Worldwide Healthcare Trust (WWH) has been increasing its allocation to small biotechnology companies, in which it now has about 25 per cent of its assets but only make up about 3 per cent of its benchmark, MSCI World Healthcare index. “We are overweight emerging biotechs because we have seen tremendous opportunities [in this area],” says Sven Borho, co-manager of Worldwide Healthcare Trust, which is included in the FTSE 250 index.
Mr Borho says that gene therapy is one of the “most promising” sub sectors in this area, and the trust's holdings include gene therapy specialists MeiraGTx (US:MGTX), Sarepta Therapeutics (US:SRPT) and UniQure (Fr:UQ1).
But the trust's managers have significantly reduced exposure to pharmaceutical companies over the past year. This is because companies that produce generic drugs – copies of an approved brand-name drug – face litigation, and the pricing pressure on drugs is making the sector less attractive. The trust used to invest in Indian generics companies, but has entirely sold out of this sub sector because the US Food and Drug Administration is “breathing down their necks”, according to Mr Borho, making regular inspections and frequently shutting down facilities. He adds that roughly eight out of 10 generic drugs consumed in the US are manufactured in India.