CONTRIBUTORS
Evan McCulloch, CFA
Portfolio Manager, Research Analyst
Franklin Equity
Akiva Felt, CFA
Portfolio Manager, Research Analyst
Franklin Equity
1. Broader access to cell and gene therapies as they move toward the mainstream
From innovation to commercialization
Cell and gene therapies are advancing from experimental science to scalable, real-world treatments. Their use cases are expanding across cancer, rare disease and genetic disorder treatments due to improvements in manufacturing, delivery and clinical validation.
These therapies offer the potential for single-use cures, and technological advances are eroding historical constraints around cost and delivery. As these barriers ease, adoption is expected to broaden beyond niche diseases—unlocking large, high-value markets and creating potentially durable revenue streams for companies that successfully commercialize these platforms.
2. More compounds approved for a wider scope of treatments
Expanding markets through multi-purpose drugs
A trend of expanding drugs to new patients and scalable platforms is creating larger commercial opportunities for each therapy — supporting higher peak sales, longer product lifecycles and more diversified revenue growth.
For example, GLP-1 therapies have expanded rapidly from diabetes into obesity and broader cardiometabolic conditions, significantly increasing their addressable market. New formats, such as oral GLP-1 drugs, are improving accessibility and patient adoption, particularly where injectables are less practical.
3. Higher approval rates and more efficient regulatory pathways
A faster path from trial to market
Clinical development and regulatory processes are becoming more efficient, supported by improved trial design and better data analytics.
Biotech companies continue to deliver meaningful clinical milestones, reinforcing confidence in the sector’s innovation engine. At the same time, clearer policy and regulatory frameworks are contributing to higher approval rates, while faster pathways— particularly in areas of high unmet need—are shortening time to market.
Together, these dynamics are increasing capital efficiency, supporting higher success rates and improving the risk-adjusted return profile of drug development. This could support a meaningful and sustained growth cycle for these companies.
4. AI-originated and designed molecules
Improving productivity across discovery and development
Artificial intelligence is increasingly embedded across the drug development lifecycle—from disease research and molecular design to clinical trial monitoring and commercial planning.
AI is not only expanding the pipeline but also improving productivity and success rates. New tools help find solutions for previously untreatable conditions, optimize molecule design and enhance trial execution.
Over time, this should lower development costs, increase approval probabilities and accelerate innovation cycles—supporting potentially stronger margins and improved returns on R&D investment.
5. Improved drug delivery mechanisms
Direct dispatch of compounds leads to better patient outcomes
Advances in drug delivery are enabling therapies to reach specific tissues at more precise concentration levels within the body, reducing side effects and improving the overall risk benefit profile. Key innovations include antibody-drug conjugates, radioligand therapies and RNA-based approaches.
This is particularly important in complex diseases like cancer and neurodegenerative conditions, where greater precision can lead to better outcomes. Improved delivery is not only enhancing effectiveness—it is also enabling new types of therapies and supporting stronger pricing and additional growth for companies, which could translate into stock price appreciation.
The bottom line
We believe biotechnology is a compounding asset class with a multi-year cycle. Current trends highlight the sector’s ability to become more productive, scalable and commercially attractive, with innovation driving higher success rates and expanding markets. These changes support stronger growth, increased M&A activity and long-term investment opportunities.
Innovation happens quickly, and meaningful price increases can be sudden, just as sharp drawdown periods bring volatility and impair short-term returns. Historical data suggests these movements often occur close together. In our view, this is why staying invested is an investor’s best chance for being at the right place at the right time.
GLOSSARY
RNA-based approach: Treatments that use RNA (a molecule that carries genetic instructions and helps cells make proteins) to change how cells produce proteins or fight disease.
Conjugate: A therapy that combines two components — such as a drug linked to an antibody — to target disease more precisely.
Radioligand: A targeted therapy that delivers radiation directly to diseased cells, such as cancer cells.
Cardiometabolic: Related to heart health, metabolism and diseases such as obesity, diabetes and cardiovascular disease.
GLP-1 therapies: Medicines that help regulate appetite and blood sugar, used to treat obesity and diabetes
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.
Investment strategies which incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. Focusing investments in the health care and biotechnology sectors carries much greater risks of adverse developments and price movements in such industries than a strategy that invests in a wider variety of industries.
Active management does not ensure gains or protect against market declines.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
To the extent the portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility.
WF: 10595508