Rhenman & Partners Asset Management, a Stockholm-based global healthcare-focused hedge fund firm, saw its flagship strategy rise in August thanks to a tentative recovery in the med-tech sector and signs of more M&A activity within healthcare stocks.
The Rhenman Healthcare Equity Long/Short Fund – which trades a range of small, medium and large pharmaceuticals, biotechnology, medical technology and service company names – added 4 per cent in its euro-denominated class in August. Its SEK share class meanwhile returned 3.75 per cent for the month, with the fund now up 3.5 per cent year-to-date.
Henrik Rhenman, CIO and founding partner, and Susanna Urdmark, portfolio manager of the Rhenman Healthcare Equity Long/Short strategy, pointed to a recovery within the med-tech sector during the sector quarter, as patients returned to hospitals for operations and treatments from May through to August, with activity nearing pre-Covid levels.
Overall, the most profitable position in the portfolio last month was Aimmune Therapeutics, a US biotech stock which focuses on food allergy treatments.
The firm’s main shareholder Nestlé made a bid for the outstanding shares at a premium of 174 per cent, sending its share price up and making “a welcome contribution” to the fund’s returns, said Urdmark. She flagged further M&A activity within the med-tech sector as an additional positive.
On the downside, BioMarin Pharmaceutical – a US biotechnology company specialising in rare diseases – was the biggest drag on fund performance last month.
The gene therapy pioneer saw its share price slide after the US Food and Drug Administration requested further longer-term follow-up data before green-lighting Roctavian, BioMarin’s gene therapy treatment for haemophilia A – a move which will likely halt the drug’s roll-out until late 2022.
“It’s a normal procedure in a well-diversified portfolio to have mishaps on a regular basis, and this time it was BioMarin,” Rhenman added.
In a webcast update screened on Friday morning, Rhenman and Urdmark also explored the fast-approaching US presidential election in November, and the Trump-Biden battle’s potential impact on the healthcare industry.
One potential headache for the sector is the Democrats’ plan to negotiate drug prices on behalf of Medicare.
Yet while the proposal is “high on the agenda”, both Rhenman and Urdmark said any such measure requires approval from the Senate, and it is likely to be “at least a year” before any such measure is brought before Congress.
“People are too worried about a Biden administration – I think a Biden administration will be just fine for the healthcare sector,” said Rhenman.
Urdmark also played down the wrangle, noting the policy has been the subject of keen debate for several years now.
“The markets have accepted that this is going to be a continued struggle between the different parties’ interests,” she said.
