What are the most compelling sectors for investment in biotech today? There are really two kinds of companies in the biotech sector. First are the product companies, which are developing new pharmaceuticals, and are currently in clinical trials. Second, there are the companies that are developing technologies and tools that are sold to biotech and pharmaceutical companies to accelerate their drug discovery efforts. And bioinformatics companies fall into that second category.
The product companies are the most exciting in the next five years because of the number of new drug candidates that are in clinical trials now that are in later stages of human testing. The expectation is that of the 350 drugs that the biopharmaceutical industry has put into phase three clinical trials, at least a third will eventually make it to market. Potentially we could have over 100 new biotech drugs in the marketplace in the next several years. So a lot of diseases that have so far been unmet or poorly addressed — from cancer to cardiovascular disease — could lead to a broad range of companies (both public and private).

If you look back over the history of biotech, the ability to produce novel pharmaceuticals is really what has been rewarded by the financial community. Companies like Amgen or Genentech have gone from a $100 million market cap at IPO to two or four billion in market cap on the basis of a single successful drug.

One of the most exciting areas that is still five to ten years away is the field of proteomics — which is the ability to understand the proteins that will be derived from understanding the human gene sequence. Because a small portion of all of the human genes encode for valuable proteins, we have the difficult task of going from identifying a gene to producing a protein. Unlike genes, which are sequenced in a linear fashion, proteins are three dimensional in their structure, and they fold in many different ways. The field of proteomics is where a lot of money is being invested, and that’s the long-term goal for the industry — to identify the proteins that are implicated in disease and be able to address those proteins.