Defensive bio-stock beats downturn

The Biotechnology/Life Sciences sector has held up well over the last year of economic uncertainly, posting a gain of 10% whilst other sectors have experienced losses according to The Association of Investment Companies.

Buck the trend. Life science stocks appear to be holding off the recessionary bite.

After collecting views from a selection of fund managers - both from the biotechnology/life sciences sector and from those who hold healthcare stocks in broader portfolios - the AIC say the overwhelming opinion is that pharmaceutical/biotechnology companies are a defensive stock in recessionary times. It may not outperform in a rising market, but it’s not as vulnerable in a downturn.

Geoff Hsu, manager of The Biotech Growth Trust said: “We believe biotech is defensive during recessionary periods. Many biotech drugs treat serious medical conditions for which there are few alternative treatments, so their use is not as sensitive to prevailing economic conditions.”

Nick Greenwood, manager of the iimia Investment Trust said: “This stock has worked out really well as biotechnology is one of the few sectors that has gone up over the past year. The defensive nature of the pharmaceutical and biotech sector has now come to the fore.” 

However, Greenwood cautions that: “The vast majority of good biotechnology companies are in the US so there is an important currency consideration.  If you’re going to invest in biotech you need to take a view on the prospects for sterling versus the dollar.”

The Association of Investment Companies represents the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of investment companies which are traded on the London Stock Exchange, AIM and Euronext.