Identifying healthcare companies that are likely to produce a successful Covid-19 vaccine is no easy feat.
As of mid-July, there were “about 180 or so vaccines currently under some stage of trial for this virus,” highlighting the competitiveness of that market and the challenge for investors, said Murdo MacLean, client investment manager at Walter Scott in Edinburgh, Scotland.
“Clearly we’re not expecting to have 180 vaccines at the end of all of this, either, [as] a great many of them will fail,” he added.
To find strong portfolio contenders, MacLean was analyzing biotechnology companies and more traditional pharmaceutical names.
While he characterized biotechnology firms as mainly “small, one-drug businesses,” pharmaceutical companies “tend to have broader shoulders” and more growth potential — qualities that better suit his bottom-up investing strategy focused on holding businesses for long periods.
The list of companies that he owned and was watching last month included Switzerland-based Roche Holding AG, which MacLean said was a “really dominant and innovative force in oncology treatment.”
Other names he listed were Novartis AG, also based in Switzerland, and Denmark-based Novo Nordisk A/S, “which has been a perennial feature of our portfolio,” MacLean said, due to its leading work on diabetes therapies.
Not only have these companies been growing due, unfortunately, to the proliferation of diseases like obesity, diabetes and cancer, MacLean explained, but “these businesses tend to attract the best and the brightest” who are able to help combat crises like Covid-19.
Medical device companies are also intriguing, and MacLean pointed to Edwards Lifesciences and Intuitive Surgical, Inc. (both based in California) as examples in that space. The first is a leader in “advancing the standard of care,” MacLean said, while Intuitive is “the pioneer of surgical robotics” that allow for more precise procedures.
It’s key to keep an eye on many companies, he suggested, because “you shouldn’t assume that there will only be one player” when it comes to vaccines and advanced healthcare.
Further, “what makes [this virus] very interesting and tough, I think, for investors is that because of the global nature of this pandemic, it’s really something that [hasn’t been] seen before. The economics around any successful vaccine might not be the same as previous successful drugs that have been developed.”
For example, there’s a lot of investment currently going into vaccines that might fail, a hurdle for the market and investors, MacLean added.
In Canada specifically, KPMG LLP found in June that the bulk of venture capital money in the second quarter was going to firms that were developing pandemic-related technology for the healthcare and education sectors. The company said in a release that while investment was down overall from Q1, vaccine development was one of the world’s most important business issues.
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