Despite the knock-on effects of Nasdaq volatility the biotech sector still has a strong fundamenta...
Despite the knock-on effects of Nasdaq volatility the biotech sector still has a strong fundamental outlook, fund managers believe.
The sector has outperformed strongly over the last 12 months. While the Nasdaq Composite lost 39.3% for the year 2000, Nasdaq Biotech was up around 20%.
Ann-Sophie Bourgeaud, fund manager at Lombard Odier, said: "Biotech stocks are sometimes wrongly grouped together with Nasdaq and as a result can be unjustly de-rated at times of volatility.
"We believe biotech companies are better positioned than ever, having raised around $35bn. This is three times the sum raised in 1999, providing them with three years of cash on average and placing them on very solid foundations. We expect to see many more biotech-to-biotech mergers and acquisitions in 2001 than inthe past."
Among one of Bourgeaud's favoured stocks is UK-based Oxford Glycosciences. She said:"With the mapping of the human genome now complete it remains to determine the specific function of each gene and its individual role in the development of disease. As proteins are gene products it is now crucial to analyse those proteins to advance from the stage of mere information to that of drug development.
"Oxford Glycosciences has an ultra-modern technology platform for high-speed, automatic protein screening, which makes it one of the leading players in the proteomics arena. The company has five major partners: Pfizer, Merck, Pioneer, Quintiles and Bayer."
Evan McCulloch, fund manager of the Franklin Biotech Discovery fund, said: "Much of the downturn in the biotechnology sector over the last few weeks has had to do with investor skittishness more than anything.
"The fundamentals in the sector have not changed, in fact, the fundamentals of the group are growing ever stronger and our positive outlook remains unchanged.
"Many investors are simply questioning some of the higher valuations in various biotech companies, and they are becoming more selective in buying companies that already have products on the market or in late stages of development instead of companies that could produce drugs years from now.
He believes speculation in the technology markets and varied performance in the Nasdaq adds to investor unrest in the biotechnology sector as well.
He said: "Some of our top holdings in the fund have felt the effects of this turmoil, such as Genentech and Amgen, however, we continue to believe in the fundamentals of these two therapeutics companies.
"As we are long-term investors, we generally try to remain focused and devote our energy towards building positions that we favour in the long-term outlook. We continue to invest in companies that have products on the market or products that will enter the market in the next 1224 months."
In the offshore specialist biotech and life science sector there are four funds with an average mid-to-mid return with net income reinvested of 192.1% over the three years to 23 January.
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