Biotechnology: the next technology super-cycle?
This October marks the thirtieth anniversary of the first biotechnology drug approved for human medical use. On the 28 October 1982, the US Food and Drug Administration (FDA) approved Genentech/Lilly’s Humulin - a genetically engineered version of natural human insulin - for the treatment of diabetes.
Regulatory approval of Humulin arguably marked the start of the modern biotechnology-driven drug industry. Over the years ever more sophisticated tools and technologies for manipulating genetic material (DNA) and biological molecular processes have been developed.
These days, roughly two-thirds of all new drugs approved by the FDA have been discovered and/or developed by a biotechnology company at some stage. Several hundred new biotechnology-based drugs have now been developed, generating tens of billions of US dollars in sales annually, with several hundred more currently in clinical development. Biotechnology has “come of age”, and is now a major global growth industry.
In recent years investors have witnessed multiple positive clinical data and regulatory approvals for exciting new drugs to treat diseases such as hepatitis, multiple sclerosis, prostate cancer and cystic fibrosis. Highly effective drugs to treat these diseases represent multi-billion dollar commercial opportunities for the biotechnology companies that have successfully developed them.
It must also be remembered that outside of medicine, over the past few decades biotechnology has already transformed agriculture - millions of farmers worldwide now use biotechnology-derived products. Biotechnology is also now widely used in hundreds of industrial manufacturing processes.
The biotechnology industry has grown and developed hugely over the past thirty years. Yet it could be argued that its current and likely future socio-economic influence is unmatched by its current status within the investment community. There’s a strong case to be made that biotechnology is emerging as the next dominant technology “super-cycle” - one of a scale, importance, and profoundness similar in size to multi-decade technology super-cycles that defined previous historical socio-economic era, and quite literally, transformed the world and human experience within it.
If the analogy holds up, then we are currently embarked on a major biotechnology-driven technology “super-cycle” - one where the application of biotechnology will determine and define our economic future as the global human population begins to grapple with the economic challenges of demographic ageing, increased disease burden caused by modern lifestyles, increasing energy consumption and question marks over resource sustainability.
As the basis for the next technology “super-cycle”, if biotechnology is to have such a profound influence over the global economic system in the coming years, for a sector that is so over-looked, and certainly under-owned by the investing majority, this means that it deserves much closer inspection for those seeking long-term investment themes.
David Pinniger is investment manager of the International Biotechnology Trust