Investment trusts: the treatments and takeovers behind the biotech boom

What are the most exciting new technologies and treatments?

Oliver Kenyon, Senior Director at RTW Investments, manager of RTW Biotech Opportunities, said: “Oncology is probably the most active area scientifically. Antibody-drug conjugates (ADCs) and cell therapies are giving oncologists tools that would have seemed implausible a decade ago.

“But the development I find most compelling is RAS-targeted therapy. RAS mutations drive roughly 90% of pancreatic cancers, 40% of colorectal cancers, and 30% of non-small cell lung cancers. It's one of the most common drivers in all of oncology, and for decades it was considered “undruggable”. That's changing fast, and Revolution Medicines recently reported that its RAS inhibitor, daraxonrasib, doubled overall survival to 13.2 months from 6.7 months in previously treated metastatic pancreatic cancer.

“For a disease that kills most patients within a year of diagnosis, that's a meaningful shift. We think that the RAS inhibitor class is one of the more financially consequential opportunities in cancer right now and could generate north of $10 billion in annual revenue across indications.”

Chris Hollowood, Chief Executive Officer of Syncona Investment Management, which manages Syncona, said: “We are seeing the combination of genomics, gene editing and AI accelerate both the discovery and development of new medicines.

“AI is helping researchers analyse complex biological and clinical datasets and identify promising targets in a more efficient and robust way. The last decade saw the development of a huge number of new ways to make drugs; gene therapy, cell therapy, RNA, gene editing and many others. So as these new targets emerge in the next decade, developers and patients have many more ways to address them, meaning medicines will be more precise and have greater impact.”

Geoff Hsu, General Partner of OrbiMed, which manages The Biotech Growth Trust, said: “Revolution Medicines presented data at the American Society of Clinical Oncology meeting showing daraxonrasib, its oral RAS inhibitor, doubled the overall survival of patients suffering from pancreatic cancer who had failed previous chemotherapy.  This medicine will immediately become the standard of care in treating pancreatic cancer patients when it reaches the market later this year. 

Ailsa Craig, Portfolio Manager of International Biotechnology Trust, said: “We’re particularly excited by next-generation RAS pathway targeting, where therapies are now showing the potential to treat cancers that were previously deemed untreatable. This works by targeting the RAS gene mutation which drives cell multiplication while avoiding some of the unacceptable side effects of earlier attempts at RAS blockades. 

“In pancreatic ductal adenocarcinoma (PDAC) - one of the deadliest cancers with very limited options - Revolution’s drug doubled overall survival in patients whose first treatment had already failed, which we view as a landmark result and, importantly, the first time a targeted therapy has worked in this disease.

“Beyond PDAC, Revolution’s broader ‘pan-RAS’ strategy could translate into a much larger addressable market if replicated across additional tumour types.”

What conditions do you think will be treated in the next few years?

Marek Poszepczynski, Portfolio Manager of International Biotechnology Trust, said: “Chronic Myeloid Leukaemia (CML) is a likely candidate. Targeted therapies have turned CML for many patients into a condition compatible with near-normal life expectancy, and an increasing proportion of patients who achieve deep molecular responses can pursue treatment-free remission.

“We also see Multiple Myeloma moving quickly towards long-duration remissions for a growing subset of patients, supported by major advances including CAR T-cell therapies, bispecific antibodies, and antibody–drug conjugates, which are reshaping outcomes.

“A real hope would be if something works for Alzheimer’s disease. This area has been especially tough to find efficacious drugs, but the industry continues with its efforts and perhaps we will see something in the next decade or so.”

Geoff Hsu, General Partner of OrbiMed, which manages The Biotech Growth Trust, said: “Medications to treat obesity have offered revolutionary weight loss, but their effects are not purely cosmetic. These medications in clinical trials have reduced the incidence of strokes, heart attacks, and diabetes, and have helped alleviate symptoms of patients suffering from sleep apnea and osteoarthritis. The more widespread use of these medicines, while not eradicating these diseases, should lead to a significant reduction in their frequency in the future.”

Oliver Kenyon, Senior Director at RTW Investments, manager of RTW Biotech Opportunities, said: “Treatment-resistant depression. Around a third of the 300 million people living with depression globally don't respond adequately to existing antidepressants. Conventional psychiatry has largely run out of answers for that population. Psychedelic-derived medicines are starting to change that, and two companies illustrate where this is heading.

“First, GH Research, a portfolio company of ours, reported Phase 2b remission rates of between 54% and 64% by day eight for its inhaled mebufotenin candidate, GH001. The inhalation route is key as it allows for a faster, more controllable experience than oral administration. It is now targeting Phase 3 initiation in late 2026, following Food and Drug Administration alignment. 

“Compass Pathways recently hit the primary endpoint in its Phase 3 trial of COMP360, a synthetic psilocybin, in treatment-resistant depression. The company described the onset of effect as early as the next day, with responses from just one or two doses lasting at least 26 weeks. For a condition where many patients have cycled through years of medications with little benefit, that durability matters enormously. 

“The psychedelic space has attracted scepticism, but the data coming out of both programmes is the kind that changes minds. We've been treating depression by adjusting serotonin levels since the 1980s. The idea that a small number of carefully administered sessions could produce durable remission in patients who've failed multiple prior treatments is exciting, and it's starting to hold up under rigorous trial conditions.”

