Biotechnology companies have been a cornerstone of the pharmaceutical industry since the mid-1990s. Today, many of these firms have matured into profitable companies. We divide biotechs into three categories: profitable, revenue growth, and development-stage. This classification helps us identify solid investments with approved products that tend to perform well during economic downturns.
Revenue-growth companies are particularly compelling. These firms have successfully navigated the rigorous clinical development process and received drug approvals from regulators. While they are generating top-line sales, they have not yet turned a profit, making them medium-risk investments, as they still need to prove themselves on the market.
Around 70% of new drug approvals are now attributed to biotechs, a notable change from a time when pharmaceutical giants dominated this area through their internal research and development (R&D) departments.
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The US leads biotech innovation, bolstered by robust funding and prestigious university hubs, but Europe also harbours strong contenders. We will highlight one European stock from each of our three categories.
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Let’s begin with Sobi (Stockholm: SOBI), a profitable Swedish firm specialising in haematology and immunology. It has a market value of $10.7 billion and generated sales of $2.5 billion last year.
A major portion of its sales stems from haematology, particularly treatments for patients with haemophilia, a lifelong clotting disorder that primarily affects men. It requires infusions of “clotting factors” VIII or IX to prevent uncontrolled bleeding.
The company recently launched Altuvoct, a groundbreaking therapy with a longer half-life, meaning patients can have a weekly injection rather than one every two or three days. This is especially convenient for active young boys prone to injuries that can trigger bleeding.
Thanks partly to a partnership with Sanofi, a leading French pharma conglomerate, Altuvoct’s sales are projected to exceed $1 billion, solidifying Sobi’s position as a formidable player in the biotech sector.
Ascendis Pharma (Nasdaq: ASND), a Danish company focused on treating rare diseases, is in our revenue-growth category. It is relatively large, with a market capitalisation of $10 billion. The firm boasts a unique technology platform that merges established biology with its unique sustained-release technology, which could be used for a variety of rare medical conditions.
It optimises therapeutic efficacy with far fewer injections, leading to a much better experience for patients. Analysts predict a path to profitability as early as next year, making it an interesting revenue-growth stock with the potential for profitability.
Lastly, we have UniQure (Nasdaq: QURE), a riskier stock. UniQure is a development-stage gene-therapy company from the Netherlands worth $700 million.
With $300 million in cash, UniQure is advancing its ambitious pipeline, notably targeting Huntington’s disease. UniQure’s gene therapy aims to silence the toxic Huntington protein responsible for neuronal degeneration.
Recently, the gene treatment was designated a “breakthrough therapy” by America’s Food and Drug Administration (FDA) – an encouraging sign. However, the inherent risks are considerable; if clinical trials do not demonstrate sufficient efficacy, it could lead to a dramatic decline in the company’s share price.
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