Investing in biotech has become an increasingly attractive proposition for venture capitalists, but the sector can be hard to navigate – so we’ve enlisted one of Australia’s foremost experts in the field to share his thoughts for those in, or considering buying into, the sector.

“For those who have already deployed their funds, have the courage of your convictions and hold on because it’s just a correction,” says Matt McNamara, board director and CIO at leading biotech venture capital firm Horizon 3 Biotech.

“And for those that have available funds, it’s actually an excellent time because whether it’s the bottom or not – and no one picks the bottom – there’s better value now. So, I look at it as a great opportunity to pick up companies at better valuations than they were a year ago.”

Mr McNamara, who started studying molecular biology 40 years ago but “quickly realised I didn’t want to be wearing a white lab coat for the rest of my life”, said he decided early on to bridge the gap between science and commercialisation, resulting in a strong understanding of the sector.

Biotech is attractive for investors, Mr McNamara told Reach Markets ahead of tomorrow’s The Insider: Biotech Special Event, “because people are going to get sick, and we get sick irrespective of market cycles”.

“Whether it’s a recession or boom time, people still get sick. So there is always a demand and in the 30-odd years I’ve been involved in the healthcare sector, it’s grown at about 7% CAGR. So it’s not about to ease up,” he said.

“And the exciting thing, as far as I’m concerned, is there are countries that are now more developed and can afford the Western medicines. So it’s not just Europe and the US making up the majority of the markets, you’ve now got the likes of India, China, even Indonesia, that are coming on board and wanting the best possible medicine.”

Another highlight of biotech in a wider sense, Mr McNamara said, is the “fantastic convergence” between IT and medical devices. “IT, machine learning, artificial intelligence, the power of computers and healthcare – it’s all very exciting.”

Mr McNamara is not alone in his passion for biotech. T​​he past few years have seen a boom in funding in the sector, with venture capital companies investing more than US$52 billion in therapeutic-based biotech companies globally from 2019 to 2021.

Two-thirds of that (US$35 billion) went to start-ups with advanced platform technologies that could transform the industry.

Horizon 3 Biotech – which manages a wholesale unit trust targeting $100 million in funding and a gross return of 20% per annum – seeks to capitalise on opportunities presented by emerging biotech companies, as well as the low level of investment competition in the segment.

“We invest in later-stage companies. We choose companies that have got runs on the board, have achieved several milestones and only have one or two more milestones before they’re an attractive acquisition,” the CIO said.

Horizon 3 Biotech CIO Matt McNamara will join Prescient Therapeutics CEO Steven Yatomi-Clarke and Reach Markets MD Patrick Nelson for our The Insider: Biotech Special Event tomorrow, Thursday 21st July at 12.30pm (AEST), where the panellists will discuss how to uncover opportunities within the sector. Click here to book yourself in.

Sources:

• McKinsey & Company, What are the biotech investment themes that will shape the industry?