Why biotech sector has further to go

Speaking to Julia Faurschou, reporter for Investment Adviser, Carl Harald Janson, manager of the £177m International Biotechnology Trust, said that the valuations of earnings-driven stocks are 18p to 19p value for a couple of years to come, with growth of 17 per cent earnings per share (EPS), so it is “good growth for the future at a reasonable valuation”.

He said he particularly liked immunocology, as there has been “plenty of progress on the scientific front”. Mr Janson highlighted recent news reports in which former US President Jimmy Carter declared himself free of skin cancer, “so we can see the starting point of a whole new area of treatments in that space”, Mr Janson added.

However he does avoid the “hypes”, cautioning that some investors draw too many broad conclusions over stocks in the cell therapy and early stage gene therapy space, which might be too early for some investors to get into.

His trust has more than 50 per cent earnings-driven stocks, with the team following valuation metrics such as sales growth and earnings growth, and the rest of the portfolio is in earlier stage companies all the way into the debenture sector.

In this portion of the portfolio, the team will look at a variety of factors when it comes to choosing stocks in this specialised area. Factors include looking at the market, the management, intellectual property funding, pricing concerns, competitors.

He said: “It is very well known that you can quickly lose a lot of money in a stock that has negative results, and is a one-trick pony with only one asset, so we avoid companies with exposure to high binary risk.”

When asked whether any of the potential presidential candidates might introduce legislation that could affect biotechnology, Mr Janson said: “It is not going to be legislation but free market forces” that would affect individual stocks.

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julia.faurschou@ft.com