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Janus Henderson: 2018 outlook for life sciences

Ethan Lovell, Co-Portfolio Manager of the Janus Henderson Global Life Sciences Strategy, provides his take on 2017 and discusses the outlook for his industry in the coming year. He says the regulatory environment remains favourable for new drugs and medical devices, and sees selected opportunities in disruptive biotechnologies.

Q. Key lessons from 2017?

In 2017 what we’ve seen is a bifurcation in the market between consistent growers and companies that are perceived to have a high degree of exposure to deceleration and demand in the healthcare markets. We’ve also seen an extreme premium paid for innovation in the marketplace that we expect to continue in 2018.

Q. Key themes for your markets in 2018 and portfolio positioning implications?

The regulatory environment is extremely accommodative; not only are the agencies approving drugs and medical devices much more quickly than they had in the past, there are also individuals at the agencies who are compelled by their history and their interactions with industry, to be much more receptive to (for example) modifications in trial designs, or exactly what companies must deliver in order to receive approvals and broad labels. So, that’s very encouraging again for areas such as biotechnology and medical devices where there’s a high degree of innovation, and speeding these therapies to patients has a great impact on society.

Q. Key risks and opportunities for 2018?

It’s become a bit more of a stock picker’s market in areas like biotech and some of the small- and mid-cap areas of devices. We do see some valuations that have gotten a little stretched, but that’s where we’re picking through to find the opportunities. So, on a selected basis, on a stock-specific basis, we’re still seeing significant opportunities, particularly in the disruptive areas of biotech, for example, where we have new companies that are working on things such as gene therapy and immunotherapy for oncology.

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