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November 11, 2024
Biotech’s Essential Supply Chain
Early this year, we shared an investment idea on Healthcare Powered by AI. Today, the focus is on the biotechnology suppliers for this industry.
As investors, it’s almost an impossible task to find who is bringing to light the next life-saving medication or a cancer cure, not to mention the amount of time and money dedicated to that – the dispersion of outcomes is too large. However, we still want exposure to the growth potential coming from this highly competitive business. It is known that companies in this business invest a huge amount of money in research & development and in the manufacturing of medicine, the latter being our point of interest for this investment idea. The global biotechnology market size accounted for USD 1.55 trillion in 2024 and is expected to reach around USD 4.61 trillion by 2034, expanding at a CAGR of 11.5% from 2024 to 2034, according to Precedence Research. By application, the bio-pharmacy segment alone has captured a 41.73% revenue share in 2023.
One key characteristic the companies in this sector have as a competitive advantage is the market/supplier power they have by the nature of drug development and approvals with the US Food & Drug Administration (FDA) agency (and other equivalent agencies in other countries). The agency does not only approve the product or drug; it also approves the end-to-end process, including the specific cells, antibodies, bioreactors, equipment, and more. In other words, all these supplies will necessarily be provided for several years or decades to avoid any change or impact on the end consumer, which also means low competition with a high barrier to entry and almost no threat of substitutes.
Among the few main companies in the world that lead the supply of equipment and raw materials to the whole industry, there are 3 names that bring value to our structured product idea: Thermo Fisher Scientific Inc. (TMO UN), Merck KGaA (MRK GY) and Sartorius Stedim Biotech (DIM FP). These companies have a diversified portfolio in areas like bioprocessing, molecular diagnostics, and lab automation, which positions them as integral players across multiple phases of drug development, from R&D to commercialisation. This is key for supporting clinical trials and manufacturing processes for biotech firms.
Drug approval is a significant growth driver for these suppliers. In fact, as more drugs are approved, especially biologics and cell therapies, the demand for high-quality bioprocessing tools, reagents, and equipment surges. A consistent flow of FDA approvals sustains and increases the need for such technologies, creating a symbiotic relationship between biotech suppliers and drug developers.
But why these companies?
- The three stocks selected for the basket optimises the coupon, among five of the biggest companies in the biomanufacturing supply industry, together with Danaher and Agilent Tech.
- Sartorius Stedim Biotech, for instance, specialises in single-use bioreactors and advanced filtration and fluid management systems used in the manufacturing of biologic drugs.
- Similarly, Merck provides bioprocessing products, including filters, media, and cell culture solutions, enabling key stages of biomanufacturing and R&D.
- Thermo Fisher is a global leader in biotechnology and life sciences, offering a range of products, including lab equipment, diagnostics, and contract manufacturing for biologics. Its size, integration, and scale make it essential to the biotech and pharma supply chains.
The increasing complexity of biopharmaceuticals, such as personalised medicine and gene therapies, further enhances the long-term growth prospects for these suppliers. The continuous evolution in drug discovery and manufacturing techniques requires cutting-edge technologies, which Thermo Fisher, Merck, and Sartorius provide. As a result, they are well-positioned to benefit from ongoing advances in biotech innovation and the expanding global pipeline.
BRC Autocallable | Product Snapshot
For informational purposes only. Not investment advice.
Insights
November 11, 2024
Biotech’s Essential Supply Chain
Early this year, we shared an investment idea on Healthcare Powered by AI. Today, the focus is on the biotechnology suppliers for this industry.
As investors, it’s almost an impossible task to find who is bringing to light the next life-saving medication or a cancer cure, not to mention the amount of time and money dedicated to that – the dispersion of outcomes is too large. However, we still want exposure to the growth potential coming from this highly competitive business. It is known that companies in this business invest a huge amount of money in research & development and in the manufacturing of medicine, the latter being our point of interest for this investment idea. The global biotechnology market size accounted for USD 1.55 trillion in 2024 and is expected to reach around USD 4.61 trillion by 2034, expanding at a CAGR of 11.5% from 2024 to 2034, according to Precedence Research. By application, the bio-pharmacy segment alone has captured a 41.73% revenue share in 2023.
One key characteristic the companies in this sector have as a competitive advantage is the market/supplier power they have by the nature of drug development and approvals with the US Food & Drug Administration (FDA) agency (and other equivalent agencies in other countries). The agency does not only approve the product or drug; it also approves the end-to-end process, including the specific cells, antibodies, bioreactors, equipment, and more. In other words, all these supplies will necessarily be provided for several years or decades to avoid any change or impact on the end consumer, which also means low competition with a high barrier to entry and almost no threat of substitutes.
Among the few main companies in the world that lead the supply of equipment and raw materials to the whole industry, there are 3 names that bring value to our structured product idea: Thermo Fisher Scientific Inc. (TMO UN), Merck KGaA (MRK GY) and Sartorius Stedim Biotech (DIM FP). These companies have a diversified portfolio in areas like bioprocessing, molecular diagnostics, and lab automation, which positions them as integral players across multiple phases of drug development, from R&D to commercialisation. This is key for supporting clinical trials and manufacturing processes for biotech firms.
Drug approval is a significant growth driver for these suppliers. In fact, as more drugs are approved, especially biologics and cell therapies, the demand for high-quality bioprocessing tools, reagents, and equipment surges. A consistent flow of FDA approvals sustains and increases the need for such technologies, creating a symbiotic relationship between biotech suppliers and drug developers.
But why these companies?
- The three stocks selected for the basket optimises the coupon, among five of the biggest companies in the biomanufacturing supply industry, together with Danaher and Agilent Tech.
- Sartorius Stedim Biotech, for instance, specialises in single-use bioreactors and advanced filtration and fluid management systems used in the manufacturing of biologic drugs.
- Similarly, Merck provides bioprocessing products, including filters, media, and cell culture solutions, enabling key stages of biomanufacturing and R&D.
- Thermo Fisher is a global leader in biotechnology and life sciences, offering a range of products, including lab equipment, diagnostics, and contract manufacturing for biologics. Its size, integration, and scale make it essential to the biotech and pharma supply chains.
The increasing complexity of biopharmaceuticals, such as personalised medicine and gene therapies, further enhances the long-term growth prospects for these suppliers. The continuous evolution in drug discovery and manufacturing techniques requires cutting-edge technologies, which Thermo Fisher, Merck, and Sartorius provide. As a result, they are well-positioned to benefit from ongoing advances in biotech innovation and the expanding global pipeline.
BRC Autocallable | Product Snapshot
For informational purposes only. Not investment advice.