At the end of Q2 2017, DVAX shares took off hitting over five-fold gains over the following four months. The driver for these gains was the first-ever FDA approval of a hepatitis-B vaccine for adults.

Sangamo Therapuetics, Inc. finished 2017 with 473.5% gains. Fuel for these gains fired when Sangamo secured a $70 million upfront payment from Pfizer, which included an agreement for double-digit royalties from the company’s gene therapy tech.

Many more research companies like these relentlessly pursue scientific breakthroughs in medicine, agriculture, and pharmaceuticals…and some ultimately grow to multi-billion valuations when commercialized.

But not everyone comes up with a winner. So much is driven by information and expertise available only to a select few. For most, it’s almost impossible to find a ground floor position in biotech that yields gains often posted from winning buys.

Most early-stage biotechnology companies go nowhere, often leading to substantial losses for their shareholders. We strongly recommend that you consider carefully how much you can afford to risk in the pursuit of the gains a biotech winner can deliver.

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