Few sectors illustrate the binary effects of risk-taking as clearly as biotech.Published: 10 August 2022, 19:30 If the research on a potential drug goes well, if it makes it through phases 1, 2 and 3 and is finally approved by authorities in the US and Europe, the owners can be richly rewarded. If something goes wrong during the time-consuming and expensive process – which is most likely – large values can disappear in an instant. Take Oncopeptides, which Di wrote about in Saturday’s paper. The company’s drug for blood cancer, Pepaxto, initially received a positive response from the American drug authority FDA, but at a later stage risks with the treatment were pointed out. Oncopeptides decided to withdraw from the US. The stock market value was almost wiped out, which affected both small savers and large owners. But then this summer everything changed again when the European Medicines Agency recommended approval of the preparation. And in mid-July, Oncopeptides carried out a share issue – new and existing owners raised just over SEK 400 million. They were not deterred by the turbulence, but judged that Oncopeptides could be successful – and concluded that the investment was worth the risk. So far this year, the company’s stock has risen by around 400 percent. But Oncopeptides is not alone in having a good stock market year – the entire biotech sector has done well after a longer period of weaker price development. Another company whose owners this year have been at least partially compensated for their risk-taking is Hansa Biopharma. The company’s main drug candidate, Imlifidase, is an enzyme that enables kidney transplantation in patients who would otherwise not be able to receive a foreign organ. Behind Hansa’s success are years of research, dedication and risk-averse investors. However things go for Oncopeptides and Hansa, both companies exemplify a central component of all business: why returns and profits are needed to motivate investors to take risks. In all ages, businessmen have wrestled with risk and how to manage it. Among other things, it has given rise to company formations and insurances. The medieval fire pillar, mentioned in Magnus Ladulå’s national team from 1350, was for example a precursor to fire insurance. The joint-stock companies, which channeled capital and spread risks in an unprecedented way, were central to Sweden’s industrialization from the mid-1850s. Today, there are ingenious mathematical and statistical models to quantify the risk and put a value on it. But no matter how you calculate, no matter what insurances have been taken, business is ultimately about a decision: Is the investment (and possible return) worth the risk? That question has been pondered by investors for all time. Without risk takers, there is no progress. No new technology is developed, no medical breakthroughs occur. The value-creating trade stagnates. Risk-taking is a mechanism that should be protected. The left’s repeated calls for higher capital taxes for, for example, savers with investment savings accounts and shareholders in small-scale companies are a threat to the creative power that presupposes risk-taking. If any profit must be taxed away, why should one take the risk of investing? There are currently 148 companies with headquarters in Sweden that are researching new medicines, according to the industry organization Sweden Bio. 420 projects are currently underway, of which more than 100 are in the cancer field. In order for them to succeed, risk-averse investors are needed. People and companies who are prepared to see nine out of ten projects fail, knowing that if the tenth succeeds, they will be richly rewarded. Sweden needs more such risk-takers – more who save in shares and participate in new issues to finance new biotechnology companies that can hopefully find cures for kidney disease and cancer patients. Risk-taking is an important force that moves society forward.
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