UK equity stalwart Nigel Thomas has revealed he invested in pharmaceutical company AstraZeneca before rival Pfizer submitted a takeover bid.
Mr Thomas, manager of the £4.8bn Axa Framlington UK Select Opportunities fund, said he had invested in the London headquartered company six months ago based on its price being subdued.
The manager said he wanted to invest in the stock because it would give him exposure to immunotherapy or immuno-oncology, an area of innovative medicine.
“While approaching the subject as a layman, the basic tenet of the research is that cancer can be transformed from a terminal illness to a chronic disease through immunotherapy,” he said. “The immune system is unleashed, disarming the cell-cloaking mechanism of cancer by freeing the immune system to fight off the disease.”
The manager said the leading companies in the field were US firm Bristol-Myers Squibb, Roche and Merck, with Astra in fourth place.
“[Astra’s] predicament of significant revenue-earning patent expiries over the next few years has been heavily discounted by the stockmarket,” Mr Thomas said. “However, behind the other three companies, Astra’s portfolio of compounds is notable due to their expertise, with existing drugs across a wide spread of clinical outcomes.
“Given that many immunotherapies will incorporate other drugs in ‘combination therapies’, AstraZeneca will have the option to commercialise a great deal of in-house compounds to late-stage trials.”
Mr Thomas said Astra’s shares had been “lowly rated” because of the patent cliff it was facing but had recently responded to the takeover approach from Pfizer.
The shares have risen 23 per cent from April 14 to May 9 to reach £46.10, according to data from Bloomberg.
“Bristol-Myers Squibb was lowly rated for similar reasons, but now trades on 31 times its consensus 2014 earnings,” he said.
Mr Thomas said immunotherapy research suggested 60 per cent of cancers could become chronic rather than terminal diseases, meaning a large demand for such drugs.
He also said Bristol-Myers Squibb had predicted sales from its Yervoy drug for melanoma of $1bn (£596m) for 2013.
Elsewhere, Mr Thomas said he did not hold any of the mainstream food retailers such as Tesco, Sainsbury’s or Morrisons, but he did hold Booker.
He said the company, “under the astute leadership of Charles Wilson”, had “flourished in a sector characterised by three main growth drivers – convenience, discount and online”.
“IGD Group has monitored the growth of food revenues over the past five years, with results showing that consumption outside of the home has grown by 18 per cent, convenience by 29 per cent, discount by 65 per cent, online by 98 per cent and then mainline supermarkets and hypermarkets by only 8 per cent,” he said.
“Even in Booker’s nascent cash-and-carry business in India, which we visited last year, the largest customer in their Pune branch is an online grocer. Booker themselves have made £800m off web sales from nil in 2005.”