‘President Biden won’t hold back biotech shares’

Biden is a ‘centrist’ who doesn’t want to build a ‘socialised’ healthcare system, Geoff Hsu of the Biotech Growth Trust tells Will Kirkman

You would think a global pandemic would be the perfect backdrop for an investor in biotechnology firms. But the focus on Covid above all else meant other drug therapies were put on the back burner.

Geoff Hsu, manager of the £530m Biotech Growth Trust, has not only kept his “closed-ended” fund on track but accelerated its growth. Few funds have backed as many winners as his and the trust’s shares have risen ninefold over the past 10 years.

He tells Telegraph Money how Covid-19 changed the biotech sector, what Joe Biden’s presidency means for his stocks and how new technologies are changing the market.

WHO IS THE FUND FOR? The fund is suited to anyone who wants exposure to the most innovative parts of the healthcare sector.

HOW DO YOU PICK STOCKS? We have a team of biotech analysts who are constantly scanning the market for interesting opportunities. Typically, we focus first and foremost on identifying drugs in clinical trials that we think are going to have positive results and ultimately get approved and make it on to the market.

A lot of our evaluation is focused on the science behind the drugs. About three quarters of the portfolio is focused on what we would classify as “emerging” biotech. These are companies that are not yet profitable and are still taking their lead drug through clinical trials.

WHAT HAS BEEN YOUR BEST INVESTMENT? A company called Immunomedics, which developed a breast cancer drug called Trodelvy. The company was acquired by Gilead Sciences for $20bn (£ 14bn) at a premium of more than 100pc.

AND YOUR WORST? A company called Acadia Pharmaceuticals. In March America’s Food and

Drug Administration identified unexpected deficiencies in the company’s drug for dementia-related psychosis, suggesting the agency was unlikely to approve its application. [Acadia’s shares have fallen by 60pc this year.]

WHAT IMPACT HAS COVID HAD ON BIOTECH FIRMS? Biotech companies fared comparatively well during the pandemic, as they were largely regarded as essential businesses. Many investors became attracted to the sector because there were many biotech companies developing treatments and vaccines to address the pandemic.

There were some clinical trial delays – healthcare institutions were too busy dealing with the pandemic. But most of the trials that were delayed by Covid have since resumed.

WERE YOU WORRIED ABOUT LAST YEAR’S US ELECTION RESULT? Many investors feared in the run- up to the election that a Democrat sweep would lead to adverse drug price legislation in the biotech industry. In our view, the elections were a clearing event and the political risk to the sector really abated quite a bit with the result.

Biden is at core a centrist and he has said publicly that he wants to build on Obamacare rather than push for a more socialised medicine system.

We wouldn’t be surprised if some kind of drug pricing legislation was passed, but we think ultimately it’s going to be fairly benign, incremental and very manageable for the industry.

IS THE PROSPECT OF AMERICA WAIVING PATENT PROTECTION FOR COVID VACCINES A WORRY? It is still unclear whether the intellectual property waiver will even be instituted given that other members of the World Trade Organisation will have to approve it.

It is also unclear how much this actually expedites vaccine production given that a lot of technical know-how outside intellectual property is still required to produce these vaccines.

This waiver is only being considered given the unusual severity and scope of the current pandemic. Even if enacted, it will not become the norm for the biotech industry, so I think the long- term impact will be minimal.

DO YOU HAVE YOUR OWN MONEY INVESTED IN THE FUND? I wish I did, but I don’t because of tax considerations. I am a US citizen and it complicates my tax returns if I am invested in a UK-based trust.

HOW ARE YOU PAID? I am paid a salary plus performance

related bonuses.

WHAT WOULD YOU HAVE BEEN IF YOU WERE NOT A FUND MANAGER? I went to medical school at Harvard for two years with the aim of becoming a physician but I decided I liked the business side better.