Investment companies have been offering investors access to innovative businesses and sectors for 150 years and an area where innovation is particularly prominent today is healthcare and biotechnology. It’s well known that investment companies in Sector Specialist: Biotechnology & Healthcare invest in pioneering life science and medical treatments and over five, 10 and 20 years to 31 May 2018, the sector has returned 116%, 532% and 1,107% respectively. However, it is perhaps less well known that other investment companies and VCTs are also investing in businesses which are addressing major challenges to human health, such as cancer, Alzheimer’s, antibiotic-resistant ‘superbugs’ and diabetes.
The Association of Investment Companies (AIC) has collated comments from managers of investment companies and VCTs which are investing in pioneering medical treatments. There are manager comments from International Biotechnology Trust, Polar Capital Global Healthcare, Scottish Mortgage, Jupiter European Opportunities and the Downing and Albion VCTs.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “As the oldest form of collective investment, investment companies have been investing in new opportunities for 150 years. Today, this pioneering spirit continues with investment companies offering investors exposure to ground-breaking treatments in biotechnology and healthcare. Investment companies are investing in businesses which are attempting to solve some of the biggest health challenges of our time and most importantly, help people live longer. And it’s interesting that as well as specialist biotechnology and healthcare investment companies, investment companies and VCTs in other sectors are investing in these transformative treatments and technologies.”
Sector Specialist: Biotechnology & Healthcare
Carl Harald Janson, Lead Investment Manager of International Biotechnology Trust plc said: “According to the World Health Organisation, cancer is the second largest cause of death. That is why International Biotechnology Trust has invested in companies which treat this disease since its inception. In recent years, we have increased our allocation to this area of unmet medical need. On 31 March 2018, 42% of our portfolio was invested in companies focussed on oncology. Our increased interest reflects the advancement in the treatment of cancer over the last two decades. Scientists have significantly improved their understanding of this disease, which has led to a meteoric increase in both the number of ways to treat the disease and new drugs.
“The treatment of lung cancer is testament to the headway made by scientists. In 1996, there were only four approved chemotherapy drugs approved for this disease. By 2016, 19 drugs had been approved covering five different therapeutic categories. Now trials using drug combinations show increased treatment efficacy, which also increases the options available to patients. Our understanding of the complexity of treating cancer along with our knowledge of the latest scientific breakthroughs is a part of the specialist skillset which has enabled us to outperform the FTSE-All Share by 99.4%* in the five years to 31 May 2018.”
Dan Mahony, Fund Manager of Polar Capital Global Healthcare said: “The UK is a global leader in life sciences research but historically we have been less successful at scaling-up these companies to become global players in the $7 trillion healthcare market. The key advantage of a closed-ended investment company is that the investment manager can take a long-term view and back management teams with global aspirations and ambitions.
“A great example of this is our investment in Medaphor plc, which is one of the smaller companies in the portfolio. Medaphor has developed state-of-the-art simulation technology for training medical professionals in the use of ultrasound. The company is close to commercialising a fetal scanning technology that uses artificial intelligence to augment the capabilities of medical professionals to speed up workflows and improve the quality of ultrasound screening. This is a great example of UK science and technology helping to improve the quality and efficiency of healthcare systems around the world. The closed-ended structure allows us to allocate capital to companies such as Medaphor with ground-breaking technology that should not only provide our shareholders with good investment returns but also have a positive impact on society.”
Global and Europe Sectors
James Anderson, Joint Manager of Scottish Mortgage said: “We believe, indeed insist, that Scottish Mortgage’s most important role is to provide patient, supportive capital to help address the most serious problems in the world. That we can do this at scale is a privilege and an important asset. Plainly healthcare investing ought to fit this objective perfectly. But all too often we see established healthcare companies failing to address unmet clinical needs and instead avoiding the greatest challenges. So we’ve searched for innovative and ambitious companies that rarely feature in more conventional and less long-term portfolios. Our investment trust status and size allows us to offer almost permanent capital. Many of our investments are in unquoted companies that we are proud to offer access to in a manner and at costs not usually possible for private investors.
“We have investments in companies dealing with problems that at present seem intractable. Two such companies in the form of Denali (aiming at treating Alzheimer’s in time) and Unity (increasing healthy life spans) have just gone public. But perhaps our most crucial investments in recent years have been in the gene sequencing pioneer that is Illumina and its unquoted spin off Grail. We helped defend Illumina from an unwanted and unwarranted takeover by Roche so it could continue to focus on driving sequencing performance up and costs way down. Meanwhile Grail is showing serious signs of being able to identify many of the most ravaging cancers at much earlier stages through its remarkable liquid biopsy innovations. Their approaches are both causing particular excitement in China as it seeks to confront modern healthcare requirements for the first time. We’re excited by the prospects.”
Alexander Darwall, Fund Manager of Jupiter European Opportunities which invests in BioMerieux said: “BioMerieux is a well-established diagnostics company. It is at the forefront of developing syndromic diagnostics which allow multiple tests to be done and their results to be reported speedily. Concerns about antibiotic resistance underpin the growing importance of diagnostics and as a technology innovator BioMerieux is well placed to continue its long record of success.”
Kostas Manolis, Partner of Downing, the manager of the Downing VCTs said: “Downing Four VCT Healthcare Shares invested in Destiny Pharma, a company that develops innovative medicines to prevent and treat infections from antibiotic-resistant bacteria or ‘superbugs’. New superbugs are emerging and spreading, making it difficult to treat common infectious diseases and increasing the risk of infection during procedures such as organ transplants, chemotherapy and major surgery. Destiny Pharma’s portfolio includes the drug XF-73, which rapidly kills bacteria before it can develop resistance. XF-73 is capable of killing 99.99% of Staphylococcus aureus bacteria within five minutes, including superbugs such as MRSA, and has a low potential for developing bacterial resistance.
“We are delighted to back the talented team at Destiny Pharma, which has built a strong patent portfolio of drugs targeting a real problem in hospitals around the world. We were attracted to the business because it is targeting a significant market opportunity with the potential for a faster route to market and improved patent protection. Since investment the company has floated on AIM and was awarded a grant from the US government for trials.”
Dr Christoph Ruedig, Partner and Healthcare Investment Specialist at Albion Capital, the manager of Albion VCT said: “Albion has been investing in healthcare services for almost 20 years and in digital health for the last 10 years. Over that time we have seen a slow but steady increase in the use of technology to deliver healthcare services. In particular, we’re seeing start-ups that are changing various care delivery models with the use of technology. An example of that is our portfolio company Oviva, a digital health company tackling diabetes and obesity. It delivers weight loss and dietetic counselling services and uses technology to make the service more effective and efficient. Its platform has been proven to deliver superior outcomes in over 40,000 patients in several European countries. Another example is our portfolio company Healios, an online platform that aims to provide 24/7 support for younger people suffering with mental health problems. They use technology to improve access and quality of care.”
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- Sector Specialist: Biotechnology & Healthcare performance data is % share price total return to 31 May 2018. No expenses taken into account. Source: Morningstar.
- *Percentage difference is based on share price total return from 31 May 2013 to 31 May 2018 and is on an absolute basis. Source: Bloomberg.
- The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 348 members and the industry has total assets of approximately £178 billion.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.