The Covid-19 pandemic led to an overall decline of 17.5% in the total number of foreign direct investment (FDI) projects in 2020. However, as the world reopened in 2021, investors reacted quickly and FDI levels increased by 18.1%.
As companies were keen to make up for lost time, most sectors saw their number of projects increase, including the nucleic acid therapeutics sector in the biotech space. These are primarily investment activities from organizations providing products and services related to genomics, pharmacogenomics, gene probes, genetic engineering, sequencing, synthesis and amplification of DNA or RNA, gene expression profiling and the use of antisense technology.
The spike in investment in 2021 came as messenger RNA (mRNA) Covid-19 vaccines, among the first to be licensed, were developed and made available to the general public. The speed with which mRNA platforms have been engineered to develop a panacea against the global pandemic has shed light on this highly specialized area of biomedical research. The pandemic has posed an existential risk to the human race, leading to heavy investments in this area, says Sudeep Basu, practice leader, Innovation Services at Frost and Sullivan. “We react immediately[ed] with the instinct to say that we will give everything to counter this challenge.
The pandemic has revealed the need for global public health cooperation and that there’s a lot of money to be made in developing public health solutions, says Justin Pierce, partner in the firm’s business law department. Goodwin lawyers.
GlobalData’s FDI project database shows that there were 76 projects in the nucleic acid therapies sector in 2021, up from 50 the previous year.
GlobalData is the parent company of Pharmaceutical technology.
Approximately 66% of nucleic acid therapeutics projects in 2021 were new investments, with the remainder being expansions of existing facilities.
Where are the main destinations of IDEs in nucleic acid therapies?
Western Europe was the top region to attract FDI projects in the nucleic acid-based therapies sector in 2021, with 17.6% of all announced or open projects globally. However, North America attracted the highest number of projects during the 2019-2020 period.
In 2021, the number of projects for Western Europe and North America was almost double the level received in 2019, while the number of products was more than three times higher for Asia-Pacific.
The United States remained the top destination country for FDI in nucleic acid-based therapies in 2021. It received 24 inbound projects, nearly double the level recorded in 2019.
In 2018, the U.S. government introduced the Foreign Investment Risk Review Modernization Act to strengthen the Committee on Foreign Investment in the United States (CFIUS), which involved a new non-review jurisdiction and a mandatory deposit scheme. Initially, there were concerns that this would scare away investment, especially from China-based investors, in the United States, says Pierce. Over time, however, the industry’s level of concern has leveled off because most technologies in the biotech space are not “critical technologies”, so most foreign investment in US biotech companies don’t trigger mandatory filings, Curran says.
Pioneering technological developments in cell and gene therapy have occurred primarily in the United States, Japan and Europe, Basu adds. However, while the Asia-Pacific region has seen a lot of investment in manufacturing capacity, it still lags behind in technology development, he says.
Japan was the largest source market for nucleic acid therapeutics investment in the United States, as they created 15 projects during 2019-2021.
Pharmaceutical company Takeda Pharmaceutical LLC and a subsidiary of Takeda Pharmaceutical Company Limited, a Japan-based, R&D-focused biopharmaceutical manufacturer, announced plans to invest $84 million to build a new commercial cell therapy manufacturing facility for 3,530 m2 in Lexington, MA.
Several countries, including the UK, Germany, the Netherlands, and China, also attracted a good number of nucleic acid therapeutic projects during 2019-2021. However, investments in Germany decreased in 2021 compared to previous years.
The other main destination markets for foreign investment were Japan, Canada and France during this three-year period.
What are the main commercial functions of IDEs in the field of therapeutic nucleic acids?
Manufacturing was the top business function for foreign investment in nucleic acid therapies not only in 2021, but also in the previous two years. 31 projects were created in 2021, compared to 20 in 2020 and 14 the previous year.
Key to this field is not only the production of RNA-based products, but also the manufacture of delivery vehicles such as lipid nanoparticles (LNPs) and extracellular vesicles to deliver RNA-based therapies or of DNA,” Basu explains. This area currently lacks large-scale investment, he adds.
Yet one of the projects included in this analysis illustrates how foreign investment is key here. Wacker Biotech BV, is a full-service contract manufacturer based in the Netherlands and a subsidiary of Dr. Alexander Wacker Familien GmbH, a German operator of chemical production facilities, in partnership with CordenPharma SpA, a cGMP manufacturer based in Italy , and a subsidiary of International Chemical Investors Group, a Luxembourg industrial group. This project plans to jointly strengthen research and development capabilities to develop solutions in the field of NLP formulation at their respective manufacturing sites: Wacker Biotech in Amsterdam and CordenPharma in Caponago, Italy.
Thermo Fisher Scientific Inc, the American supplier of scientific instruments, reagents, consumables and software, has also opened a new manufacturing site in Lengnau, Bern, Switzerland.
Where are the main investors for nucleic acid therapies?
Our analysis shows that the United States remained the top source market for outbound FDI in nucleic acid therapies in 2021. The number of outbound projects from the United States was 22 in 2021, compared to 8 in 2020 and 12 in 2019.
For example, Lemba LLC, a US-based biotech start-up established its operations in Nijmegen, Gelderland, Netherlands. The Company is focused on drugs that work by targeting long non-coding RNAs (lncRNAs).
Besides the United States, the other main source markets were Japan, the United Kingdom, Switzerland and Germany during this period.
What does the future hold?
In summary, the United States is the undisputed leader in terms of FDI in the therapeutic nucleic acid sector. It ranks at the top of both the inward and outward FDI charts, accounting for 35.9% of global FDI inflows and 25.6% of FDI outflows for the period 2019-2021.
The United States should continue to dominate FDI flows in this sector in the coming years, but it remains to be seen if this will continue or if we will see a slowdown. Given rising inflation and other market forces, U.S. private equity firms and venture capitalists are likely to tighten their investments this year compared to the past two years, Basu said.
However, good ideas will continue to be funded, he adds. “The only way for countries like the United States to stay ahead is to invest in new technologies and delivery platforms, and to push the boundaries of innovation, especially in the area of health,” says Basu.