If you’re an investor or someone who works in the biotech industry, your best move would be to flock to a smaller firm with a new drug therapy on the market. This is where Wall Street is most giddy within the biotech world, and it is forcing Big Pharma to make buyouts and acquire startup companies to attain new patents and access to emerging therapies.
Some banks and underwriters are hopeful of this biotech boom, while others are more cautionary in future projections. But all signs point to a good year for the biotech field in 2014.
This is contingent upon a number of factors, including the Federal Reserve’s policy of injecting monthly stimulus funds into the economy.
Doubt has been cast over whether or not Janet Yellen will taper the program – although there are signals that she may continue the status quo.
And even though the Fed’s policy is a band aid solution, it is important because the cash injections have placed more investors at ease when delving into the market, which in turn has encouraged more companies to go public.
34 biotech firms debuted in 2013, with another 35 to 40 projected in 2014, provided the Fed program continues.
If the Fed program ends, that number could very well drop to 20, Boston Globe reports.
And things could get worse in the event of government cutbacks in health services in response to economic turmoil and, most importantly, venture firms dumping IPO stocks if the market seems unstable.
But there is a light at the end of the tunnel, since new investors can potentially take the place of venture firms. As long as smaller companies continue to engage in meaningful and successful research, the industry will have no shortage of investors.
Some of the most vigorous research has been in the area of slowing down tumor growth and alleviating debilitating symptoms for sickle cell anemia and leukemia among other diseases.
For instance, Amgen (NASDAQ: AMGN) made a $17 billion buyout that will give it access to such drugs that treat bone marrow cancer.
Any emerging drug that treats anything related to cancer, heart disease, or blood disorders is a company worth looking into, since Big Pharma is doing the same. With patents set to expire and less innovation from the big fish, these larger companies are simply acquiring their smaller competitors.
But as of now, smaller companies hold most of the cards, since many of them are doing just fine on their own and have the power to reject buyout offers from big companies.
With the FDA initiative to get life-saving drugs on the market much faster, the wind is at the back of small companies with the yearning to make it big in the biotech world.
We’re not going to see Big Pharma collapse, since these companies may be too big to fail, so to speak, but they are going to struggle as these small companies move ahead. Smaller companies face the most pressure in continuing to wow investors and companies in order remain relevant.
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Onyx (NASDAQ: ONXX) is one company that previously rejected a buyout offer from Amgen, forcing the large company to up the ante with a better offer. Onyx has access to multiple drugs on the market pertaining to cancer therapy.
Infinity Pharmaceuticals (NASDAQ: INFI), based out of Massachusetts, is in the midst of developing its drug for leukemia, and it has already heightened in value by over 50 percent in the last few years.
Pharmacyclics Inc. (NASDAQ: PCYC) is developing a new drug that will tackle cell lymphoma. This biotech company has already leapt to a value over $9 billion through its work, skyrocketing 734 percent over two years.
Internationally, the biotech industry grew 353 percent since 2012.
And aside from the field of biotech, biosimilars are also making headway within the field – not as much as analysts had hoped, but it is another avenue of investment in the future. Biosimilars could give way to cheaper developments for drug therapies.
The trend started in Europe, but it struggled to take off due to economic conditions. In the U.S., regulations have not been finalized to allow the use of these drugs. But once they are, the U.S. can adopt these drugs should smaller biotech companies begin struggle with innovation.
Still, creativity within smaller companies is not likely to stop anytime soon.
And even though a fair number of Big Pharma companies are doing well on the IPO market, smaller companies are taking up most of the excitement.
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