Key themes for biotechs: valuations, US elections and M&A

Despite the setbacks in the global markets since the beginning of 2016, the valuations of biotechnology companies remain attractive in comparison to the S&P and are based on strong fundamentals, says Carl Harald Janson, investment manager at SV Life Sciences Managers.

“The sector has matured, and many of the companies are profitable. Despite being viewed as a more risky sector, biotechnology stocks have a history of outperforming - over the last five years, the Nasdaq Biotech Index has outperformed the S&P 500 index by 133.2%,” said Mr Janson at a meeting to report SVLS-managed International Biotechnology Trust financial results

Commenting on the impact of the US presidential election in November, Mr Janson added: “Both front-runners, Hillary Clinton and Donald Trump, have expressed concerns about the lack of competitive drug pricing, which has made investors nervous. But, legislative changes will require consensus and considerable time to implement. Market forces will force down the prices of certain drugs which are either off-patent or have a number of competitors in the market. However, innovative drug development with significant benefits to patients will continue to lead to high margin products offering attractive investment opportunities in the future.”