A red-hot sector, we put a trio of investment trust holdings focused on potentially life-saving drugs under the microscope.
Biotechnology and Healthcare is a red-hot, but notoriously volatile investment trust sector. The results of clinical trials, or a ruling from the US regulator the Food and Drug Administration (FDA), can send a stock skywards or straight into a nosedive.
Individual companies engaged in developing treatments to fight cancer, develop vaccines, or tackle the healthcare needs of ageing populations may all appear attractive bets to investors. The Covid-19 vaccine drive also spurred investors to buy names such as AstraZeneca (LSE:AZN), Moderna (NASDAQ:MRNA), Pfizer (NYSE:PFE), and Covid-19 testing firm Novacyt (LSE:NCYT).
Yet the risks of investing in this sector and the complexities of the pioneering work health and biotech firms carry out, mean many investors prefer to leave the stock selection to financially, and often scientifically, experienced fund managers.
Kate Bingham, for example, an investment manager at International Biotechnology Trust (LSE:IBT) and chair of the UK Vaccine Taskforce during the Covid-19 pandemic, has a first-class biochemistry degree from the University of Oxford. Other fund managers in this specialist sector have similarly impressive credentials.
- Ian Cowie: three health and biotech trusts I wish I’d owned
- Worldwide Healthcare Trust: why it’s time to buy
Here, we take a closer look at a few lesser-known names inside the portfolios of three investment trusts in the Association of Investment Companies (AIC) Biotechnology and Healthcare sector.
Worldwide Healthcare Trust
Headquartered in New York and launched in 1995, the trust is managed by Frostrow Capital. As of 31 July 2021, it had 91 holdings in the portfolio. North America is the trust’s main focus (a 70% weighting), but it also invests in emerging markets (20%).
Boston Scientific: a large-cap stock, this US firm manufactures medical devices, including stents, catheters, forceps, pacemakers and needles. Sven Borho, co-manager of Worldwide Healthcare (LSE:WWH), told interactive investor’s head of equity strategy Lee Wild in an interview in August 2020, that “the reason you want to be invested in Boston Scientific (NYSE:BSX), and why we have been invested since probably 2012, is that they are the best-run company in the med-tech space. This is really a bet on the management team, or on [chairman and CEO] Mike Mahoney, who came on board in 2010-11.” In terms of its reach, one statistic promoted on Boston’s website is: “every 21 seconds, a patient is treated with a Boston Scientific Urology product”.
Watch the interview in full with Sven Borho here
Horizon Therapeutics: founded in 2008, this specialty pharma company has a portfolio of medicines to treat rare, autoimmune and severe inflammatory diseases. WWH’s Sven Borho told interactive investor in a recent interview that Nasdaq-listed Horizon (NASDAQ:HZNP) had “really reinvented itself”. Borho said: “They have a big legacy business of primary care inflammation drugs, but in the period 2015 to 2017, they acquired a number of companies and from those acquisitions they got two brand new drugs. Krystexxa is for uncontrolled gout and Tepezza is for active thyroid disease. These two drugs are very transformative drugs for Horizon.”
Watch the interview in full with Sven Borho here
Mirati: this £6.5 billion biopharmaceutical company based in San Diego works on genetically targeted oncology (cancer) therapeutics. Mirati (NASDAQ:MRTX), loosely translated, means ‘targeted’ in Italian.
Merck: a self-described ‘science and tech’ company, Merck (NYSE:MRK) focuses on three areas: healthcare, life science and electronics. In healthcare, its interests include fertility and endocrinology, while in life sciences, it is involved in diagnostics and academic research, for example. Merck, valued at around $200 billion (£172 billion), also has a vaccines arm making jabs to treat shingles and human papillomavirus (HPV), and it produces hormone replacement therapy (HRT) drugs, which our head of personal finance Moira O’ Neill recently wrote about in her Financial Times column.
Vertex Pharmaceuticals: the North American $51 billion biotech business, which was founded in 1989, recently launched a cystic fibrosis (CF) therapy called Trikafta, which WWH’s Sven Borho described as a “major blockbuster drug”. On its website, Vertex (NASDAQ:VRTX) says that “our goal is to one day cure CF”, which is a life-threatening genetic disease. While the company has several approved drugs for CF, it also has “a rapidly expanding pipeline of genetic and cell therapies for diseases such as sickle cell disease, Duchenne muscular dystrophy and type 1 diabetes mellitus”. For anyone considering it from an ethical, sustainable and governance (ESG) perspective, the Vertex website declares that the company is “consistently recognised as one of the industry's top places to work, including 11 consecutive years on Science magazine's Top Employers list”.
