Small-Cap Biopharmaceuticals:

The Epicenter of Medical Innovation


Key Takeaways

  • Small-cap biopharma companies have created new ways to treat life-threatening diseases and grown to become a substantial weight within the Russell 2000® Growth Index.
  • Investing in smaller biopharma companies has produced positive returns over time, though the risks are considerable.
  • Our approach to this volatile industry is to own a basket of companies that are in the latter stages of getting their drugs to market.

The Golden Age of Biopharma

Advances in science have created new ways to treat life-threatening diseases. Most of us are keenly aware of the incredible breakthroughs in COVID-19 vaccines by companies like Pfizer and Moderna. Of course, there are many other success stories. Thanks to drug discoveries over the last 40 years, the five-year survival rate for leukemia has improved from 30% to 65%, non-Hodgkin’s lymphoma from 45% to 76% and kidney cancer from 52% to 77%.1

Many of these advances have emerged from small-cap biotechnology and pharmaceutical industries (biopharma) companies. For example, Opdivo®, the immunotherapy drug that is a highly effective lung cancer treatment was discovered and partially developed by a small-cap biopharma company. And the original antiviral breakthrough drug to treat hepatitis C, SOVALDI®, was discovered and partially developed by a small-cap biopharma company before Gilead brought it to market.

Innovation is accelerating. With rapid advances in technology enabling new discoveries and increasing growth in the pipeline of new drugs, we believe we are entering a golden age of biopharma.

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Market Perspective: Small-Cap Biopharmaceuticals: The Epicenter of Medical Innovation

1 “Cancer Stat Facts,” National Cancer Institute Surveillance, Epidemiology, and End Results Program, accessed August 2, 2021.

References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.