Ozempic investors ‘overlook’ opportunities in other areas of healthcare – here are six experts from pharmaceutical companies delving into…

The weight loss drug market has been dominating the headlines lately, with manufacturers Novo Nordisk and Eli Lilly being the almost untouchable darlings of the stock market when it comes to the healthcare sector.

The drugmaker duo has boomed in recent years thanks to the success of their products.

However, the two companies have seen their prices fall in recent months, with disappointing sales data the main cause of the downturn.

Investors may wonder whether their portfolios are overexposed to the weight-loss drug market – although experts say the fundamentals of these companies look robust and the high price-to-earnings ratios suggest investors expect further growth.

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

With Novo and Lilly expected to maintain their grip on the weight-loss drug market for the time being, many healthcare investors may find their fortunes hinging on the future performance of these companies’ products.

But the healthcare industry is large and extends far beyond the high-profile weight-loss drug bubble. Of course, these drugs are an important development, especially given the increasing prevalence of obesity around the world, but they are also not the only cogs integral to the healthcare industry.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘All the excitement around weight-loss drugs would suggest that this is the only thing that matters in healthcare. Although this area is incredibly important, there is a lot happening elsewhere too.

‘The sector can be high risk because it is difficult to predict the success of drug trials. That means it’s better to take a diversified approach through a fund or mutual fund than to try to pick individual stocks.’

While investors may be wise to expand their portfolios into other parts of the industry, the future of the weight loss market may still be promising.

Coatsworth said: ‘There is the potential to have a drug on the market that not only tackles obesity, but also helps reduce alcohol or substance use, and could even be used on a broader basis, for example to treat dementia prevent and improve cognitive function in humans. with Alzheimer’s disease.’

Healthcare services

The Baronsmead Venture Capital Trusts invest heavily in the healthcare sector, with healthcare and education making up 21 percent of their portfolio.

And yet the trust avoids companies focused on drug development because of the uncertainty of the outcome.

Ken Wotton, manager of the Baronsdmead VCTs at Gresham House, told This is Money: ‘Healthcare is a core sector for Baronsmead. We are very selective within this broad sector.

“We avoid risky drug development opportunities that often burn cash for years and rely on binary regulatory approvals.

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

The healthcare industry sees companies taking advantage of the pharmaceutical giants leading the way in drug development, without being exposed to the uncertainty themselves.

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 major theme within the healthcare sector is a trend towards outsourcing specific elements of the drug discovery process by major pharmaceutical companies.

‘Specialist providers of services, technology and data help their customers reduce, accelerate or improve the expensive process of delivering a new commercially viable medicine.

‘This area is potentially attractive and benefits from structural tailwinds in spending with a lower risk business model than some other parts of the sector.’

Medical technology is advancing

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

Baronmead points out Ixico as a lower-risk business benefiting from the rise of artificial intelligence. Ixico is part of Baronmead’s investment portfolio.

Wotton said: ‘Ixico applies AI technology to the neuroimaging process to improve the effectiveness and efficiency of clinical trials aimed at developing therapies for central nervous system disorders such as Alzheimer’s disease and Huntingdon’s disease .’

The London-based company’s shares have suffered in recent years, but the company recently booked an order worth more than £5 million, taking its order book to almost £15 million by the end of the year, while the loss is expected to decrease.

Among the more traditional medical technology players there is another Baronmead investment, Bioventixcreates antibody technology that companies can use for testing and research purposes and sells it on a royalty basis.

Nicholas Midgley, senior equity analyst at St James’s Place, says a Danish company Coloplast has carved out a strong niche in the medtech sector.

He told This is Money: ‘Coloplast has long been the European champion in medical technology, but a huge injection of R&D investment by ConvaTec, Coloplast’s main competitor in ostomy and continence products, has led to significant advances in the quality and comfort of simple items. such as catheters.’

Drug development can still offer opportunities

While drug developers pose a higher risk than other parts of the healthcare industry, they also present significant opportunities.

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

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

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

Overexposure to the weight loss sector may not be a wise move, but it is perfectly reasonable to have these companies as part of a balanced portfolio.

However, within drug development there are other areas that may offer 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 that target 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 medicines has emerged.’

Companies like Intracellular therapies And Supernus Pharmaceutica are leading developments in these areas.

Shares of Supernus are up about 60 percent in the past five years, while shares of Intra-Cellular are up almost 740 percent

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

‘Caplyta’s unique mechanism of action differs from traditional antipsychotics, making it better tolerated and with fewer side effects, such as less weight gain or movement disorders.’

Supernus’ Qelbree therapy is also ‘capturing market share’ because it produces a better side effect profile than its competitors.

SJP’s Midgley also points out that significant progress has been made in treatments for diseases such as HIV and cancer.

He said: ‘In oncology the work of harnessing the immune system to beat cancer is ongoing, while long-acting HIV drugs are now not only highly effective but also mean patients only need to see the doctor every six months improve treatment compliance and reduce memories of the disease.’

According to Craig and Poszepcynski, developments in cell therapy for the treatment of leukemia, lymphoma and melanoma create significant opportunities in oncology.

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

‘This represents a new frontier in immunotherapy, especially in the treatment of solid tumors, and the drug is currently in late-stage research for the treatment of lung cancer.’