Janus invests in science
Fund takes chance on health holdings
The Denver Business Journal
Marsha Austin Business Journal Staff Reporter
June 7, 1999
John Klobnak first told Janus Mercury Fund manager Warren
Lammert that the eximer laser would someday make eye
surgery a popular alternative to messy contact lenses and
nose-pinching eyeglasses in 1992.
Klobnak knew it would take more than one trip from his
company's St. Louis headquarters to Janus Funds' Cherry
Creek offices before he could convince Lammert to invest in his
chain of eye clinics, which recently had gone public.
What the CEO didn't realize was that it would take seven years
before a Janus mutual fund manager would be willing to make
Laser Vision Centers a top pick.
That manager turned out to be Lammert protegé Tom Malley, a
molecular biologist from Stanford University who launched the
Janus Global Life Science Fund in December 1998. Malley
made Klobnak's company his top holding, along with
pharmaceutical giants Pfizer, Schering Plough and Elan PLC
and another eye-care company called VISX.
Malley has declined all media interviews, but according to Janus
officials, the firm's newest fund will invest primarily in health
care, biotechnology, pharmaceutical and agricultural companies
worldwide that demonstrate rapid growth potential.
"Those positioned to benefit from breakthroughs in
biotechnology, industry consolidations or emerging demographic
trends are particularly exciting," reads a comment from Malley
on the Janus Funds Web site.
At the end of March, the last date for which accurate data is
available, Malley had invested 79.9 percent of the fund's $195
million in assets in U.S. companies, 19.5 percent in international
companies and retained 0.49 percent in cash reserves.
As of June 1, the fund was posting a return of 4.9 percent.
Malley's focus on pharmaceutical companies with strong
research and development arms is probably a legacy of his time
with Lammert, as is his well-known affinity for Pfizer, said
Christine Benz, an analyst who follows Janus for Morningstar.
"That seems to be the only (pharmaceutical) stock that all the
Janus managers still really like," she said.
But Pfizer is more than just another Janus darling to Malley, said
colleagues.
They said Malley's attachment to Pfizer is a telling look at his
investment style. He takes his time researching a company
before he invests, and when he does, he may not expect huge
returns right away.
"He bought Pfizer when it was cheap and held on to it," said
David Bouchey, a biotechnology analyst at Bigelow & Co. "He
seems to be the kind of guy that's in it for the long haul."
Malley certainly took his sweet time before delving into the
eye-care business.
He began researching the eximer laser's potential to heal
cataracts, nearsightedness and farsightedness while working
with Lammert on the Mercury Fund in the early 1990s. But
though Malley's scrutiny of the eye-care industry took years,
Klobnak admires the new fund manager for his thoroughness.
"He didn't buy the stock from us the first time he met with us,"
said Klobnak. Malley and his investment team typically "don't
just spend five minutes reading your financials and asking about
what they read in your SEC filings," he said.
"Tom is certainly among the most thorough, but more than that,
he doesn't have a problem picking up the phone" if he hears
about an acquisition target or a new product.
Prior to a secondary public offering this May, Laser Vision
Centers executives toured the country holding hundreds of
investor meetings.
"The one (meeting) I really remember is the one with Tom
Malley," said Klobnak. "The questions were so good. They
were so on the money. They were insightful, deeper and he
offered some suggestions we might want to consider to make
the company better."
Roger May, an executive vice president at Schneider Securities,
and longtime business associate of both Malley and Klobnak,
described Malley as "nose-to-the-grindstone bright."
"He's always been a really bright, intuitive analyst," he said.
According to May, Malley isn't afraid to roll up his sleeves and
get to work, traveling to trade shows, visiting emerging
companies, asking tough questions, grilling the "experts."
Benz has a lot of faith in Malley's ability to make the Global Life
Science Fund as successful as Janus' other well-known funds, a
rare compliment for a first-time fund manager.
"Their research has been pretty strong in this area," she said. "I
would be more inclined to steer investors to this fund than I
would a fund with a brand new manager."
So far, Laser Vision looks like a good pick. The company's
stock price has been steadily climbing since last November,
when it dipped below $10 per share. At press time June 2, the
stock was trading at $58.75 on the Nasdaq Stock Exchange.
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