Chris Hollowood, Chief Executive Officer of Syncona Investment Management, which manages Syncona, said: “The options available to create an impactful medicine have never been greater. One example is the retinal disease X-linked retinitis pigmentosa, where advances in gene therapy now provide a way to restore a person’s vision which was impossible with previous treatments. These modalities finally allow us to consider modifying diseases as routine, rather than simply managing symptoms. Impact will be the greatest where breaking science aligns with a devastating disease.” 

What are the best performing companies in your portfolio and why?

Oliver Kenyon, Senior Director at RTW Investments, manager of RTW Biotech Opportunities, said: “Kailera is a good example of how we work. RTW co-founded the company alongside Bain Capital, backing it from the outset through funding rounds and a $719 million IPO, making it the largest biotech IPO on record. The stock has traded well since. 

“The company was built around ex-China rights to GLP-1 drug candidates licensed from Jiangsu Hengrui Pharmaceuticals. That's worth dwelling on for a moment. China is now the second largest source of drugs entering clinical trial pipelines globally, behind only the United States. The quality of science coming out of Chinese biotechs has improved dramatically, and the opportunity to take proven or late-stage assets and develop them for Western markets will become more common.

“The lead programme, ribupatide, is a GLP-1/GIP dual agonist that succeeded in a late-stage study in China, where participants lost an average of 18% of their body weight after 48 weeks. An oral version showed 12% average body weight loss in a Phase 2 study; an oral formulation approaching injectable efficacy would be a meaningful step forward for patient access.”

Ailsa Craig, Portfolio Manager of International Biotechnology Trust, said: “Some of our portfolio’s strongest performance has come from companies where high-quality science was validated and recognised by the market and, in several cases, by acquirers. Examples include Terns Pharmaceuticals and Vera Therapeutics, which have been notable contributors to the fund’s performance. 

“More broadly, biotech returns are often driven by a combination of clinical success and M&A. In our experience, high-quality companies with differentiated assets can attract valuation premiums, and strategic acquisitions by larger pharma have been an important source of returns across the sector in recent years. We have been successful in picking high quality, de-risked stocks which are likely to also appeal to acquirers in the pharmaceutical sector. Year to date we have had 15% of the fund acquired, compared to last year, when a total of 15% was acquired, which has significantly helped the fund’s performance.”

What is the most remarkable treatment you’ve seen in development that exhibits how far biotech science has come?

Geoff Hsu, General Partner of OrbiMed, which manages The Biotech Growth Trust, said: “Bispecific antibodies are drugs that are able to stimulate a patient’s own immune system to fight cancer. Cancer cells can evade our bodies’ natural defences. Bispecific antibodies are able to simultaneously bind to a cancer cell and a body’s immune cell, thereby allowing the immune system to recognize the tumour and eliminate it.”

Marek Poszepczynski, Portfolio Manager of International Biotechnology Trust, said: “The most striking recent example for us is, again, Revolution Medicines in pancreatic cancer. We see this as a genuine inflection point, similar in significance to early breakthroughs that unlocked progress in other previously intractable cancers.”

What are the risks of investing in the biotech sector?

Oliver Kenyon, Senior Director at RTW Investments, manager of RTW Biotech Opportunities, said: “The most obvious is binary trial risk. A drug that looks promising in Phase 2 can fail in Phase 3 for reasons that weren't predictable, and the share price consequences are severe. It's not unusual to see a company lose half its value overnight on a clinical readout. That's why it is crucial to have a solid understanding of the science to be able to better predict the likelihood of drugs passing through the various clinical stages.

“Interest rate sensitivity is a material factor as biotech valuations, particularly for clinical-stage companies, are long-duration assets. When interest rates rise, the present value of distant cash flows compresses, and the sector sells off even when the underlying science hasn't changed at all. We are active managers and not simply allocating capital – we build companies, sit on boards, and in many cases help shape the clinical strategy. That doesn't eliminate risk, but it gives us a better chance of seeing problems early.”

Geoff Hsu, General Partner of OrbiMed, which manages The Biotech Growth Trust, said: “The process of developing a drug is difficult and takes many years of research and clinical trial work to prove efficacy and safety. Young biotech companies’ fortunes are generally linked to one lead asset in development, so share prices can be volatile depending on clinical trial results or regulatory decisions for that single asset. The individual company volatility can be mitigated significantly by having a diversified portfolio of biotech holdings. We tend to focus our investments on companies whose drugs have passed the proof-of-concept stage to manage risk and maximize returns for shareholders.”

Ailsa Craig, Portfolio Manager of International Biotechnology Trust, said: “Biotech is a highly complex and fast-moving ecosystem. Key risks include:

• Clinical risk: trials can fail due to lack of efficacy or unexpected safety findings. 
• Competitive risk: a competitor may show superior efficacy, safety, dosing convenience, or a combination thereof. 
• Regulatory and policy risk: approval pathways, pricing debates, and political scrutiny can affect timelines and commercial outcomes. 
• Financing and sentiment risk: smaller companies can be sensitive to capital markets conditions, especially pre-revenue. 

“That said, the sector can offer substantial rewards for investors who can navigate these risks through deep scientific diligence, trading discipline and diversified portfolio construction.”