The Biotech Rebound Is Just Beginning

By Dr. David Eifrig, editor, Retirement Trader

"Science doesn't care what markets are doing, and science moves forward"...

Robert Nelsen, co-founder and managing director at ARCH Venture Partners, said these bold words. And we agree with his statement... to a degree.

The ugly truth is that money must also push science forward. There's always going to be politics involved, at least a little.

Fortunately, Nelsen is committed to what he believes in. He's also a bit of a magician...

If you've never heard of ARCH Venture Partners, it's one of the most aggressive venture-capital ("VC") firms in the biotech and life-sciences spaces. It was originally spun out of the University of Chicago in 1986 and has backed more than 150 companies... such as Illumina, Sage Therapeutics, Vir Biotechnology, and more.

ARCH is best known for its early investments in experimental cancer drugmaker Juno Therapeutics. The Seattle-based company was acquired by Celgene in 2018 – a deal worth more than $9 billion.

Over the past couple of years, ARCH has been doing the impossible... It has been one of the few VC firms raising money and investing in biotech.

Back in June 2022, ARCH closed a $2.98 billion fund targeted at early-stage biotech companies. It was ARCH's 12th venture fund. And it was launched even after the firm had already raised nearly $2 billion for a fund in January 2021.

If you're a biotech investor, you'll know how impressive this is.

You see, after the COVID-19 pandemic dumped money into the sector, interest dried up.

Higher interest rates pushed investors away from risky startups and saddled firms with hefty borrowing costs. Instead, VC firms have focused on helping their existing portfolios survive the bloodshed.

The days of biotechs raising cash with the snap of their fingers – even before starting a clinical trial – are gone. But as I'll explain, that's not stopping companies from investing in this innovative industry...

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A report from banking giant HSBC shows early investment in biotechnology startups was on pace to fall 40% in 2023 from the year before... and 55% from the 2021 peak. Take a look...

The bank also said that it's increasingly rare for just-launched companies to see blockbuster success in their first round of funding (that is, to win $150 million or more in Series A).

Committed investors like ARCH are still backing the space, though. They aren't letting a troubling macro environment get in the way of investing in medical breakthroughs.

ARCH has continued to fund biotechs, even amid the bear market. In fact, ARCH was the most active venture firm in the first half of 2023. It participated in seven deals total.

Here's Nelsen from a press release last year...

All the fundamental innovations in biotechnology are accelerating, with huge promise for new preventive, disease-modifying, and even curative treatments. Science doesn't care what markets are doing, and science moves forward. With over 35 years of venture experience, ARCH has been creating and consolidating companies for the long term.

Like Nelsen, we know that the world of medicine is on the verge of doing incredible things. We're seeing advances in cell and gene therapies to treat previously incurable diseases... surgical interventions that are more precise and less invasive... and diagnostics that offer early detection and better patient outcomes.

My team and I have been closely tracking the health care and biotech spaces across my suite of newsletters. And lately, we've seen things turn around for biotech companies. ARCH isn't the only one buying anymore...

The SPDR S&P Biotech Fund (XBI) has risen almost 30% over the past four months. Take a look...

XBI is still well off its 2021 highs. But it's encouraging to see investors beginning to regain interest.

Health care and biotech stocks are poised to take off in the years to come, thanks to new technologies and medicines. So if you haven't already, consider gaining some exposure to this sector today.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

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