Mr. Patten: Sectoral Asset Management is an investment advisor based in Montreal, Canada. We focus on healthcare investing, meaning that we invest in biotech, pharmaceutical, specialty pharmaceutical, generic and medical device companies. We have, as of the end of March, 3.4 billion under management. I'm a portfolio manager on the long/short accounts and one of the funds that I manage is the Quaker Biotech Pharma-Healthcare Fund.
TWST: What is the environment like for investing in biotech at this time? Has it
been adversely affected by the US economic slowdown?
Mr. Patten: Since the summer of last year when subprime issues emerged and
credit concerns were raised and economic worries emerged, biotechs have
outperformed the broader markets.
TWST: Are they considered a safe haven in this turbulent period? They are not
traditionally defensive stocks.
Mr. Patten: If we look at the performance of biotech since about the summer of
last year, the NASDAQ Biotech Index is down about 5% as of the end of March,
while the NASDAQ Composite and the S&P 500 are down about 16% and 15%
respectively. That's about a 10% outperformance since essentially the beginning
of the subprime worries. You raised a good point that it is not traditionally
viewed as a safe haven, but just looking at the performance of this year, a lot
of the pharmaceutical stocks had quite a difficult time. This year
pharmaceuticals are down about 12%, so somewhat in line with the market.
Breaking down the biotech performance, we see that the small and mid-caps, the
riskier biotechs, are down considerably (as much as 16% or so if we use the
Russell 2000 Healthcare Index as a proxy for small and mid-cap biotechs). The
silver lining is that large cap biotechs — the Amgens (AMGN), the Genentechs
(DNA), the Gileads (GILD) — as a group are up 7% this year. I think that the
sector has done not that badly in a difficult environment.
Tickers included in this excerpt: ALXN, GENZ, SVNT
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