Biotechnology is a rapidly growing area of study with the potential to improve human health, agriculture and the environment, playing a significant role in developing new drugs and vaccines. However, businesses within the sector experienced a post-pandemic slump in valuations, a problem that has been exacerbated more recently when President Trump‘s administration slashed funding for federal health agencies, such as the US Food and Drug Administration (FDA), fuelling fears of delays to drug approvals that could kickstart a selloff of biotech stocks.
Despite these challenges, Linden Thomson, senior portfolio manager at Candriam, says the long-term value proposition of the biotech sector remains intact. Here, she discusses how the sector has changed over the past 20 years, the healthcare themes the Candriam Biotechnology fund is focused on, and its engagement strategy.
How would you say the biotech sector has changed over the past 20 years?
Over the past two decades, biotech has evolved from a niche, emerging field to a vital, mature sector within healthcare. We’ve witnessed an explosion in scientific understanding and innovation, supported by strong early-stage research funding. The sector now spans hundreds of companies across numerous therapeutic areas and technological platforms, from R&D-focused businesses to fully commercialised firms.
Importantly, biotech has delivered real-world impact. We’ve seen breakthroughs such as curative treatments for hepatitis C, transformational therapies for cystic fibrosis, targeted cancer treatments, and highly effective anti-obesity drugs such as GLP-1s. However, we’re now entering a new and uncertain chapter, with shifts in the US political and regulatory environment raising concerns around scientific integrity, regulatory consistency and the long-term sustainability of the sector’s progress.
Where are you finding the best opportunities?
The best opportunities continue to lie with companies that have exceptional management teams and compelling science. We focus less on specific therapeutic areas and more on the fundamentals — are these drugs addressing unmet medical needs? Are they better than existing treatments in terms of efficacy and safety?
While innovation is key, a company’s success hinges on its ability to gain US regulatory approval and access the US commercial market. That’s become more complicated recently due to the potential for political influence on regulatory decisions and a concerning loss of expertise at the FDA. As such, the best investment opportunities are those where we can still be confident in a science-led, transparent regulatory process.
Which healthcare themes are you focused on currently?
At a macro level, two issues dominate our thinking: the outlook for drug pricing in the US and the stability of the regulatory environment, particularly the FDA. These two factors underpin the investment case for biotech.
We are also contending with broader macroeconomic forces such as inflation, interest rates and geopolitical uncertainty. All of this has made the environment more challenging in the short term. In response, we’ve shifted the portfolio towards more defensively positioned, commercial-stage companies that are better equipped to weather near-term volatility. Ultimately though, our north star remains unchanged: identifying companies with strong science, sound strategy, and the ability to deliver real clinical and commercial value.
Which biotech projects are you excited about for the future?
Despite short-term headwinds, the long-term innovation pipeline in biotech remains incredibly robust. Advances in genomics, AI and data science are accelerating our ability to understand and treat disease at the molecular level. This is especially important given global demographic trends — we’re living longer, managing more chronic conditions, and placing greater demand on healthcare systems.
AI in particular is beginning to revolutionise drug discovery and diagnostics, and I believe biotech will be one of the sectors most profoundly shaped by these advances. The innovation engine is still running strong, and that gives us reason for long-term optimism — assuming the sector continues to be supported by a reliable regulatory framework.
How is your fund currently positioned?
Our strategy remains focused solely on biotech, but within that space, we’ve become more defensive. We’re favouring commercial-stage businesses that have already navigated much of the regulatory and developmental risk. While we can’t deviate from our biotech mandate, we can adjust our exposure within the sector to better reflect current market dynamics and macroeconomic concerns.
How do you engage with companies?
Company engagement is a central part of our investment process. Having invested in this sector for over 20 years, I’ve built strong relationships with many management teams. We typically meet multiple times before making an investment and maintain an active dialogue throughout the holding period.
For developmental-stage companies, success often hinges on the management team’s ability to ask the right questions, run trials effectively, and communicate transparently with regulators. Engaging directly allows us to assess their credibility, long-term vision, and executional ability — factors that are just as important as the underlying science.
What’s the outlook for the biotech sector?
Biotech’s long-term value proposition remains intact. The sector exists to improve patient outcome and that mission inherently aligns with both ethical impact and commercial success. But near-term uncertainty is high. We are watching closely to see how the US regulatory landscape evolves under the new administration, whether drug pricing reforms will materialise, and how broader macro factors will influence investor sentiment.
There’s no single catalyst right now – no clear “if X happens, biotech will rebound” scenario. Instead, it’s a matter of watching for consistency in drug approvals, reassurance from FDA engagement, and signs that science will continue to be the basis of regulatory decision-making. If those elements remain intact, the sector is well-positioned to recover and thrive.
