This is a sponsored article from J.P. Morgan Asset Management
Since the onset of COVID-19, the healthcare and pharmaceutical sectors are increasingly on investors’ radar. The pandemic has accelerated many themes that are already gaining momentum, and highlighted the investment potential of innovative healthcare and health-related business.
The healthcare and pharmaceutical sectors have performed robustly through recent market volatility, as of 30 June 2020, as they tend to act defensively during an economic contraction.
Source: J.P. Morgan Asset Management’s chart based on data, in US dollar, from Bloomberg between January 2020 and June 2020. The indices referred for to: Tech is MSCI Information Technology Index, Healthcare is MSCI World Healthcare Index, Consumer services is MSCI World Consumer Services Index and MSCI world is MSCI World Index. Past performance is not a reliable indicator of current or future results. Data is based on availability as of 30.06.2020. Provided to illustrate general market trends, not to be construed as research or investment advice.
In today’s market environment, investors tend to reward innovative companies that use advanced technology to address unmet medical needs and we believe this trend could continue even after the pandemic subsides.
What are genetic therapies?
Genetic therapies are ground breaking innovation with the potential to revolutionise the healthcare industry. They seek to cure diseases by modifying genetic information, mainly:
- Personalised treatment to address the underlying cause of the disease
- Focus on curing chronic diseases with targeted treatment by introducing or modifying defective genetic material in cells
- Potential to improve quality of life with a single treatment
Incidentally, companies involved in genetic therapies were also at the forefront in responding to COVID-19. Scientists were able to sequence COVID-19 within weeks, while earlier it took more than a year to fully sequence severe acute respiratory syndrome and others.
Our JPMorgan Funds – Thematics – Genetic Therapies Strategy1 seeks to provide investors, with an exposure to this innovative long-term theme. And we view genetic therapies as an early stage investment opportunity with growth potential.
Why invest in genetic therapies
- Acceleration of clinical trials and regulatory approval. We are seeing an acceleration in clinical trials in genetic therapies and believe there is future growth potential. For example, 1,066 clinical trials2 were underway worldwide at the end of 2019 demonstrating quarter-on-quarter and year-on-year increases and there are expectations of approval of 10-20 new cell and gene therapies every year by 20252.
- Innovative technology that has the potential to cure a broadening range of diseases, such as Fabry, sickle cell and Parkinson’s diseases, cystic fibrosis, myeloma and haemophilia. For individuals, there is significant potential for improvement in quality of life. For investors, there are higher potential growth rates for companies involved in genetic therapies and significant long-term revenue potential for companies exposed to this theme.
- Significant growth prospects with increasing investment. We have seen increasing numbers of mergers and acquisitions, US$41 billion since 20173. Companies which are pure plays are looking to bring drugs to the market, while more established Big Pharma companies view genetic therapies as the next stage in the evolution of the healthcare industry.
ThemeBot: facilitating access to our Genetic Therapies Strategy
Our innovative investment process leverages ThemeBot, our proprietary investment engine which uses Natural Language Processing to identify opportunities relevant to the theme of genetic therapies and rank companies based on two metrics: textual relevance and revenue attribution. This allows the identification of smaller, early stage opportunities which might typically get overlooked.
We believe the ability of ThemeBot to efficiently analyse hundreds of millions of data sources in a short period of time is a significant advantage, especially in a rapidly evolving field such as genetic therapies, allowing our portfolio managers to make swift informed decisions. In addition, we have partnered with our fundamental healthcare research analysts from our equity research team to verify ThemeBot’s output, ensuring the robustness of the theme.
We invest in a diversified global portfolio4 , targeting about 1005 holdings across the market capitalisation structure that provide exposure to the long-term growth prospects of genetic therapies, while minimising idiosyncratic risk.
Bringing it together within Investor Portfolios
Genetic therapies represent a once-in-a-generation breakthrough in the world of medicine and they are currently at an inflection point, moving from the clinic to commercial reality. Within the portfolio context, thematic exposure to Genetic Therapies can be a niche allocation within biotechnology or a complement alongside the broader healthcare segment. Ultimately, what makes a robust thematic solution is not just one with a relevant theme and sound objective, just as important is the rigor and transparency of the investment process – which ThemeBot serves to address, sieving through the investment universe and providing investors with a well-diversified exposure through a set of clearly defined investment criteria.
Genetic therapies represent a once-in-a-generation breakthrough in the world of medicine and they are currently at an inflection point, moving from the clinic to commercial reality. Our Genetic Therapies Strategy1 seeks to provide the opportunity to investors to gain diversified6 exposure to this new and exciting theme, and we anticipate that with traction from big pharmaceuticals, genetic therapies could profoundly disrupt the healthcare industry.
1 For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.
2 Source: Alliance for Regenerative Medicine, 4Q 2019, 3Q 2019 and 4Q 2018.
3 Source: Reuters, CRISPR Therapeutics, UBS: Longer Term Investments – Genetic Therapies (2019), UBS: Daily Europe, UBS House View.
4 Holdings, exposures and allocations for actively managed portfolios are subject to change from time to time. These represents the investment team’s views under current market conditions, subject to change from time to time. Provided for information only, not to be construed as investment advice.
5 Holdings, exposures and allocations for actively managed portfolios are indicative and are subject to change from time to time.
6 Diversification does not guarantee investment return and does not eliminate the risk of loss.
For Professional Investors and Financial Intermediaries only.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore and the Securities and Futures Commission in Hong Kong. Investments are not comparable or similar to deposits. Investment involves risk, value of investments may rise or fall including loss of any or all of the amount invested. Not all investment ideas are suitable for all investors. Past performance is not indicative of current or future performance. Diversification does not guarantee positive returns or eliminate risk of loss. Investors should make their own evaluation or seek independent advice before investing. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not be taken as or constructed as research or investment advice. Issued in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K) and in Hong Kong by JPMorgan Funds (Asia) Limited. All rights reserved.
This is a sponsored article from J.P. Morgan Asset Management