Ozempic’s investors ‘look’ at other areas of health – six pharmaceutical companies are valued by experts …

The weight loss drug market is dominated by the late heads and manufacturers Novo Nordisk and Eli Lilly dear friends of the stock market when it comes to the health sector.

The drug manufacturing group has been on the rise in recent years after the success of their products.

However, both firms have seen their prices slide in recent months, with disappointing sales reports being the main reason for the decline.

Investors may be wondering if they’ve invested too much in the weight-loss drug market — although experts say these companies’ prospects look solid, with high price-to-earnings ratios suggesting expectations investors to grow.

However, it is always a good idea to avoid putting all your products in one package.

As Novo and Lilly hope to maintain their dominance of the obesity drug market for the foreseeable future, many healthcare investors will find their holdings tied to performance. future of the products of these companies.

But the health sector is huge, extending far beyond the popular bubble of weight-loss drugs. Of course, these drugs are an important development, especially due to the increasing prevalence of obesity worldwide, but they are not the only drugs involved in the health sector.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘All the excitement surrounding weight loss drugs suggests that they are the only thing that matters for health. Although this area is very important, there is also a lot of work in other areas.

‘The sector is very risky because it is difficult to predict the success of drug trials, which means that it is better to have alternatives through funding, investment trust when trying to pick individual trees.’

While investors are wise to expand their portfolios to other parts of the sector, the future of the weight loss market is still promising.

Coatsworth said: ‘There is a tendency to have drugs on the market that not only deal with addiction but also help reduce alcohol and substance use, and use on more broadly such as helping to prevent dementia and improving cognitive function in humans. and Alzheimer’s disease.’

Health services

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

However, the trust is shying away from ventures focused on drug development due to uncertain outcomes.

Ken Wotton, director of Baronsdmead VCTs at Gresham House, said: ‘Healthcare is a key focus area for Baronsmead. In this broad sector we are careful to be very selective.

‘We avoid high-risk drug development approaches, which burn years of money and rely on bilateral regulatory approvals.

‘Instead, we prefer to pursue healthcare services opportunities that are close to profitable and can deliver a low-risk growth path that supports consistent investment returns.’

The health services sector sees companies benefit from pharmaceutical giants leading drug development, without facing uncertainty.

Instead, these companies are focused on developing and providing technology and products to drug development companies to help them find them.

Wotton said: ‘A key issue in the healthcare sector is the tendency to outsource the private sector of drug discovery by the big pharmaceutical companies.

‘Expert providers of services, technology and data help their customers to minimize, accelerate or enhance the cost-effective process of delivering new medicines that are commercially viable.

‘This area is very attractive, benefiting from a lower cost structure and a lower risk business model than other parts of the sector.’

Medical technology is advancing

With the rise of AI in recent years, there is an increasing opportunity in the technology sector as companies take advantage of these new tools in the medical sector.

Baronsmead pointed out Mexico as a low-risk enterprise that capitalizes on the emergence of artificial intelligence. Ixico is part of Baronsmead’s investment portfolio.

Wotton said: ‘Ixico will apply AI technology to the neuroimaging process to improve the efficiency and effectiveness of clinical trials aimed at developing treatments for conditions of the central nervous system. such as Alzheimer’s and Huntingdon’s Disease.’

Shares in the London-based firm have struggled in recent years, however, as the company recently booked orders worth more than £5million, bringing its order book to around £15million. the end of the year, as the loss narrows.

Among other legacy medical technology players, another Baronsmead investment, Bioventixantibody technology is developed that can be used by companies for testing and research purposes and sold on a royalty basis.

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

He said The Money: ‘Coloplast has long been Europe’s leading medical-technological champion, but there is a major challenge of R&D investment by ConvaTec, Coloplast’s main competitor in ostomy and continence products. , great progress has been made in the quality and comfort of soft furnishings. such as catheters.’

Drug development can still play a role

Although drug developers have more risk than other areas of the healthcare sector, the opportunity is also great.

The most important thing is to ensure that companies that operate in this area are not focused on the same area.

Coatsworth said This is Money: ‘Big pharmaceutical companies face the problem of expired patents on their anti-aging treatments, which leads to competitors offering copycat products at very low prices.

‘That will put pressure on pharmaceutical giants to have a pipeline of treatments that could produce big profits in the future, either by making them in the lab or by buying them.’

Being heavily involved in the weight loss sector may not be a wise move, but including these businesses as part of a balanced portfolio is definitely the right thing to do.

However, there are other areas in drug development that can present promising marketing opportunities.

Alisa Craig and Marek Poszepcynski, fund managers at the International Biotechnology Trust, said: ‘About 20 per cent of our holdings are dedicated to new CNS (central nervous system) medicines targeting conditions that unmet medical needs, such as schizophrenia and ADHD.

‘With a better biological understanding of diseases affecting the brain, a new generation of more effective and safer drugs has emerged.’

Similar institutions Intra-Cellular Reactions a Supernus Pharmaceuticals is leading developments in these areas.

Supernus shares are up 60 percent over the past five years, while Intra-Cellular shares are up nearly 740 percent.

Craig and Poszepcynski added: ‘Intra-Cellular Therapies is gaining momentum and its lead product, Caplyta, has received regulatory approval for the treatment of schizophrenia and bipolar depression.

‘Caplyta’s unique action sets it apart from traditional pharmaceuticals, allowing for better tolerability and reduced side effects, such as less weight gain and impaired mobility.’

Supernus’ Qelbree drug is ‘carving out market share’ by offering better side effects than competitors.

Midgley also pointed out that SJP has made significant progress in treatments for diseases such as HIV and cancer.

He said: ‘In oncology, work is continuing to use the immune system to defeat cancer, but the long-acting HIV drugs are now not very effective. but it means that those who are sick should see a doctor every six months, and improve compliance. reducing the reminders of the disease.’

According to Craig and Poszepcynski, the development of cell therapy for the treatment of leukemia, lymphoma and melanoma is creating important opportunities in oncology.

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

‘This is a new area of ​​immunotherapy, especially in the treatment of solid tumors, and the drug is currently being tested for the treatment of colorectal cancer.’