BIOTECHNOLOGY INVESTMENT STRATEGIES

The downward re-rating of the pharmaceutical sector presents an opportunity for investors in the sector to look at emerging growth environments, particularly the biotechnology sector, says a report by Duncan Moore and James McKean of Morgan Stanley.

However, note the analysts, there are risks inherent in investing in such a small emerging area. The risks can be catagorized in three ways: scientific, financial and execution.

The scientific risk, which was much more evident in the very early days of the sector, has to a large extent been removed in the USA, as the level of understanding of the technology has risen among industry observers. In effect, this negates, at least in part, the chances that unrealistic claims or incomplete approaches are accepted when investment is sought. In the UK, things are slightly different, say the analysts. This is due to the fact that valuations of companies seem to be similar irrespective of prospects because comparative valuations have to be used when determining a listed price.