Skip to main content


Audience for the document: Share Class: Language of the document:


Share Class: Language of the document:

Change Details

If you need to change your email address please contact us.
You are ready to start subscribing.
Get started by going to our products or insights section to follow what you're interested in.

Products Insights

GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

Other Literature

You have successfully subscribed.

Notify me by email when
regular data and commentary is available
exceptional commentary is available
new articles become available

Thank you for your continued interest

Please enter valid search characters

October 2021 / U.S. EQUITIES

Sector Insights: The Three Drivers of Innovation in Biotech Stocks

Key Insights

  • Advancements in research tools, increasing investment capital, and a maturing contract research and development field are driving biotech innovation.
  • The net result of having better tools, more money, and more advanced capabilities has been the emergence of unique therapeutic modalities.
  • Our sector analyst is leveraging his scientific background to identify investment opportunities that he believes will shape the future of medicine.


We are in an amazing period of innovation within the biotech industry. It is being driven by a deeper understanding of biology and better elucidation of the basis of human disease. Similar to the advantages of high-definition television, better resolution of human biology is enabling the design of more effective therapies, which are resulting in better outcomes for patients.

I am an immunologist who spent years in the lab studying autoimmune diseases. In 2014, I joined T. Rowe Price to become a biotech analyst. The role lets me leverage my deep scientific training while looking broadly across the therapeutic landscape to identify investment opportunities which will help shape the future of medicine.

I see three factors responsible for driving innovation in the sector. Generally speaking, these are technological advancements in research tools, which are facilitating discovery; an increasing supply of investment capital, which is funding the development of new therapeutic approaches; and a maturing contract research and development field, which is lowering the bar to company formation and helping to democratize drug development.

Collectively, these factors are enabling innovative approaches, resulting in new company formation and investment opportunities. For instance, modalities such as cell therapy and gene therapy are providing cures for patients who otherwise would not have had treatment options just 10 years ago, while emerging approaches such as targeted protein degradation and RNA-based therapies are just beginning to show their promise. The efficiency with which COVID vaccines were developed using mRNA stands as a testament to the promise within the sector. The wealth of new technologies and their potential application bodes well for the long-term prospects for investment in biotech, and over the next 10 years I expect that we’ll see many more transformative discoveries.

Let’s dive a bit deeper into why I think these developments are notable.

First, the effects of the advances in research cannot be overstated. New and better research tools are accelerating the pace of discovery and enhancing our ability to resolve complex biology. And as resolution of the underlying biology improves, drug developers can use that information to generate novel approaches to treat disease. For example, while it took nearly 13 years and $1Bn to sequence the first human genome, that process can now be completed in less than a day for only hundreds of dollars.

Since starting the Human Genome Project, we’ve learned that a person’s genetic code may only reflect a fraction of the risk of developing a disease. As such, newer techniques that measure how genes are regulated (called transcriptomics) and the levels of protein expression (called proteomics) are being deployed to increase the resolution of these factors in healthy and diseased states. Given that we can collect and analyze these data on thousands of individuals in parallel, we are making breakthroughs in the understanding disease biology.

We are also seeing new research tools emerge that are enhancing our ability to test scientific hypotheses. For instance, the discovery that CRISPR and Cas9, which are components of the immune system of bacteria, can be used to cut DNA in a directed way is being used by scientists to interrogate the role of specific genes in biological processes in ways that would have previously taken years to determine. Advances in microscopy techniques are enhancing the ability visualize proteins in their native state and enabling more precise measurement of protein structure. Since highly effective drugs interact with their protein targets with very specific geometry, a high-resolution view of the protein structure can facilitate more precise drug development.

Another big driver of innovation has been the capital markets, which have generously supported early-stage biotech for the last several years, enabling new technologies and approaches to advance. Successful biotech companies will take many years to develop their first product and begin generating revenues. Thus, in order to fund their development costs, they rely upon selling equity to investors. Early on, equity sales are done in the private markets where money is supplied primarily by venture capital investors. When those technologies are matured, usually by generating proof-of-concept data in animal studies or in humans, those companies attempt to access the public markets through an initial public offering. This process has been particularly robust for the last several years. We’ve also seen additional biotech companies founded by venture investors at a similar pace to what’s occurring in the public markets. The trend of new company formation has been increasing over the past several years but has been accelerated by the COVID-19 pandemic, which has shone a spotlight on some of the innovation within the sector and has drawn even more investment into early-stage biotech. Many companies which lack proof-of-concept data have received significant funding to develop their technologies as investors have looked for more innovative ideas to fund.

But ultimately this funding environment presents the biggest challenge within the sector, namely that there is a growing number of highly technical companies with largely idiosyncratic risk that are fighting for limited mindshare amongst investors and competing in overlapping domains. Having a scientific background helps me to understand some of the nuances of the programs and often helps me to access the complicated biology being addressed. There still is a significant amount which remains unknown as companies forge a new path, and therefore it is important to be humble about the limits of your knowledge.

The last big enabler of innovation is the democratization of drug development made possible by artificial intelligence and machine learning, as well as maturation of the contract research (CRO) and contract development (CDMO) sector. Artificial intelligence and machine learning are being leveraged to both expedite discovery and improve drug design with the potential to provide better selectivity and safety than has been achieved previously. CROs and CDMOs have made it easier for companies to outsource research and development activities. Early-stage science can be carried out by professional contract research organizations, allowing new ideas to be tested and validated in a capital-efficient manner, which lowers the risks behind early-stage science. Innovators with promising ideas don’t need to hire full teams and form companies to test promising ideas. Lastly, many early-stage companies leverage CDMOs to manufacture drugs early in development so that they don’t need to build out internal manufacturing, soaking up valuable capital.

The net result of having better tools, more money, and more advanced capabilities at an early stage in the company life cycle has been the emergence of unique therapeutic modalities.

Take gene therapy, for example, which has the potential to correct monogenic diseases. There are more than 5,000 distinct human diseases that are caused by a mutation in a single, specific gene. When the specific gene is mutated, it results in a nonfunctional protein, which can give rise to an incurable disease. In many cases, there are no treatment options because the protein which is mutated is essential for cell survival and cannot be replaced. Gene therapies leverage the natural ability of a virus to get inside of a human cell to deliver a healthy copy of the missing gene and restore functional protein expression. These early approaches have been cultivated in labs within academic centers, which don’t have the financial resources to turn these scientific discoveries into real therapies for patients. These discoveries need to be recognized by venture capitalists who provide initial funding to form companies around these ideas. With capital, these newly formed companies can begin leveraging contract research and development organizations to help run clinical trials and focus on building out FDA-quality drug manufacturing without the need for full teams of researchers, ensuring that these therapies can continue to progress.


This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

USA—Issued in the USA by T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, MD, 21202, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only.

© 2021 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

Previous Article


Innovations in Sustainability Are Reshaping the Future of Plastic
Next Article

October 2021 / VIDEO

Inflation, Central Bank Policy, and the Implications for Emerging Markets

You are now leaving the T. Rowe Price website

T. Rowe Price is not responsible for the content of third party websites, including any performance data contained within them. Past performance cannot guarantee future results.