Polar Capital swaps Merck for Lilly – Polar Capital Global Healthcare (PCGH) acquired a large holding, representing ~3% of its NAV, in US pharmaceutical giant Lilly in January, at the same time selling its entire holding in Merck & Co, according to an analysis by Marten & Co. Lilly appears in 14th position by size as of the end of January, having not previously featured in trust’s portfolio. Polar capital also disclosed the sale of its position in Biogen and a partial sale of its holding in Nektar Therapeutics in February.
The consensus view on Lilly is that it has a better longer-term revenue and earnings growth profile than most of its peers, but investor sentiment remains cautious because of the perceived threat to its diabetes franchise from a new weekly injectable drug from Novo Nordisk called Ozempic and an oral follow up version. Last month NovoNordisk reported positive results in its first Phase III trial with its oral drug. Meanwhile, investor sentiment towards Merck is driven by the potential of the immuno-oncology drug Keytruda, particularly in the large cancer indication of non-small cell lung cancer. Merck currently enjoys the leading position in this indication but this could change based on cross trial analysis of results from a number of phase III trials – all of which are known to be positive – are presented at scientific conferences over the next few months.
PCGH laso reproted it has increased its position in AstraZeneca last month, which represented 1.5% of NAV in January, based on the belief that 2018 will be the trough year for earnings and that revenue expectations for certain key drugs are too low. AstraZeneca’s immuno-oncology drug Imfinzi has just been approved in the US for Stage III non-small cell lung cancer – where it has no competition, and also received a positive opinion from the EMA for the ovarian cancer drug Lynparza.
PCGH also added three new biotech company positions in the form of Acceleron Pharma, Loxo Oncology and Zogenix. Acceleron’s investment case depends on its lead asset luspatercept, which is being developed for a number of haematological indications with Celgene. Acceleron is approaching two near-term catalysts in the middle of this year in the form of top-line results from Phase III trials of luspatercept in myelodysplastic syndromes (MDS; MEDALIST) and beta-thalassemia (BELIEVE). Acceleron and Celgene are also starting additional trials of luspatercept in related indications, including a Phase II trial (BEYOND) in non-transfusion-dependent beta-thalassemia, another in myelofibrosis and a Phase III trial in first line low-risk MDS.
Loxo last year subject to a major collaboration with Bayer and has just completed a submission of its lead product, larotrectinib, in the US for TRK fusion cancers.
With a 2% decline in NAV, the trust underperformed its benchmark, the Morgan Stanley Global Healthcare Index (-1.3%) in February. Polar Capital Global Healthcare’s top holdings for January and February are shown in the table below with the share price change this month (note not all data for February has been reported, table shows holdings with >3% of NAV at the end of January).
| Jan-18 | Feb-18 | Share % change 1/3-26/3 | |
| Johnson & Johnson | 5.8% | 5.8% | -0.5% |
| Novartis | 4.7% | 5.6% | -5.2% |
| UnitedHealth Group | 4.3% | 4.4% | -3.1% |
| Abbott | 3.8% | 3.9% | 3.3% |
| Danaher | 3.7% | 3.8% | 1.8% |
| Fresenius Medical Care | 3.7% | 3.6% | -6.3% |
| Takeda | 3.7% | 3.6% | -7.8% |
| Becton Dickinson | 3.7% | 3.6% | -1.9% |
| Vertex | 3.4% | 3.5% | -0.6% |
| Anthem | 3.8% | 3.3% | -5.2% |
| Bayer | 3.71% | N/A | -6.0% |
| Biogen | 3.34% | 0.0% | -5.4% |
| Lilly | 3.06% | N/A | -1.2% |
| Humana | 3.09% | N/A | -1.0% |
PCGH: Polar Capital swaps Merck for Lilly