Europe is a market rich for the picking when it comes to healthcare stocks, Dan Mahony has said.
Speaking to Investment Adviser’s Ellie Duncan on the trends driving rising revenues for pharmaceutical developers and distributors, the Healthcare Fund manager for Polar Capital, said the rise of the grey pound was key.
He said: “The major trend is demographics. We have an ageing population who when they hit 65, they need and demand more healthcare.”
Policy and pricing are also factors in what companies can come to market with their products. For example, Mr Mahony said the US was using technology to estimate the viability of certain drugs before they are launched, so government can work out where any state funding will go.
He said: “Drugs that actually improve people’s lives and make them healthier will get paid for while drugs that are a little ‘me too’ and less differentiated will struggle to get the funding they need to reach the market.”
However, the US is not - as often thought - leading research and development in the sector.
According to market capitalisation, Mr Mahony said Europe has a larger pharmaceutical sector with plenty of research.
He said: “US universities is where a lot of the research comes from, and they obviously spend a lot more than many other companies across the world.
“But the UK is up there too; we tend to punch above our weight in terms of what is being developed.”
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Across his portfolios, Mr Mahony said: “We do not just invest in drugs; we invest in medical devices, in services such as hospitals, and software companies focused just on the healthcare sector.
“The overriding factor for us is finding companies delivering better healthcare for less money.
“These are the ones that are likely to deliver growth in revenues and profits at a time when governments are trying to cut costs and make things more efficient.”
Mr Mahony also said he had held back quite a “reasonable bit” of cash across his portfolios, particularly in the run up to the US election as there has been a headwind in this sector.
“By holding cash, it is reducing the beta and the volatility of the portfolios”, he added.
However, Mr Mahony said he was not overly concerned about the prospect of a Brexit on 23 June, as he believed the UK could still export even in the event of leaving the European Union.
