Henderson European fund manager John Bennett believes we could be two years into a decade-long bull market for the pharma sector.
Speaking at the Fund Strategy Investment Summit in Kitzbühel, Austria last week, Bennett said he started to see value in the sector a couple of years ago and expects to take his pharma position past 30 per cent in both his £1.4bn European Select Opportunities fund and the £78m European Focus fund.
Bennett said there was a fallow period from 1998 to the mid 2000’s when research and development “fell over and the well did run dry”. However, he said this was simply because R&D was in a cycle rather than the industry’s perception that “pharma running out of science was here to stay”.
He added the market is desperate for sustainable earnings and that a firm like Novartis – the second largest holding in his European Select Opportunities fund – by 2017 will have 70 per cent plus of its profit and loss from sustainable franchises which are similar to fast-moving consumer goods.
Bennett said many firms are now attempting to bring more drugs to market as they “re-discover their science”, something he said the market has missed.
He said: “All these firms are now regaining their faith in the science. The big thing is that you are not paying 30-times earnings for this. If you buying pharma companies today at 11-times earnings and 4 or 5 per cent yields there is no option premium for the science coming back, the science is free in the price.”