Healthcare capitalism: Investing in cures

The Covid-19 pandemic has put Big Pharma in the spotlight again. Investors in healthcare and biotech companies are potentially backing developments that could determine the future of the human race, but what does investing in ‘cures’ mean from a cashflow point of view?

The Genome Revolution, a 2018 Goldman Sachs report, states that “the potential to deliver ‘one shot cures’ is one of the most attractive aspects of gene therapy”.

It goes on to say that “such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies”.

Everybody ultimately wants to see cures for serious life-threatening illnesses, but the underlying science is not that easy, says David Pinniger, fund manager on investment firm Polar Capital’s healthcare team. 

“What’s difficult is that the biology, even in straightforward situations, is often very complex,” he explains.

“All these gene therapy approaches and gene editing technologies hold phenomenal promise to make durable and meaningful positive clinical benefits for patients, but the C-word – cure – is a big word to use.”

Scientists may be years away from developing ‘one shot cures’, but in the words of Nina Deka, senior research analyst at index provider Robo Global, the investment opportunities are exploding. 

Healthcare technology continues to advance. It is now possible to detect whether someone is susceptible to certain diseases, just by looking at their genetic code, for example.

“What do we do with that information? That opens up a huge industry for pharma companies – biotech – to make the drug that treats that one cancer with that one gene; enter the world of precision medicine,” says Deka.

The healthcare specialist adds that many problems in the industry stem from the fact that “a lot of companies and providers are just trying to get up to speed with today’s technology”.

The potentials in the biotech realm are plenty, but capital plays a crucial role in taking innovation from idea to design.

So what would the potential for one-off cures mean for investors seeking sustained cashflow? For Michael Johnson, group head of institutional services at corporate services firm Crestbridge, this is difficult to predict. 

“We don’t yet know whether a possible Covid vaccine, for example, will be a one-off or require everyone to have vaccinations each and every year,” he says.

“However, in this sector very often a company that is able to pioneer a first is able to come out with a second, more profitable product. The first product may not even generate that much of a return, but will have succeeded jumping a research or regulatory hurdle of some kind.”

Read more about biotech and healthcare investment here: Private markets: Biotech and healthcare funds point to the future

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