- Focus on innovation more important than ever
- Companies in the portfolio working with treatment for Covid-19
- We expect delays in clinical trials
- Pharma outperforming general markets while small and mid cap Biotech companies have been significantly sold down
Focus on innovation more important than ever
The focus of Arctic Aurora LifeScience has, since the inception in 2016, been on innovation and more specific on companies in the biotech and pharma industry focusing their research and efforts towards true unmet medical needs. As managers, we have directed our investments looking for companies developing transforming treatments for devastating disorders. Cancer has for example been a large area for investments. Our conviction has been, and still is, that those investments will give the best return to the portfolio. The pandemic the world now is facing is an unmet medical need never seen in modern time. In our fund, several companies are in the front of developing treatments, anti viral compounds as well as vaccines. The new innovative technologies we have been writing about are now used to develop help in as short time as possible.
Companies in the portfolio working with treatment for Covid-19
The intensive work is going on in research departments in all segments of the industry, biotech as well as pharma. Regeneron and Gilead have been investments for longer time in the portfolio and the fund now also has a smaller position in Moderna.
When global markets are weak, the pharma sector outperforms. This has been the case during the last decades, e.g. during the financial crisis in 2008, when pharma and bio sectors outperformed general markets with approximately 20%. The defensive property with growth drivers from demography, innovation and lifestyle makes it attractive in current market situation facing threat of recession.
Expect delays in clinical trials
The team has done an extensive work analysing potential effects from the lockdown of nations globally and the spread of the virus itself. We do not foresee significant supply disruptions as companies have production spread over several sources. Due to the re-prioritisation at the hospitals (focusing all resources at treating the Corona patients), we believe we will see delays in clinical trials and launch of new products.
Pharma and Biotech performance in a volatile market
The fund has performed better than the general market during this crisis. S&P 500 is down 23.8% and AALS in USD is down 20.1% year to March 25th. The large pharma companies have outperformed and the small mid cap biotechs have been significantly sold down, which is as expected in those market conditions when investors screen out segments perceived carrying more risk. The fund has more than half of the assets invested in large cash flow positive companies, which has been very positive for the performance during this crisis. Importantly though, in the case of AALS, the SMID biotech companies are well funded and it is our view that many companies now are valued at very low levels. It is our conviction that when markets stabilize, much is pointing to that the biotech segment will perform very strongly as well as the large pharma companies.