How to invest in healthcare

John Bell-Irving, investment advisor at Macquarie Private Wealth, focuses on superior growth investments in U.S. biotech for his 30-to-50-year old clients.

Why the U.S.? It has the largest healthcare industry, with more companies and opportunities. By comparison, Canada’s market is smaller and lacks government support for R&D.

“A lot of companies have one, two, three products going for [U.S. Food and Drug Administration] FDA approval,” he says. “They have potential for huge returns if they’re successful, but you may lose 80% if they’re not.”

Here are his dos and don’ts for healthcare investing.

DO: Look at what trial stage the drug is in, as well as the data. Make sure there’s proof the drug can do more than existing ones.

DO: Examine company management, including experience and how it handles cash flow.

DO: Beware companies run by the lead scientist. Often, they’re not business-minded and may run out of money before trials are complete.

DON’T: Get carried away by hype. If in early trials the company claims it has a miracle drug, or they bring back a previously failed one claiming it now heals something else, be suspicious. Read more: Investing in biotech—It’s a science >