I agree that nearly all biotechs don't fit the criteria for value investing, and are a speculation.
For myself, I try a barbell strategy: a handful of biotechs and a handful of big steady companies. For the biotechs, I do not like to invest in the riskiest companies that only have development phase molecules, even though this may be where the greatest gains are to be had. I prefer to invest in companies with at least one marketed product in disease states with a wide moat- for example, SEPR's Alvesco (Asthma) and Brovana(COPD). And IMO the development they are doing should be attractive to major pharma. For example, BMS and LLY are shopping for an oncology portfolio.
In terms of major pharma worth buying, I concur with your list:
JNJ, PG, maybe GSK, maybe SNY, maybe WYE
and I would add ABT. Note that with the exception of SNY, all of these companies have extensive CPG product lines in addition to their pharma products. In fact, I wouldn't really consider PG a pharma company, although they do have some blockbuster medicines. Also JNJ probably makes more money from devices than drugs.
I think diversification away from primary care drugs will be essential to survival over the next few years. If the US moves closer to socialized health care, chances are that catastrophic care may be more widely available, while routine care may suffer (e.g. MRIs "just in case" and statins as a heart disease prophylactic). |
