Biotechnology & Technology
Solutions

The fourth industrial revolution is blurring the lines between the physical, digital and biological spaces in global industries, and Biotechnology and Technology Solutions, are at the forefront of it.

The Biotechnology Evolution

 
1.
Harnessing technological leaps in cellular and biomolecular processes to develop expertise and products, improving lives and the health of our planet.

Biology & Technology Fusion

2.
Advancements in areas such as data processing, cloud computing, machine learning and AI is paving way for a fusion of Biology and Technology.
3.
The Industry has Exploded with New Drug Discovery Platforms and Technologies
mRNA
Vaccines
Small
molecule
precision
oncology
Oncology
cell therapy
(CAR-T, NK, TILs)
Antibody-
drug
conjugates
Immuno-
Oncology
CRISPR Cas9
Gene Editing
4.
The Biotechnology Opportunity

Investors now have a larger opportunity set to position themselves in medical biotech: Absolute growth in terms of number and market capitalisation of biotechnology companies suggests that there is a high demand in the medical technology and novel drugs.

Growth of Biotechnology Companies in the U.S.

 

Source: S&P Dow Jones Indices, as of 31 March 2022. Data from Jan 2009 to Mar 2022. Past performance is no guarantee of future results. Chart is provided for illustrative purpose only. Number of biotech companies in the U.S. as measured by the S&P Total Market Index.

Why Tech is Here to Stay?

From process automation to big data, digitalisation shapes our world today.

The coronavirus crisis has driven a long-term, structural acceleration of digital transformation (DT) and improved quality of businesses in the sector.

1.
Key Pillars of Digital Transformation
2.
Technology Firms Continue to Dominate

Technology sector is dominating the equity markets and will continue to grow as a result of the digital transformation megatrend. To date, technology stocks have been dramatically outperforming the wider markets.

Top 10 Companies by Market Capitalisation (in USD billion)
As of 31 March 2022
80%

are technology related companies

Technology Other

Source: Bloomberg, as of 31 March 2022. These securities do not represent all of the securities purchased, sold or recommended for clients, and the reader should not assume that investment in the securities listed was or will be profitable. For illustrative/discussion purposes only. It is not a recommendation to purchase, sell or hold any particular security. It is neither indicative of any portfolio holdings at any one time nor reflective of current or future portfolio holdings.

3.
Through investing in Technology,
investors are rewarded with:

Secular Growth

 
3rd fastest growing S&P 500 sector by estimated revenue

Good Quality

 
3rd most profitable sector across S&P 500 by 3-Yr Average EBITDA margin

Strong Balance Sheet

 
Least net debt sector across S&P 500

Source: Bloomberg, as of 31 March 2022. EBITDA margin is derived from the earnings before interest, tax, depreciation and amortization as a percentage of the total revenue. Price-to-Earnings Ratio is based on an estimate of Next-Twelve-Months Earnings Per Share (NTM EPS). Copyright © 2022, S&P Dow Jones Indices LLC. All rights reserved.

Outlook for Biotechnology &
Technology Sectors

Aging Population Drives Healthcare Demand

Percentage of total annual expenditures

Under 25
3.8%
25–34
5.5%
35–44
6.4%
45–54
6.9%
55–64
8.6%
65+
13.6%
People spend more on healthcare as they age.

There is no assurance that any projection, estimate or forecast will be realised.
Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2019 Edition, as of 28 August 2019.

Biotech Offers Attractive Fundamentals
Research and Development spending has more than quadrupled (4x) in the past 10 years…
2011
$257B
(USD)
$56B
(USD)
 
2011
$213
$762
and sales-per-share has more than tripled (3x), which helps to cover the increased costs.

Source: Bloomberg LP. As of 31 December 2021. Updated Annually. Based on holdings in the NASDAQ Biotechnology Index from 2011 through 2021.

New Drug Innovation Remains the Key to
Biotech Sector Growth

New drug technologies offer new treatment options for patients, and advances in healthcare.

Annual FDA Drug Approvals

 

Source: Food and Drug Administration’s (FDA) Center for Drug Evaluation and Research (CDER). *As of 31 March 2022.

Three Leading Growth Themes for Technology

Evolution of Software Delivery

Cloud Computing Services

Storing and accessing data and applications over the Internet instead of on local compute resources.
Why?
 Top priority for many companies: global, scalable, flexible, cost effcient
 Cloud services spending estimated to surpass $1 trillion in 2024 while sustaining a double-digit CAGR of 15.7%1
 Representative companies: Amazon, Google, Microsoft
Leading Industry Growth Themes

The Internet Of Things

Adding Internet capability to devices beyond just computers and smart phones.
Why?
 Immensely disruptive with potential for big winners
 Potential economic impact2: $11 trillion per year by 2025
 Connected devices3:
2006: 2 billion
2023: 299 billion
Financial Services Transformation

Fintech, Digital Payments, E-commerce

Innovation disrupting traditional banking—mobile banking, digital payments/wallets, social lending.
Why?
 Global financial services market US$20+ trillion
 Fintech future:
data-driven, personal, real time, social
 Sales growth exceeds retail growth4:
36.7% vs 3.25% year-over-year
 Digital payments/currency:
payment networks, blockchain

There is no assurance that any projection, estimate or forecast will be realised.

  1. Source: IDC., October 15, 2020. Compound annual growth rate (CAGR) is the rate of return required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s lifespan. There is no assurance that any projection, estimate or forecast will be realised. References to particular securities are only for the limited purpose of illustrating general market or economic conditions and are not recommendations to buy or sell a security or an indication of any portfolio holdings at any one time.
  2. Source for economic impact: McKinsey & Company. The Internet of Things: Mapping the Value Beyond the Hype June 2015.
  3. Source for connected devices: Intel Corp. A guide to the Internet of Things: Intel, IDC, United Nations 2016.
  4. Source for sales growth: U.S. Census Bureau. Based on U.S. sales, year-over-year, as of 31 December 2020. Quarterly year-over-year change, as of 2020 preliminary estimate. There is no assurance that any projection, estimate or forecast will be realised. References to particular securities are only for the limited purpose of illustrating general market or economic conditions and are not recommendations to buy or sell a security or an indication of any portfolio holdings.

How Opportunities Are Evaluated

Growth

Focus on companies with the potential to produce sustainable revenue, earnings, and cash flow growth

Quality

Identify high-quality companies with strong management teams and financial strength

Valuation

Assess if the growth opportunity is already reflected in the stock price