The cream of British biotech
Ageing populations and burgeoning middle classes spell long-term growth for the biotech industry, says professional stock picker David Pinniger. Here, he tips three British pharmas to buy now.
Each week a professional investor tells MoneyWeek where he'd put his money now. This week: David Pinniger, CFA, investment manager at the International Biotech Trust.
On the 28 October 1982, the US Food & Drug Administration approved Genentech/Lilly's Humulin diabetes treatment. It was the first approval of its type and since then several hundred more biotechnology-based drugs have been developed for patients with a range of serious life-threatening illnesses.
Such successful innovation is reflected in the value of today's biotechnology industry. The high-profile US Nasdaq Biotechnology Index (NBI) is made up of more than 100 listed firms with a combined value of more than $450bn. And there are plenty more listed companies, including some located outside America, and also hundreds of privately owned venture-capital-backed enterprises all developing the medicines of tomorrow.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Despite the well-known risks of drug discovery and development, over the last five years the sector (NBI) has returned 77%, versus the S&P 500's 6%. The longer-term investment case for biotechnology also remains solid.
Ageing populations and burgeoning middle classes in developing economies provide the demographic foundations for the long-term secular growth of the industry. Demand is only set to increase for innovative new drugs, diagnostics and medical devices to prevent and treat modern complex diseases associated with living longer and unhealthier lifestyles.
Yet while the international biotechnology industry has come of age, such success hasn't yet been mirrored in Britain. In the current, capital-starved, risk-intolerant investment climate, this is not going to change any time soon. However, there are a few British firms investors can buy that carry an acceptable level of risk when held as part of a broader portfolio. Here are three of my favourites.
Shire (LSE: SHP) has over recent years transformed itself into one of the highest-growth speciality medicine companies operating in the global pharmaceutical and biotechnology industry. The company's strategic move into rare, life-threatening genetic disorders is paying off, as these drugs command high prices and generate high profit margins.
A string of recent minor setbacks has seen investors' great expectations diminished, but this makes now a good time to buy a high-quality company with strong growth prospects.
Summit (Aim: SUMM) is a small British-based biotechnology company developing a potentially exciting new treatment for Duchenne muscular dystrophy, a rare, genetically inherited, muscle-wasting condition. The first clinical results for its drug candidate are expected towards the end of the year.
It's a high-risk project the company's stockmarket valuation suggests investors are already discounting failure yet it could surprise everyone.
Oxford Pharmascience (Aim: OXP) is another small, British-based firm applying its formulation technologies to improve the usability of well-established drug products. Poor compliance around chronic drug treatments is a major problem for the healthcare industry.
The company has already licensed its technology for chewable calcium and vitamin D tablets to a large Brazilian firm. It is also working on developing safer versions of statins cholesterol-lowering drugs that make up one of the world's largest drug classes.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
RICS: Housing market continues to strengthen but 2025 could be challenging
The latest survey by the Royal Institution of Chartered Surveyors reports a resilient UK housing market, but warns of headwinds next year
By Ruth Emery Published
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published
-
Somero: trading this overlooked bargain
Features Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
By Dr Matthew Partridge Published
-
How to find big profits in small companies
Cover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
By Dr Matthew Partridge Published
-
The hidden gems on Aim, London's junior market
Features Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
By Scott Longley Published
-
Is Aim finally coming of age?
Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
By Dr Matthew Partridge Published
-
Three Aim-listed firms that will thrive in a post-Brexit world
Opinion Matt Tonge and Victoria Stevens of the Liontrust UK Smaller Companies Fund pick three Aim-listed firms that will survive Brexit turmoil.
By moneyweek Published
-
Fetch! The Chinese small-cap stocks to buy in the Year of the Dog
Opinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
By Tiffany Hsio Published
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
By Guy Anderson Published
-
Get cheap, reliable growth from smaller companies
Features One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
By Max King Published