Ozempic Investors ‘Overlook’ Opportunities in Other Areas of Healthcare – Here Are Six Pharma Companies Experts Are Focusing On…

The weight loss drug market has been dominating the headlines lately, with manufacturers Novo Nordisk and Eli Lilly being the near-unassailable stock market favorites when it comes to the healthcare sector.

The drug manufacturing duo has been on the rise in recent years thanks to the success of their products.

However, both companies have seen their prices fall in recent months, with disappointing sales data being the main culprit for the slowdown.

Investors might wonder if their portfolios are too exposed to the weight-loss drug market, although experts say the fundamentals of these companies appear strong and high price-to-earnings ratios indicate investors expect further growth.

However, it is always advisable to avoid putting all your eggs in one basket.

With Novo and Lilly expected to maintain their stranglehold on the weight-loss drug market for the foreseeable future, many healthcare investors will find their fortunes tied to the future performance of these companies’ products.

But the health sector is big and extends far beyond the high-profile bubble of weight-loss drugs. Of course, these drugs are an important advancement, especially given the increasing prevalence of obesity around the world, but they are also not the only integral cogs in the healthcare sector.

Dan Coatsworth, investment analyst at AJ Bell, said: “All the excitement around weight-loss drugs would suggest it’s the only thing that matters in healthcare.” While this area is incredibly important, there is a lot going on elsewhere as well.

“The sector can be high risk as it is difficult to predict the success of drug trials, meaning it is better to take a diversified approach through a fund or investment trust than to try to pick individual stocks.”

While investors would do well to expand their portfolios to other parts of the sector, the future of the weight loss market could still be bright.

Coatsworth said: “There is a possibility of having a drug on the market that not only combats obesity but also helps reduce alcohol or substance use, and may even be used more widely, such as potentially helping to prevent dementia. and improve cognitive function in people. with Alzheimer’s disease.’

Health services

Baronsmead Venture Capital Trusts invest heavily in the healthcare sector, with healthcare and education representing a combined 21 per cent of its portfolio.

And yet, the trust stays away from companies focused on drug development due to the uncertainty of the outcome involved.

Ken Wotton, Baronsdmead VCT manager at Gresham House, told This is Money: ‘Healthcare is a core sector for Baronsmead. Within this broad sector we are careful to be very selective.

‘We avoid high-risk drug development opportunities, often burning money for many years and relying on binary regulatory approvals.

“Instead, we prefer to look for healthcare opportunities that are at or near profitability and that can offer a lower-risk growth trajectory that supports more consistent investment returns.”

The healthcare sector sees companies benefiting from pharmaceutical giants leading drug development, without exposing themselves to uncertainty.

Instead, these companies focus on developing and delivering technology and products to drug development companies to assist them in their discovery process.

Wotton said: ‘A key issue within the healthcare sector is the trend towards outsourcing of specific elements of the drug discovery process by large pharmaceutical companies.

‘Specialized data, technology and service providers help their clients reduce risk, accelerate or improve the costly process of delivering a commercially viable new drug.

“This area is potentially attractive as it benefits from structural tailwinds in spending with a lower risk business model than other areas of the sector.”

Medical technology advances

With the rise of AI in recent years, there are growing opportunities in the technology sector as companies harness the power of these new tools within the medical sector.

Baronsmead notes Ixico as a lower risk company that takes advantage of the emergence of artificial intelligence. Ixico is part of Baronsmead’s investment portfolio.

Wotton said: “Ixico applies artificial intelligence technology to the neuroimaging process to improve the effectiveness and efficiency of clinical trials focused on the development of therapies for central nervous system conditions such as Alzheimer’s and Huntingdon’s disease.”

Shares of the London-based company have suffered in recent years; However, the company recently placed an order worth more than £5 million, taking its order book to almost £15 million by the end of the year, while its losses are expected to reduce.

Among more traditional medtech players, another Baronsmead investment, bioventixcreates antibody technology that companies can use for testing and research purposes, selling it for royalties.

Nicholas Midgley, senior equity analyst at St James’s Place, says the Danish company coloplast has carved out a strong niche for itself in the medical technology sector.

He told This is Money: ‘Coloplast has long been Europe’s medtech champion, but a huge injection of R&D investment from ConvaTec, Coloplast’s main competitor in ostomy and continence products, has given led to considerable advances in the quality and convenience of simple items. like catheters.’

Drug development may still offer opportunities

While drug developers present a greater risk than other parts of the healthcare sector, they also present considerable opportunities.

The key is to ensure that exposure to companies operating in this space is not concentrated in a single area.

Coatsworth told This is Money: ‘Big pharmaceutical companies are facing the problem of patents expiring on their blockbuster treatments, leading to their rivals offering copycat products at much cheaper prices.

“This puts pressure on pharmaceutical giants to always have a pipeline of treatments that could become important products in the future, either through work in the laboratory or through acquisitions.”

Being too exposed to the weight loss sector may not be a smart move, but having these companies as part of a balanced portfolio is perfectly reasonable.

However, within drug development there are other areas that could prove promising investment opportunities.

Alisa Craig and Marek Poszepcynski, portfolio managers at International Biotechnology Trust, said: “Approximately 20 percent of our holdings are dedicated to innovative CNS (central nervous system) therapies targeting conditions with significant unmet medical needs, such as schizophrenia. and ADHD.

“With a better biological understanding of diseases that affect the brain, a new generation of more effective and safer drugs has emerged.”

Companies like Intracellular therapies and Supernus Pharmacy are leading advances in these areas.

Supernus shares have gained about 60 percent over the past five years, while Intra-Cellular shares have risen nearly 740 percent.

Craig and Poszepcynski added: ‘Intra-Cellular Therapies is making significant progress with its lead product, Caplyta, which has gained regulatory approval for the treatment of schizophrenia and bipolar depression.

“Caplyta’s unique mechanism of action sets it apart from traditional antipsychotics, providing better tolerability and a reduced side effect profile, such as less weight gain or movement disorders.”

Supernus’ Qelbree therapy is also “gaining market share” as a result of offering a better side-effect profile than competitors.

SJP’s Midgley also notes that there have been considerable advances in treatments for diseases such as HIV and cancer.

He said: “In oncology, work on harnessing the immune system to defeat cancer is ongoing, while long-acting HIV drugs are now not only highly effective but also mean patients only need to visit the doctor every six months, improving compliance and reducing illness reminders.’

According to Craig and Poszepcynski, advances in cell therapy for the treatment of leukemia, lymphoma and melanoma are creating significant opportunities in the field of oncology.

They said: ‘Iovance Biotherapeutics recently launched its tumor-infiltrating lymphocyte (‘TIL’) therapy, lifileucel, for advanced melanoma.

“This represents a new frontier in immunotherapy, particularly in the treatment of solid tumors, and the drug is currently in late-stage trials for the treatment of lung cancer.”