While the health-care sector offers plenty of investment opportunities, high valuations mean more “muted” returns compared to previous periods, a CIBC portfolio manager says.
Michal Marszal, senior analyst and portfolio manager at CIBC Asset Management, said the opportunities in the global pharmaceutical industry directly related to Covid-19 have diminished. Omicron will likely have a smaller impact on the sector than previous Covid-19 waves of infections, he said in an interview early this month.
Regardless, there are still “quite attractive opportunities across practically all sub-sectors” of global health care, he said.
The market is pricing in “significant patent-cliff scenarios,” Marszal said, when a firm’s revenues drop after the patent on an established product ends, and other stocks become more attractive.
Marszal also noted that the expectation of higher interest rates has led to volatility in the biotechnology sector. There’s been a “significant dislocation” among small and mid-cap companies, which represent “extremely attractive investment opportunities,” he said.
Additionally, despite facing headwinds related to diminishing volumes of Covid-19 testing, the life science space still has “pockets of very attractive exposure to research and development-related tools and solutions, particularly in fast-growing areas such as genetic sequencing, proteomics [and] tissue analysis,” Marszal said.
Lastly, Marszal said there are opportunities in U.S. health-care services companies.
There are “very strong fundamentals across managed care, in particular, and certain pockets of outsourcing, specifically with respect to manufacturing of drugs, as well as conduct of clinical trials and research and development,” he said.
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