Life sciences investor Syncona was co-founded in 2012 by CEO Martin Murphy and the world’s second-largest medical charity the Wellcome Trust. As of 30 June 2021, Syncona (LSE:SYNC) investment trust had 11 life science companies in its portfolio, most within the areas of cell and gene therapy. According to its website, 79% of the investment team has a PhD/MD.
CEO Murphy told interactive investor’s Lee Wild in an interview in November last year, that: “We are at a remarkable age in the field of medicine at the moment, the so-called age of personalised medicine…now we really understand how to look at patients on a one-by one basis and design therapies that are targeted to the molecular mechanisms that are driving their diseases.”
Watch the interview with Martin Murphy in full here
Murphy also explained to investors what the team are looking for when it comes to potential investments. “First of all, what we are looking for is a very significant unmet patient need. The reason we focus on that is one, we are motivated to do it. Frankly it’s a pretty worthwhile goal to spend your life trying to do those things. Second, it’s economically rational as well.”
Watch the interview with Martin Murphy in full here
Gyroscope: this gene therapy firm founded in 2016 is “developing innovative medicines to preserve people’s sight”. It is focused on treatments for age-related macular degeneration (AMD), a retinal disease, which is the leading cause of irreversible blindness in people aged 50 and older. The unlisted firm has UK offices in Stevenage and London, and also in the US. There were rumours of a US IPO, but it was postponed in May. Gyroscope chief executive Khurem Farooq said: “We believe it’s in the best interest of our existing shareholders and employees to execute our IPO in more favourable market conditions.”
Autolus: listed on the Nasdaq in 2018, Autolus (NASDAQ:AUTL) is described by Syncona as “a clinical-stage biopharmaceutical company focusing on the development of precisely targeted, controlled and highly active T effector cell therapies” for cancer patients.
Purespring: currently not listed on a stock market, this pre-clinical gene therapy company was founded last year and concentrates on the kidney and treatments for chronic renal diseases.
Freeline: this company is developing gene therapies for those with inherited diseases. On Syncona’s website, it says “targeting the liver, Freeline (NASDAQ:FRLN) has the potential to treat a wide range of chronic diseases”. Amit Nathwani, professor of haematology at UCL, founded the company in 2015, and it listed on the Nasdaq five years later in 2020.
Achilles: a London-based company that is involved in personalised cancer medicine. Syncona describes it as a “clinical-stage biopharmaceutical company developing novel cancer immunotherapies targeting clonal neoantigens: protein markers unique to each individual that are expressed on the surface of every cancer cell”. Achilles (NASDAQ:ACHL) listed on the Nasdaq in March.
International Biotechnology Trust
The trust was launched in 1994 and is run by SV Health Managers. As of 31 July 2021, it has 82 holdings. The US and Canada is its main focus (99%).
In an interview with interactive investor, Ailsa Craig, an investment manager at International Biotechnology (LSE:IBT), addressed perceptions of pharmaceuticals. “The pharmaceutical industry has a worse reputation than tobacco companies, which is incredible in my opinion,” Craig said.
“My view is that society has a deal with industry. The industry puts billions into R&D for new drugs, and in return it is rewarded with an approximate 10-year patent life with unrestricted pricing. Following that period, the drugs become generic and prices fall dramatically. I think that’s a good deal, and it is directly the reason behind new life-changing cancer drugs being discovered and helping society live longer, healthier lives.”
Gilead: the California-based drug giant works “to create a healthier world for all people by delivering innovative medicines that aim to prevent, treat and cure life-threatening diseases”. Founded in the US in 1987, Gilead (NASDAQ:GILD)’s portfolio of drugs include treatments for HIV, hepatitis C, and cancer. The company also makes antiviral medicine Veklury (remdesivir), the first treatment for Covid-19 approved by the FDA.
Regeneron: another US firm founded in the 1980s and headquartered in New York, Regeneron (NASDAQ:REGN) has been described as a ‘Covid-19 play’ because of its antibody treatment. Other interests for the company include developing products that fight eye disease, including wet age-related macular degeneration, cardiovascular disease, and inflammation. In July, it announced a partnership with AstraZeneca to research obesity treatments.
Incyte: trading on the Nasdaq, Incyte (NASDAQ:INCY) is based in Delaware and develops medications in areas including oncology and autoimmunity.
Alnylam: founded in 2002, Alnylam (NASDAQ:ALNY)’s website explains how it “has led the translation of RNAi (RNA interference) into an innovative new class of medicines which silence the genes that cause disease or that contribute to disease”.
Biogen: the company says that “our mission is clear: we are pioneers in neuroscience”. Biogen (NASDAQ:BIIB) was founded in 1978 and produces several multiple sclerosis (MS) drugs, while Aduhelm was approved as the firm's first Alzheimer’s disease therapy in June 2021.
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