Happy new year!
First, I want to share my appreciation to the subscribers of this newsletter, and for those who were kind enough to offer feedback and suggestions for improvements. Over the last few months, the email list has grown from 0 to over 80! The Ergo Bio Insights audience includes graduate and medical students, postdoctoral scholars, scientists and engineers from industry, entrepreneurs and directors from startups, and investors from small and large funds! Also, thank you for those who reached out to make a connection!
To start the year off, I’m sharing brief notes on the biotechnology sector in 2020. If you’re interested, I made a slide deck similar to a “Year-in-review: 2019” for the Mythos fund. In the report are some analyses on biotech companies and innovation.
Highlights and takeaways
The COVID-19 pandemic disrupted everyday life, but spurred numerous healthcare innovations.
Accompanying the recovery of the stock market was a tsunami of IPOs in the life sciences and healthcare sector. Collectively, the offerings exceeded $26B. Five of these companies had each raised over $1B.
Stanford’s biotech stock portfolio had several excellent investments, including remarkable M&A targets like Eidos Therapeutics, Forty Seven, and Livongo.
Expanding the Ergo Bio Insights as a resource hub and continuing consulting services for startups and investors.
Innovations spurred by the COVID-19 pandemic
Unquestionably, 2020 was a year of extraordinary challenges and unusual circumstances. Yet, these difficult times had become a significant motivator for embracing new approaches to providing healthcare. One major change was the virtualization of healthcare. During March, Teladoc Health observed a rapid climb in virtual medical visits (ref). Some providers like the Butler Health System closed their hospitals and instead deployed Zoom for primary and urgent care (ref). Drive-through screening was also adopted in several communities for efficient and safe COVID-19 screening (ref).
Source: Kwon et al. 2020
The pharmaceutical industry also quickly mobilized to develop drugs to combat the pandemic. Numerous vaccine candidates of different types (e.g. live attenuated, protein subunit, viral vector, DNA, RNA) were being tested in clinical trials (ref). In less than a year (!!), two COVID-19 vaccines from Moderna and BioNTech/Pfizer had been authorized by the FDA. Notably, these were the first mRNA products to get any sort of regulatory authorization in the USA. Check out this Ergo Bio Insights article on mRNA vaccines.
Source: Ball 2020
Explosive growth in life sciences and healthcare funding
This year, we experienced a market-wide collapse in March. However, some sectors quickly recovered and even exceeded all-time highs. Compared to the general market, the biotech sector had an aggressive climb and indexes like the $XBI yielded 50% return. With the rapidly recovering stock markets, there was an explosion in life sciences and healthcare IPOs.
Source: Yahoo Finance
I sorted through the NASDAQ database for IPOs related to the life sciences and found that over $26B was raised by 120 companies going public this year. Accompanying these IPOs were at least 32 SPACs, and I highly recommend reading Bruce Booth’s article “It’s Raining Biotech SPACs”. Briefly, SPACs are blank check companies that conduct an IPO for the purpose of later acquiring an existing company. This can be a cheaper and faster process for a private company to become publicly-traded. For retail investors, buying shares in SPACs is essentially a bet on the fund managers making appropriate acquisitions.
Five life sciences companies had raised over $1B in their IPO: Royalty Pharma ($RPRX), Maravai LifeSciences ($MRVI), PPD ($PPD), GoodRx ($GDRX), and Sotera Health ($SHC). Royalty Pharma funds biotechnology R&D and purchases royalty interests in pharmaceuticals. Maravai generates products to support drug development, including those for mRNA vaccines. PPD started as a one-person consulting firm and is now a large contract research organization (CRO). GoodRx offers a digital platform which facilitates healthcare transparency and negotiates lower prescription drug costs. Sotera Health provides sterilization, lab testing, and advisory services for the healthcare industry.
Stanford’s public equity holdings in healthcare
I reorganized the last four quarterly reports of Stanford’s holdings specific to biotech equities. Generally, Stanford had $70-$140M invested in biotech stocks. Many of these shares were granted through out-licensing technology and supporting startups. Interestingly, multiple positions in the portfolio were M&A targets this year: Eidos Therapeutics ($EIDX), Forty Seven ($FTSV), and Livongo ($LVGO). Eidos is a subsidiary of BridgeBio Pharma ($BBIO), which had held 36.3% at the time of announcing the merger (ref). BridgeBio acquired the remaining outstanding shares of Eidos for 1.85 shares of BridgeBio stock and $73.26 in cash per share. Gilead Sciences ($GILD) acquired Forty Seven for $4.9B in an all cash agreement (ref). Teledoc Health ($TDOC) acquired Livongo for 0.592 shares of Teledoc stock and $11.33 in cash per share (ref). Stanford did not appear to hold onto Teledoc shares. Recently, Stanford reported having positions in three companies which IPO’d this year: Aditx Therapeutics, ALX Oncology, and Annexon. In particular, Stanford has a large stake in ALX Oncology, a company developing CD47 blockade as a cancer therapy. Check out this Ergo Bio Insights article on another CD47 company.
Expanding Ergo Bio Insights as a resource hub and continuing consulting services
The Insights resource hub was started late last year and articles are posted about 1-2 times each month. The goal was to organize information and share findings related to biotechnology innovation and business. 7 articles on a variety of biotech topics were generated last year!
Advances: mRNA vaccines are on the verge of realization
Advances: Protein folding with artificial intelligence from DeepMind’s AlphaFold2
Deal: Pfizer’s equity investment in Trillium Therapeutics
Deal: Biogen to co-develop and co-commercialize LRRK2 inhibitors with Denali Therapeutics
Meta: Due diligence in biotech equity investments
Meta: Valuation and trading of competing biotech companies
Noteworthy: Gilead Sciences at the center of biotechnology in 2020
Going forward, the resource hub will be having additional contributing authors and this will help to improve the quality and depth of the articles. We’re also continuing to offer consulting services and can arrange project teams for short-term and long-term engagements. Please feel welcome to reach out regarding contributing or consulting!
Author information
Ergo Bio closely follows innovation in the biotechnology space and evaluates interesting drugs and deals. It is run by Vandon T Duong (LinkedIn), feel free to connect! I am a biotech enthusiast and a molecular engineer by training. I am also an avid consumer of news and research around precision medicine.
Ergo Bio pages
Disclaimer
This article serves informational purposes only and should be treated strictly as educational material, not as investment recommendation or legal advice. The information presented may be inaccurate or out-of-date. The contributing authors and editors disclaim liability for any errors or omissions. Any opinions expressed may change without notice. Ergo Bio LLC reserves all rights to the content generated through this resource hub (Ergo Bio Insights).