How biotech is fighting the pandemic

The biotech industry can draw on an impressive arsenal of new technologies and data and thus fight against the coronavirus at the forefront.

A vaccine would of course be the most elegant way to win. And there is hope. Perhaps the most promising route for research is mRNA – here the body is essentially used as a “bioreactor” to produce a vaccine. In this process, the cells receive the molecular template (messenger RNA) that is necessary to produce virus proteins. These proteins then serve as triggers for the production of antibodies.

mRNA is a very clever process, but has never been tested. The first hurdle is that an antibody response must be raised that is strong enough. This is currently being investigated in a phase 1 study, which will take a year alone. More traditional vaccines may be developed faster, but again, it takes at least 12 months.

Different vaccine approaches

Source: Pictet Asset Management, Biocentury

A faster solution, albeit on a smaller scale, could come from therapeutics. Some biotech companies are working to produce antibodies against the corona virus in the laboratory. These antibodies are said to have a neutralizing effect – they attach to the virus surface like Velcro so that the virus cannot bind to the cells and spread throughout the body. The antibodies could be injected prophylactically into the most vulnerable. People who were already ill could also be treated with it.

An alternative to producing antibodies is to obtain them from the blood plasma of people who have been cured of the coronavirus – this approach has proven to be quite successful in the SARS epidemic.

Combating the virus and its consequences

The scientists are currently working on the development and adaptation of various drugs to combat the pandemic. Antiviral agents that stop or slow the reproduction of the virus in the body have immediate priority. One of the most advanced drugs in development is Gilead Science Inc’s Remdesivir – an intravenous drug that was originally used against Ebola but is now being tested for the treatment of coronavirus at an early stage. Clinical trial results are expected this month.

Another area of ​​research concerns the more serious complications that arise in the later stages of viral infection.

If the disease is not recognized early or effectively combated, the immune system may switch into a so-called overdrive and begin to attack the body. To suppress this immune system overreaction – by blocking the IL-6 receptor – drugs aimed at treating the disease in the later phases are aimed, such as Kevzara by Regeneron Pharmaceuticals. *

Risks and opportunities

However, it is not the case that the biotech industry can research and develop at full speed. Measures to contain the pandemic are also slowing it down. Clinical studies in humans are much more difficult due to the lockdowns, so there are delays in many studies. The distribution of new medicines has also stalled because traditional personal marketing is currently not possible. The production came to a standstill due to the temporary plant closings and the lack of raw materials – some of the large production plants for ibuprofen, for example, are located in the Chinese province of Hubei and in Lombardy in Italy. In addition, the pressure on the financial markets makes it difficult to raise new capital, which is particularly problematic for younger, less established biotech companies.

Even if possible treatment strategies against the corona virus dominate the headlines and create a euphoric mood, the companies involved will have to keep the price as low as possible, which is why – rightly so – they will not make any great profits.

Investments in the biotech industry are fraught with uncertainty – drugs can be successful or fail, patents can be granted or withdrawn. However, the industry has held up well in the past in times of market turmoil and recession (even during the global financial crisis 2008-09). This is because the demand for medicines is independent of the business cycle.

The Pictet-Biotech strategy focuses on important therapies with high effectiveness and uses an in-house scoring system that covers every medicinal product with regard to the severity of the disease to be treated, its effect, its affordability and accessibility (including the cost coverage by the health insurance companies) and the Competitive position compared to similar drugs that are already on the market or are being developed.

The portfolio includes companies that focus, among other things, on the treatment of rare diseases, oncology and central nervous system problems. In recent weeks, portfolio managers have increased allocations to some profitable large caps with a lush liquidity buffer because they are able to weather the storm. However, we are always on the lookout for new investment opportunities. As the 12-month P / E shows, the industry is cheaper than it has been for years, both nominally and in relation to the broader market.

Lydia Haueter, Senior Investment Manager at Pictet Asset Management

* Gilead and Regeneron are included in the Pictet-Biotech portfolio.

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