Investors are diversifying bets in the healthcare sector as the rush to develop treatments for Covid-19 has pushed up the prices of some pharmaceutical stocks.
A record 48% of fund managers are overweight healthcare, according to a BofA survey, and the S&P 500 healthcare sector is up nearly 34% from its March low. Hopes for a treatment have also triggered increases in the shares of companies such as Moderna and Inovio Pharmaceutcials, which have risen 253% and 327% since the beginning of the year, respectively, until the end of Friday.
In recent weeks, news of possible treatments or vaccines to combat the pandemic have occasionally fueled changes in broader markets.
However, some fund managers believe that lasting benefits may be difficult for vaccine manufacturers to obtain, leading them to look for corners of the healthcare sector that could see long-term benefits in the fight against the coronavirus.
Large pharmaceutical companies such as Johnson & Johnson and GlaxoSmithKline Plc have said they plan to make any successful vaccine available at cost price, although they could reap benefits later if a seasonal vaccine is needed. Multiple treatments could also divide the market among many players, investors said.
“There is the question of whether anyone really makes a lot of money from this,” said Larry Cordisco, co-portfolio manager of the Osterweis Fund.
Signs of progress in possible treatments could reinforce the case for a faster economic recovery and further fuel the rebound that has pushed the S&P 500 around 30% from its lows in late March. In the next two weeks, Gilead Sciences is expected to announce the results of clinical studies of its potential coronavirus treatment, remdesivir, for patients with moderate symptoms of Covid-19. Pfizer has said it expects to release safety data for initial human tests of the experimental vaccine in late May.
Cordisco is looking further. One of the companies it owns is medical device maker Danaher Corp, which makes an FDA-approved Covid-19 rapid test in March. Its shares have risen 3.1% since the beginning of the year.
“If you are looking for where the benefits may be in the chain, it is someone like that who will benefit. They can charge all the way, “said Cordisco.
Alessandro Valentini, portfolio manager at Causeway Capital Management, said his company is looking for value opportunities as the healthcare sector becomes more expensive, now trading at 22.9 times less profit, slightly more than the multiple of 21.9 for the S&P 500 Index as a whole.
It stays away from potential vaccine producers in favor of companies like Takeda Pharmaceutical Co Ltd. Japan’s largest pharmaceutical company said this month that it could start clinical trials as early as July for a blood antibody-based COVID-19 treatment. of recovered patients.
“This is a company that will be part of the solution and can buy a world-class business at a significant discount to what we believe to be fair value,” said Valentini. Its shares have dropped nearly 6.5% so far this year.
Mike Caldwell, a portfolio manager for the Driehaus Event Driven Fund, said his fund focuses on vaccine production supply chains rather than the pharmaceutical companies themselves.
You are betting on companies like Roche Holding and Abbott Laboratories, which have big diagnostic businesses that are likely to be part of any future COVID-19 treatment.
It also bets on smaller companies like Luminex Corp, which received an emergency use authorization from the FDA for its COVID-19 diagnostic test. Shares are up 36% to date.
“With so many players who have significant resources, it is difficult to predict what the final market share of any approach will be,” he said. (Reporting by David Randall; Editing by Ira Iosebashvili and David Gregorio) .. Translate serenitymarkets