If you’re thinking about ways to expand your portfolio, one route to consider is investing in the smaller to medium sized biotech companies out there. In a story earlier this year, Detroit was heralded for its distinction as one of the biggest biotechnology hubs in the country. Now, while many of the things we have read in the news about Detroit in the past year haven’t been the best, one area Detroit has shined is in biotech startups. The reasons for this are twofold:
First, a major portion of the startup companies out there are focusing efforts on stem cells and regenerative medicine. Michigan has very lenient laws related to embryonic stem cell research. Second, Detroit has a low cost structure. The situation in Detroit is just one example of the emergence of startup biotech companies that are drawing the attention of larger pharmaceutical companies out there.
In 2011, the National Defense University conducted a study on the United States biotechnology industry and concluded that the industry as a whole made nearly $93 billion in 2010. And these numbers should continue as the study also indicated short term industry growth of at least nine percent. This growth is due in part to the advancements made by these startups as well as the demand for more drugs. According to a study from Mayo Clinic researchers, seven out of ten Americans take at least one prescription drug.
Given the short term growth prospects and demand from Americans for new drugs to help maintain chronic conditions, larger pharmaceutical companies will be on the lookout for smaller research teams and companies that are making breakthroughs with their respective work. If you’re looking for new investment opportunities, companies that offer potential with dynamic new research and innovative biotech products should certainly be considered as these are the companies that could be acquired.
For more insight on this, here’s what Ian Mausner of J.S. Oliver Capital Management had to say on the subject:
“Large cap Pharma is desperate for new drugs and the small to medium sized biotech firms have them. So the large pharmaceutical companies are systematically buying all of the small and medium sized biotech companies. One can’t know, of course, which ones they are going to buy but the trend is strong and long lasting so buying the industry through IBB and XBI is the way to go. It has been extremely profitable over the last year and we expect it to continue to be so for at least several more years.”
For more information on these and other investment opportunities, follow Ian Mausner on Twitter at @imausner.