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Investments in the medical biotechnology sector - Opportunities and risksAs many as 10 companies with a market value of PLN 3.7 billion from the medical biotechnology sector are currently listed on the WSE Main List. There are 12 of them on the NewConnect market. On the other hand, this sector is growing dynamically every year. It is forecasted that by 2027 the Polish red biotechnology market will reach a value of over PLN 21.5 billion. Currently, it is PLN 14.7 billion.

MedTech is gaining popularity year by year

Experts from Dom Maklerski BOŚ spoke about the growth potential of the medical biotechnology sector in Poland, what to pay attention to when diversifying the investment portfolio, what is the cycle of development of medical projects and what opportunities and risks are associated with financing biotechnology companies – experts from Dom Maklerski BOŚ said during the meeting for investors, IPOPEMA Securities, BioInMed and the Polish Development Fund.

The growing patient population, increasing number of tests, progress in the development of new drugs and the crisis that occurred in connection with the COVID-19 pandemic contribute to the development of the biotechnology industry in Poland. compared to 2016, the value of investments in R&D (research and development) in the United States increased in 2021. Moreover, each year the pipeline of Polish companies from the medical biotechnology sector develops – know-how is strengthened, new companies are created, new ideas for projects appear – including in the field of new drugs development, new diagnostic methods and technologies supporting their development, such as like artificial intelligence or machine learning.

– Biotechnology is one of the key directions of development in the life science industry, which increases its value by leaps and bounds every year. Some Polish projects have already entered the phase of clinical trials, some of them have initially proven effectiveness and safety in the second phase, however, in most cases to conduct the third phase of clinical trials, it is necessary to find an international partner – says Marta Winiarska, President of the Polish Association of Innovative Medical Biotechnology Companies BioInMed.

– In order to realistically take advantage of the opportunities offered by the biotechnology sector, it is necessary to understand the challenges and perspectives we are dealing with. These projects can allow for a huge investment leap. However, the key is consistency, persistence and diversification of the investment portfolio, both in terms of industries and areas. Only a holistic and prudent approach can ensure final success – the expert adds.

– Medical biotechnology companies are characterized by specific characteristics and without understanding it, it is very difficult for investors to achieve good investment results in this sector. We are glad that more and more companies from this industry appear on the Stock Exchange. We hope that there will be even more of them. The current value of companies from the biotechnology sector listed on all markets of the Stock Exchange is nearly PLN 5 billion. We believe that the workshops on investing in medical biotechnology companies will increase the knowledge of investors in this area and will allow them to understand the investment opportunities and risks in this sector, which will result in the development of this industry – says Maciej Bombol, director of the Primary Market Department of the Warsaw Stock Exchange.

– The process of developing innovative drugs is very complex and time-consuming – it can last 10-15 years, and the probability of success depends on the therapeutic area, while the higher sales potential of drugs, e.g. from the area of ​​the central nervous system or oncology, compensates for the relatively lower probability of success in these projects – says Beata Szparaga-Waśniewska, Deputy Head of Equity Research at IPOPEMA Securities.

– The valuations of biotechnology companies on the stock exchanges have dropped significantly recently. There has even been a situation where many of the companies that make up the NASDAQ Biotechnology index are priced cheaper than the cash they have on their balance sheet. Sentiment towards the sector may improve in the event of an improvement in the economic situation on the stock exchange or when large acquisitions with a premium to the stock exchange rate appear, which would be a signal to the market that it is already cheap – sums up.

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– Historically, the pharmaceutical sector has done an average of 3 percent. higher than the market. In the case of biotechnology companies, it is even better over the last 10 years. Accelerated economic growth around the world and the COVID-19 pandemic have increased the demand for innovative drugs, especially personalized treatments. These factors make the biotech sector increasingly attractive to investors who reduce investment risk by diversifying their portfolio – says Zofia Szewczuk, Investment Director, Polish Development Fund.

– There is, unfortunately, a misconception that small firms have a high ‘mortality’ rate, but this sector is actually lower than other VC deals. According to reports from investment and analytical companies, the number of transactions in the biopharmaceutical sector that generate losses is 15 percent. lower than the general numbers for the entire VC industry, 20 percent. fewer amounts invested are exposed to loss-making transactions. Successful investment in biotechnology in the early stages could mean more than 40% IRR over 15 years, which covers the costs of many unsuccessful investments. However, it should be remembered that the probability of reaching the commercialization phase of an oncological drug, which is one of the most risky ones, before phase I amounts to an average of approx. 5%. And it increases to approx. 8 percent. after a successful Phase I. Diversification at the portfolio level significantly increases the probability of at least one success – explains the expert.

– Global spending on drugs is forecast to increase from $ 1.3 trillion in 2020 to $ 1.6 trillion in 2024. The main growth stimulants include: greater care for health and availability of drugs, the emergence of new therapies or aging society and increasing the number of people – says Sylwia Jaśkiewicz, Managing Director in the Analysis and Recommendations Department of Dom Maklerski BOŚ.

– In recent years, biological drugs as well as gene and cell therapies have been gaining particular importance, although small molecule drugs still constitute the majority of the revenues of pharmaceutical producers. It is estimated that in 2020–2026, new modalities, including new generation antibodies, cell and gene therapies, DNA and RNA-based therapies, bioengineered vaccines, and genetically modified drugs, will account for 17 percent of the total population. sales of drugs, 43 percent. will be generated by biological drugs, and 40 percent. conventional drugs. Innovative solutions will emerge beyond market leaders and well-established drug classes. New players will dominate the oncology sector – he adds.

– In 2021, the FDA approved 50 new drugs, of which 33 were small molecule drugs and 17 monoclonal antibodies and other drugs with large molecules. The so-called advanced therapies, e.g. gene or cell therapies. In Poland, preclinical or clinical trials are currently underway in each of these categories. For this reason, support for this sector from both private and public investors is particularly important. It is today that we are building the future of Polish business and creating the opportunity to join the elite group of countries where new drugs are being developed to meet unmet health needs. However, success requires not only appropriate know-how and scientific knowledge, but also stable financing of projects. This risky investment, with appropriate diversification, can bring multiple profits – says Marta Winiarska, President of the Polish Association of Innovative Medical Biotechnology Companies BioInMed.

– In the days of the oil laborer, few believed that the idea of ​​enclosing light in glass was possible. Although this idea seemed crazy then, today we cannot imagine life without electric lighting. It is important that we support modern innovators. The more that despite the young age of the medical biotechnology sector, we already have examples of successful investments in Poland – Marta Winiarska summarizes.




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