TIP SHEET: Fidelity Manager Sees Opportunity In Biotech Funding Crunch
2011年12月25日 - 8:15AM
Dow Jones News
A funding crunch has descended upon the biotechnology industry
in recent years, which has made the sector less desirable to some
investors.
But Rajiv Kaul, portfolio manager of the Fidelity Select
Biotechnology (FBIOX) fund, sees the pressure on biotech stocks as
an opportunity. It has allowed him to buy what he sees as
higher-quality biotech stocks at cheaper valuations than in the
past.
"If in general companies are having a hard time getting financed
because of debt pressures, some can get unfairly penalized for
that," Kaul said. "That becomes a great opportunity for
investors."
His strategy has paid off this year. The $1.2 billion fund has
posted a year-to-date return of 16.07% through Wednesday, ranking
it third among 134 health funds tracked by Morningstar. Its
category was up 6.16% year to date through Wednesday, while the
S&P 500 index had a return of 0.93% for the period, according
to Morningstar. Morningstar gives the fund a rating of three out of
five stars.
"For investors interested in a biotechnology fund, it's a pretty
good option," said Christopher Davis, analyst with Morningstar. He
added, however, that few investors really need dedicated biotech
funds because they are niche funds that can be volatile.
Davis said Kaul's performance since taking over the Fidelity
fund in 2005 has exceeded that of actively managed biotech
rivals.
Kaul also manages the $72 million Fidelity Advisor Biotechnology
(FBTAX) fund, which is similar to the Select fund but sold through
financial advisers instead of directly to retail investors. The
Advisor fund had a year-to-date return of 16.31% through
Wednesday.
Top holdings in both funds as of Oct. 31 included Amgen Inc.
(AMGN), Biogen Idec Inc. (BIIB), Gilead Sciences Inc. (GILD),
Alexion Pharmaceuticals Inc. (ALXN) and Vertex Pharmaceuticals Inc.
(VRTX), according to Morningstar.
Biogen and Alexion each have posted year-to-date gains above 65%
as of Wednesday's close. Alexion has benefited from continued sales
growth for its drug Soliris, which treats a rare blood disease.
Biogen has risen on improve results from existing drugs plus high
expectations for an experimental multiple sclerosis drug it is
developing.
Both Biogen and Alexion are emblematic of key attributes Kaul
looks for in biotech stocks. Given the funding constraints,
companies with existing products generating cash flows are in a
better position than those that are still in the development stage,
Kaul said.
"There's a clear shakeout in the industry," he said. "Smaller
companies with higher-risk programs and questionable drugs are
finding it much harder to raise money...It's a very tough
environment. Those companies with products already are more
advantaged."
Kaul said he also looks for companies with solid clinical-trial
data for drugs under development. He likes companies selling or
developing drugs that represent meaningful advances in medical
care, as opposed to drugs that aren't much better than what is
already on the market.
He said drugs with meaningful benefits have a better shot at
getting reimbursed by cost-conscious health plans.
Despite the capital constraints, Kaul sees the biotech industry
as being in a "renaissance period," as scientific advancements are
leading to new therapies that can be combined with genetic
diagnostics to increase the odds that certain drugs will work in
certain patients.
"The general direction of the industry is moving forward," he
said. "That creates a fertile, rich environment in looking at new
ideas."
(Peter Loftus covers the pharmaceutical industry for Dow Jones
Newswires. He can be reached at 215-656-8289 or by email at
peter.loftus@dowjones.com.)
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