KUALA LUMPUR: Franklin Templeton remains positive on the biotechnology sector, as fundamentals remain intact and global megatrends are unchanged.
Franklin Equity Group senior vice president, director of equity research and portfolio manager Evan McCulloch said the company seen the sector being driven by three megatrends — demographics, increase in research and development (R&D) investments and activities and innovation.
"The population of the largest market of healthcare products are getting older. This includes the US of which elderly population aged over 65, is estimated to grow to 20.3 per cent in 2030 from 14.6 per cent in 2015. Likewise in China, this age demographic population is expected to grow to 16.9 per cent from 9.3 per cent over the same period.
"As you move through progressively older age group, you will see older cohorts present an increasing proportion of overall healthcare expenditures.
"This demographic change has driven a very healthy growth of pharmaceutical healthcare expenditures. Over the past 20 years, this has grown over single digit growth rate," he said during Franklin Templeton's Innovation in Biotechnology amidst Covid-19 webinar held recently.
He said the biotechnology sector sales growth has outpaced other sectors due to the strong product cycle that the industry saw over the period between 2012 to 2017, with a compound annual growth rate (CAGR) of 15.01 per cent.
As compared to other sectors, healthcare recorded a CAGR of 8.26 per cent, information technology at 6.47 per cent, consumer staples at 3.64 per cent, and negative growth for utilities (-2.04 per cent), consumer services (-2.8 per cent) and energy (2.91 per cent).
Besides that, he said R&D spending has more than tripled in the past 10 years to US$201 million in 2019 from US$53 million in 2009.
McCulloch said the biotechnology sector has been resilient to the impact of Covid-19.
He said earlier on, the company saw the impact of delays in clinical trial timelines and regulatory approvals, softer drug sales and new drug launches as well as slowdown in merger and acquisition activity.
He said however, these activities has started to pick up again, especially in drug sales, as the industry is moving towards virtual marketing and slowly starting to conduct physical meetings as movement restriction eased.
"We think we have lived through the worst of Covid-19 impact and our long term view on the sector is unchanged," he said.
Meanwhile, Franklin Equity Group research analyst and portfolio manager Wendy Lam said currently, there are over 180 vaccine candidates in various stages of development; most are early and still in pre-clinical development.
She said most of these candidates are based on novel technologies (mRNA vaccines, adenovirus vaccines) developed by new entrants with limited vaccine experience (Moderna, BioNTech).
Besides that, she said several established vaccine developers such as Sanofi, Merck and Novavax have candidates already in or about to enter human trials.
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