Fears of blockbuster drug patent expiry, generics competition and price erosion aside, mutual funds investing in US pharma stocks have outperformed the rest of the global industry in the past one year. These funds have not only bettered the MSCI Global Pharma Index, but have also raced ahead of their Indian counterparts.
While the MSCI Global Pharma Index managed to gain 24 per cent during this period, US pharma-focused funds saw their NAVs rise between 34 per cent and 71 per cent. This is much higher than the 29-34 per cent gains clocked by India-based mutual fund schemes investing in pharma and healthcare stocks listed on Indian bourses during the same period.
Boston-based Eventide Asset Management’s Healthcare and Life Sciences Fund launched in December 2012 has been the star performer, gaining a whopping 71 per cent in the last one year despite parking almost 12 per cent of its assets in mutual funds investing in money market securities.
How did it achieve this? Here’s the secret sauce. Identifying future stars helped the fund stay ahead of its peers. The fund’s top two bets − Acadia Pharmaceuticals and NPS Pharmaceuticals − quadrupled in the last one year. Early entry into the stock of Acadia Pharma helped the fund capitalise on the positive news flow around its innovative drug for Parkinson’s Disease, which is in advanced stages of development. The other stocks in the fund’s kitty that more than doubled during this period include Stemline Therapeutics, Ligand Pharmaceuticals, Celldex Therapeutics and Pacira Therapeutics.
Fidelity Advisor Health Care Fund was the second-best performer, rising in excess of 60 per cent over the one-year time period. Investment in stocks of pharma companies such as Gilead Sciences, Actavis Plc, Biogen Idec, Alexion Pharmaceuticals and Illumina Inc lifted its performance. Identifying and buying into multi-bagger stocks before competition sneaks in has been the mantra for most of these funds.