Name: Sectors Up Close: Biotech investment during COVID 'paying off'
Uploaded: 2026-02-16T17:21:52.000Z
Duration: 6 min 10 s
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Money has been flooding into biotech and drug makers.

This is sectors up close and we're talking healthcare.

Big Pharma is flush with cash as obesity, drugs and new cancer treatments drive significant revenue.

Investors are also hoping AI can be used to discover new drugs and boost production margins.

Overall, the sector is up so far this year and seems immune to the recent sell off.

Leah Bennett is chief investment strategist at Concurrent Leo.

We've had sell offs over the last couple of weeks across the board because of worries about AI.

But is health care one sector that's set to be a winner?

Yeah, I think health care is a really interesting area that should really perform well over the next several years.

I think there's some secular changes that could play out and in particular when we're talking about health care, I think it's kind of emerging health care and biotechs.

So if we think about the period that we've been through over the last few years, I mean, there's been lots of discussion about the big tech companies that have performed so well.

But I think anytime, just kind of basic economics, you can only earn an outsized return for a certain period of time before you attract competition.

And you've seen the big tech companies really competing with themselves in the meantime, the broader market.

There are many companies that have been trading at much lower multiples.

And I think healthcare and particular biotech is just really fascinating right now.

In 2020, the industry or the sector raised about 50 billion in capital.

Obviously at the time we were really concerned about sequencing the DNA of viruses.

We were concerned about COVID and finding solutions.

But that money went to work in discovering other areas as well.

And now we're six years past that period and those funds and I think the potential productivity from those funds combined with AI making everything more efficient could really drive multiples in that area.

So how exactly is that huge investment from the COVID era paid off in new drug discovery to cope with other diseases?

You're starting to see, like mRNA for example.

Obviously they produced some vaccines for Covid, but they are definitely having the potential.

Or they're doing trials for cancer applications as well.

There's a lot more that that technology could be applied for.

Also the area that I'm most excited about is gene sequencing.

And you've seen some material information come out on the gene sequencing companies and there's multiple that exist.

And if you think about those companies, they haven't had products.

There's only one product that has been approved and on the market.

But they've been funding their pipelines during a period where interest rates have been relatively high and it's been expensive.

So a lot of them still aren't trading at valuation that I think they could be trading at.

And if you look at the next couple years, we should get some of these products actually coming to market.

And that would be very impactful for not only the industry investors, but

There's been a huge amount of M and A in this sector.

Why is big pharma acquiring so many smaller firms?

Yeah, so I think you have two things going on.

One, if you think back again, the COVID era, you had companies like Becton, Dickinson and Abbott Labs making a tremendous amount of cash through COVID test kits.

And then you look at Lilly and Novo in particular.

Lilly, the amount of capital, the amount of profits They've created through GLP1s and GLP1s being used in a different way is another great example of how you're seeing a lot of big pharma companies do very well during this period.

But Lilly, GLP1 is now half their sales, half their revenues, which is a huge number.

So if you take that, combined with the amount of drugs that are coming off patent between now and 2030, we're looking at between 250 and 300 billion in sales coming off patent.

And the only other period that we've had that's somewhat similar was 2015 through 2016, where $100 billion came off Patton.

So you have companies that are flush with clash and they're facing revenues under pressure.

And the most obvious thing is it's easier to buy than build.

And if you look at the biotech industry, their new technologies, they should have longer runways.

As it relates to some of these new products coming on the market, margins should be higher because in a lot of cases, these are going to be brand new classes of drugs.

So we've seen some consolidation, but I think consolidation is going to increase.

How can investors hope to find the next Ozempic then?

How do you pick and choose a health care investment?

Yeah, I think one of the most critical things right now, I think of 2026 as being the year of disruption.

We've gone through an interesting period again of kind of all this new technology coming out on the market.

I think across the board, it's really thinking about companies that have moats, and

I think you've got to look at companies that are doing things that are fairly unique, but

also with a trying to solve a broader problem.

And then I think looking at what companies burn rates are is exceptionally important.

Again, we should be an environment where financing becomes more attractive and less of a headwind.

It's obviously been a big headwind for biotechs in 2023, even through today.

It's just been expensive to develop products.

But I think looking for companies where that burn rate is decreasing and where there truly is a moat and less competition where they're developing and the track record of management.

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