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Invest in the ‘golden age’ of biotech

Biotech trust Trump benefit may be shortlived

Biotech Growth Trust has struggled this year but this might have created a good entry point for long-term investors

September 23, 2021, Investors Chronicle, By Mary McDougall

Biotechnology is an area from which some of the world’s most exciting innovations emerge. But as seasoned healthcare investors know, it’s a sector that can deliver heavy losses as well as huge gains. Biotech Growth Trust (BIOG) has certainly had its share of volatility recently, with its share price rising 68 per cent last year but down 24 per cent between the start of this year and 21 September.

Volatility aside, Biotech Growth Trust has delivered strong long-term performance. Despite the recent setback, it made a net asset value (NAV) total return of 70 per cent over the five years to 21 September, ahead of Nasdaq Biotechnology index’s 62 per cent. It was also trading at a discount to NAV of 8.3 per cent, which compares with a 12-month average of 0.7 per cent. This could prove an attractive entry point for long-term investors with a high risk tolerance.

Biotechnology companies focus on novel drug development and clinical research aimed at treating diseases and medical conditions. The sector was critical in the development of Covid-19 vaccines last year, including ones that use a fairly new gene sequencing technique known as messenger ribonucleic acid (mRNA). The hope now is that gene sequencing will be adapted to help treat all sorts of other diseases.

“The industry is in something of a golden age as new advances in technology, our understanding of the genome and our ability to manipulate genes open up new territory,” says James Carthew, head of research at QuotedData.

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